When it comes to lifting at least 100 million extremely poor people out of lack, poverty reduction is one half of the problem. Inequality, as measured by the Gini index, which measures income distribution among a population, is another half of the dilemma.
Nigeria is Africa’s largest economy, yet three in every five Nigerians live in poverty. However, inequality has also reached extreme levels.
Put in another context, if poor Nigerians were a country, it would be more populous than Germany. Almost six people in Nigeria fall into this trap every minute.
In 2009, the difference between the haves and have-nots in Nigeria increased by 3 percentage points, according to the Gini index compiled by the World Bank.
Over the years, Nigeria’s economy has grown without creating adequate opportunities for the broader population. Resources are unevenly distributed, resulting in persistent disparity across generations and regions.
Outside of a job in the agriculture sector, the best employment prospects for a young and bulging labour force are urban centres like Lagos, Abuja and Port Harcourt. Residents in other cities lag behind in terms of wages and living standards.
Some stakeholders have also questioned why a country with over 60 percent of the population living in poverty has one of the highest paid lawmakers in the world.
These lawmakers representing a fraction of the country’s population are some of the highest paid in the world, earning as much as $118,000 a year which comes at the expense of infrastructure and similar investments. Similarly, widespread bribery and corruption, whether in the form of withholding the salaries and pensions of civil servants, nepotism, or greasing the palms of police officers, continue to contribute to income inequality.
UK-based Oxfam International in a report stated that economic inequality in Nigeria has reached extreme levels, despite being the largest economy in the continent. The country, it noted, has a large economy with abundant human capital and the economic potential to lift millions out of poverty.
Why security, health, education and agriculture (SHEA) matter in reducing inequality
Everywhere in the world, from China to Brazil and India, rapid economic growth that generates jobs has lifted millions from poverty. Unequal access to health and education, pre-conditions for being employed, risks leaving many behind, hence the need for progressive social reforms alongside macroeconomic policies that drive growth.
Analysts have said Nigeria’s economy could grow as much as 11 percent per annum and lift its over 90 million people that are living below $1.90 a day if it invested the huge amount of money it spends on fuel subsidy on providing social security, education, agriculture and health.
Nigeria spent an estimated N623 billion ($1.7 billion) on fuel subsidies last year, according to International Monetary Fund (IMF) estimates.
Such bold reforms would enable the country tackle its current illiteracy rate which limits access to information about basic things such as the right medication or credit facility, according to Charles Robertson, global chief economist of Renaissance Capital, an investment banking and advisory firm.
Nigeria has been faced with a failing educational system where out-of-school children more than doubled to 13.5 million in 2015, according to Universal Basic Education Commission. The surge in out-of-school children is attributed to the low budgetary funding (way below the global standard of 21 percent) and the lack of investment in education.
“To avoid this tsunami coming on its citizenry, Africa’s biggest oil producer would have to pivot away from oil and grow its adult literacy rate from the current 60 percent to 80 percent by 2030,” Robertson said in a research note to clients.
Insecurity in the northern part of the country, where illiteracy is highest, further worsens inequality.
Data from the United Nations Development Programme (UNDP) for 2017 ranked Nigeria 157 out of 189 countries in terms of Human Development Index, while its life expectancy at birth stood at 53.9 years.
A life expectancy of 53.9 years means that an average Nigerian dies around 54 years of age.
“Nigeria needs to find sustainable ways to fund its education and health sector if it wants to empower its citizens and one of such sustainable strategies is through the adoption of endowment funds, which have successfully established in the West and will take little or nothing to implement in Nigeria,” PricewaterhouseCoopers (PwC) said in its report titled ‘Closing social infrastructural gap’.
Endowments are restricted funds that are essentially got from charitable donations, private investments, among other sources. This becomes the principal, which is then invested with a fund manager to earn income. The income earned is then used for very specific purposes that are articulated in a charter.
What Nigeria is doing wrong
President Muhammadu Buhari in his Democracy Day speech on June 12, 2019 set a 10-year target for Nigeria to lift at least 100 million people out of poverty. But he didn’t really specify how this would be possible.
“This task is by no means unattainable. China has done it. India has done it. Indonesia has done it. Nigeria can do it. These are all countries characterised by huge burdens of population. China and Indonesia succeeded under authoritarian regimes. India succeeded in a democratic setting. We can do it,” Buhari said.
There are views that the National Social Investment Programmes (NSIP) such as TraderMoni scheme, N-Power and the rest are still not enough to improve the poverty situation in the country.
In 2018, the government disclosed that 500,000 graduates had been employed under the N-Power which was a part of NSIP for providing jobs to graduates, and the TraderMoni scheme, a micro-credit scheme aimed at the empowering 2 million petty traders.
“This TraderMoni that we have been doing, how many people has it lifted out of poverty? It has not been able to combat poverty. How are we sure that the people who are given this money really need it? Or maybe some of them have exhausted it by only feeding themselves,” Maduka Maxwell, an investment administrator at ARM Holding Company, said.
“Right now inflation has eroded the value of the naira, that N10,000 is nothing. Assuming you give that N10,000 to a market woman selling tomatoes at Yaba and she gets them from Mile 12, she will spend out of that money for transportation and logistics,” Maduka further said.
What India is doing right
Nigeria and India share a common similarity in terms of population. Nigeria’s population estimated at 198 million people is the largest in Africa, while India is the second-most populous country in the world with 1.3 billion people.
However, while Nigeria still struggles with millions of people in poverty, Indian government seems to be having a positive impact on its citizens thanks to structural poverty reduction policies such as India’s Aadhaar programme.
India’s Aadhaar programme is a platform whereby India’s residents obtain a 12-digit unique identity number, based on their biometric and demographic data which is collected by the Unique Identification Authority of India (UIDAI).
The programme which was introduced in 2009 was designed to help the poor by providing welfare payments and social services. Each user of this programme receives a card with that number on it, which can be cross-referenced with the biometric data held in a database.
As of April 2018, more than 1.2 billion people, which is over 99.7 percent of India’s population, had enrolled under the programme.
Also in 2015, India established Payment Service Banks (PSBs) to bring the huge unbanked population of India under the formal banking system, thereby deepening financial inclusion after research showed most rural Indian people who are poor don’t have access to banking services due to the high operational costs of running a traditional bank branch in rural areas as sufficient volume of funds is not deposited by the account-holders and loan disbursement is low.
So far, looking at India, the number of people living in extreme poverty is falling. According to a 2018 report by UNDP and the Oxford Poverty and Human Development Initiative (OPHI), over 270 million people in India moved out of poverty as the country halved its poverty rate from 55 percent in 2006 to 28 percent in 2016.
“Although the level of poverty – particularly in children – is staggering, so is the progress that can be made in tackling it. In India alone some 271 million have escaped multidimensional poverty in just 10 years,” UNDP Administrator Achim Steiner said in the report.
Brazil lifted 36 million people out of extreme poverty, here is how
Another country which shares similar population with Nigeria is Brazil. Nigeria’s estimated population of 201 million people is the largest in Africa, while Brazil is the world’s fifth-largest country by area and the fifth most populous with a population of 209.3 million people.
Learning from Brazil would mean Nigeria would have to effectively utilise the billions of naira it currently spends on petroleum subsidy if it truly desires to lift millions of people away from poverty.
The starting point and inspiration for this effort is the most successful Brazilian programme of all time – Bolsa Familia – which in its decade of implementation has managed to reduce poverty by half in Brazil (from 9.7 percent to 4.3 percent), with over 50 million low income Brazilians (a quarter of the total population) lifted out of poverty, thanks to its broad scope and coverage.
Unlike subsidies and other general social programmes, Bolsa Familia is a conditional cash transfer programme which awards poor families a monthly cash payment on the condition that children are sent to school and vaccinated. It was introduced to combat extreme poverty by reducing hunger and malnutrition.
Bolsa Familia pays out £10 to £100 ($14 to $140) a month depending on family earnings and the number of dependents. The subsidies are only paid to women. Empowerment of women has long been cited by the UN as key for poor children to grow up healthy.
According to the International Social Security Association (ISSA), the world’s leading social security body, Bolsa Familia is the largest programme of its kind in the world. Today it reaches 13.8 million families, or 50 million people, around 26 percent of Brazil’s population.
Government statistics say that Bolsa Familia has lifted 36 million Brazilians out of extreme poverty, which the Brazilian government calls those who live on less than 70 real a month – or £23.
The scheme has been most successful in Brazil’s arid North-east, where more than half of the receiving families live. Much lauded by the World Bank, other governments, in India and Africa in particular, are looking into adopting similar schemes.
As of 2013, the number of recipient families had risen from 3.6 million to 13.8 million, which means Bolsa Familia now covers about a quarter of Brazil’s population of 199 million.
What Nigeria can do right
Some stakeholders are also of the view that Nigeria can go policy fishing from Brazil or India or even both for its social security programmes which can be reformed or reviewed the same way the country reformed its pension laws in 2014 and 2014.
In order to ensure that every worker receives his retirement benefits as and when due, Nigeria went on policy fishing from Chile and thereafter adopted Contributory Pension Scheme for public and private sectors which was established under the Pension Reform Act, 2004.
Before the pension reforms that ushered in the contributory scheme, the public sector operated the old Defined Benefits Scheme (DBF), bedevilled by many challenges, including the accumulation of over N2 trillion pension liabilities, according to data sourced from the National Pension Commission (PenCom).
So far, Nigeria has been able to offset the trillions of liabilities in the pension sector, and also pull together funds that are readily available to settle retirement benefits of workers as well as invested in the economy.
Some economists have recommended that Nigeria can replace its current subsidy regime and either learn from Brazil’s Bolsa Familia or India’s PSB policy to reduce Nigeria’s alarming poverty rate.
Analysts argue that Nigeria could go a long way in closing up its inequality gap if it channels the enormous amounts it spends yearly on subsidy into empowering the conditional cash transfer schemes it embedded in the SURE-P.
To the detriment of socio-economic developments, Nigeria has spent nothing less than N10 trillion on petrol import subsidy between 2006 and 2018, according to BudgIT.
Research by BudgIT revealed the N10 trillion consumed by the subsidy regime is sufficient to construct 27,000MW of electricity or build about 2,400 units of 1,000-bed standard hospitals across 774 local government areas of Nigeria.
BusinessDay analysis of the latest financial records of Nigeria National Petroleum Corporation (NNPC) showed that in 2018, the government spent N730.9 billion on subsidy popularly called “Under Recovery” alone, which is far higher than total 2019 budget of Ministry of Education (N651 billion), Ministry of Health (N356 billion), Ministry of Transportation (N267 billion), and Ministry of Agriculture and Rural Development (N203 billion).
Ayo Akinwunmi, head of research at FSDH Merchant Bank, said there are other programmes that impact or touch the lives of the poor people in the country compared to subsidy.
“And also, you ensure that there is security and you empower people to go to the farm and provide adequate tools and equipment for them to produce and a mechanism within which the produce from the farmland will get to the market to prevent wastages,” Akinwunmi told BusinessDay.
Ayorinde Akinloye, a consumer goods analyst at Lagos-based CSL Stockbrokers, said before India started its social security programmes, it first of all improved industrial participation in terms of manufacturing or mining.
Akinloye noted that the best policy to combat poverty in Nigeria is to focus on improving industrial and private sector development in the country.
According to a UN publication called Africa Renewal, many countries in Africa such as Cote d’Ivoire, Mauritius and Rwanda have registered remarkable economic performance over the past decade, lifting millions out of extreme poverty and making schooling and health care available to larger shares of their populations, whereas others have lagged.
Precise Financial Systems (PFS), a Fintech company that provides software products and services to Nigerian financial industry, says financial disempowerment is the reason financial exclusion rate is high in Nigeria.
Yele Okeremi, CEO of PFS, disagrees with the claim by some people that the problem with financial inclusion is about creating products.
“I do not think so; people will remain financially excluded because they are financially disempowered,” Okeremi told BusinessDay.
DIPO OLADEHINDE, MICHEAL ANI, BUMMI BAILEY & ENDURANCE OKAFOR
