As of 2016, Nigeria has five billionaires on the Forbes list. Their combined net worth was 8.5 percent of their country’s national income, the highest share since 2008. But as the number of these billionaires and their share of national wealth soars, so is their country’s poverty rate.
In 2004, 68.7 million Nigerians were living in poverty with zero number of billionaires in the country. By 2010 these figures have risen: the poor to 112.47 million and the number of billionaires from zero to two. That means, for every additional billionaire that is made into the Nigerian Forbes’s list, there are about 22 million Nigerians that slipped into poverty. Could these facts be a coincidence? That the cost of producing a Nigerian billionaire is the shoving of over 20 million into poverty?
The official figures show that the poverty rate in Nigeria between 1980 and 2010 rose by 153.6 per cent (or 62.76 percent if $1.25 poverty line is used in 2005 PPP, i.e. accounting for purchasing power parity, that is equivalent to approximately 353 Nigerian naira per person per day based on the January 2019 consumer price index – enough to buy a light lunch, two haircuts or half a gallon of gas in Nigeria, but not a Starbucks coffee in the United States). In 2010, 7 out of 10 Nigerians were considered poor by this standard.
Three of these billionaires mentioned oil business as their main/only source of fortunes and one into telecom. Yet, the oil industry is not performing as expected, e.g. over 80 percent of gasoline (or petrol) consumed in the country is imported. This is in addition to sporadic supplies and queues at local pump stations. Damningly, internet services are not robust let alone the availability of broadband connections.
The question:
How do these billionaires make their profits? When the system (or the market environment is not operating efficiently, and the rules being rigged?) Or something is not adding up?
This question reminds me of George Stigler’s claim in “The Theory of Economic Regulation”: “that the state has one basic resource which in pure principle is not shared with even the mightiest of its citizens: the power to coerce”. The government uses this power to compel its subjects to pay taxes and follow rules. That power of coercion can be deployed in such a way as to help some individuals and industries at the expense of others. By trying to influence how the state uses its coercive authority, businesses seek to “buy” one or more of government’s four main products: subsidies; control over competitive entry; regulation of product substitutes or complements; and the fixing of prices.”
It should, however, be noted that billionaires should not be against provided the economic rules of the game are not being rigged – using the heavy hand of the government in tipping the balance of the scale – in their favour. In a fairer society, when the pie gets bigger and the income of the richest increased, the level of inequality should not be rising fast. That means billionaires are getting richer not through rent-seeking but by contributing to expanding the size of the national pie and by so doing the poor will be breaking free from the iron grip of poverty.
