Nigeria’s struggles with widespread poverty, unemployment, and economic inequality are well-established obstacles to growth and stability. A crucial, yet underutilised, strategy for addressing these issues is investing in and empowering the Nigerian consumer class.
According to the World Bank, the poverty rate in Nigeria is estimated to have reached 38.9 percent as of 2023, with an estimated 87 million Nigerians living below the poverty line (the world’s second-largest poor population behind only India). Despite bold reforms from the current administration, poverty rates are expected to increase in 2024 and 2025 before stabilising in 2026, posing material risk to Nigeria’s economic outlook. Stark income inequality continues to exacerbate social tensions and limit economic mobility.
Creating and implementing policies centred around poverty alleviation (with both public and private sector participation) is essential towards a robust and sustainable consumer class, which is key to addressing core issues such as high unemployment and low domestic consumption.
A growing middle class serves as the backbone of any thriving economy, driving consumption, fostering innovation, and stabilising social structures. Drawing lessons from other developing countries such as India, Brazil, and China, which have continued to successfully lift large swathes of their populations out of poverty and into a sustainable middle class, will benefit Nigerians as we seek to crystalize significant potential for economic prosperity.
Investing in and nurturing Nigeria’s middle class segment would stimulate demand for goods and services, in turn driving production and job creation. This demographic also tends to invest more in education and health, contributing to a more skilled and healthier workforce. Additionally, a strong middle class can advocate for better governance and social stability, essential for long-term growth.
Between 2006 and 2021, India successfully lifted 415 million people out of poverty (criteria discussions aside) and has significantly expanded its middle class through economic reforms and inclusive policies. Infrastructural investments and targeted welfare programs, as well as economic liberalisation in the 1990s—e.g., deregulation via removal of licence requirements and reduction of state control in many sectors, which led to increased private and foreign investment—opened up markets, reduced poverty, and created a burgeoning consumer base. Additionally, the implementation of the Goods and Services Tax (GST) streamlined the tax structure, boosting business efficiency. Between 1991 and 2011, following implementation of the above-mentioned policies, India witnessed GDP growth of 6-7 percent per annum.
2005 also saw India pass the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which guaranteed 100 days of wage employment per year to every rural household. Projects under the act included water conservation, afforestation, and rural infrastructure development. To date, MGNREGA has benefited c. 75 million households via more than 3 billion person-days of employment generated annually, reducing rural poverty and improving rural infrastructure.
China’s rapid economic ascent can be attributed to its focus on manufacturing and export-led growth. However, the Chinese government has also implemented policies to boost domestic consumption. Initiatives such as urbanisation (through investment in transportation, water supply, electricity, and internet access in rural areas), improved social security, and housing reforms have expanded the middle class, reducing income inequality and fostering a stable economic environment. By the end of 2020, China had announced the eradication of extreme poverty, with c. 100 million rural residents lifted out of poverty since 2013.
Finally, Brazil’s Bolsa Familia program (launched in 2003), which aims to provide financial aid to low-income families that follow certain conditions, such as children attending school and families getting regular health check-ups, has been instrumental in lifting millions out of poverty (with estimates suggesting R$1.78 of economic activity is generated for every R$1 spent on the program). Cash transfers are made to eligible families monthly through a federal payment system. Coupled with economic stabilisation policies and increased access to education and healthcare, Brazil has grown its middle class, enhancing its economic and social fabric.
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While these policies have proven effective in other countries, Nigeria does face unique challenges ranging from governance to a lack of economic diversification. Policy inconsistency remains a significant barrier to effective implementation. Strengthening institutions and promoting transparency are critical. Any such policies must address the disparity between the rich and poor, ensuring equitable distribution of wealth and opportunities.
On the flip side, favourable demographics continue to support Nigeria’s long-term prospects, with a median age of 18 years representing a young, dynamic population poised to drive future growth. Critical to any long-term sustainability goals will be harnessing the potential of this segment, empowering them with opportunities for gainful employment to counter the impact of ever-increasing living costs. Currently, the average daily income in Nigeria remains below the global poverty line, while costs of basic necessities continue to rise.
Low-hanging fruits do exist in the form of financial inclusion via enhanced access to microfinance and affordable credit for small businesses—the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) demonstrating commitment to development in this area for Nigeria’s c. 40 million MSMEs—which can stimulate entrepreneurship and job creation. Technical and vocational training is another important area for empowering previously marginalised segments and towards poverty alleviation. Expanding vocational training programs will equip the youth with practical skills, making them employable and fostering entrepreneurship. Strengthening social safety nets through targeted welfare programs such as conditional cash transfers and unemployment benefits can also provide a buffer for vulnerable Nigerians, creating an avenue to lift them out of poverty and supporting growth in Nigeria’s consumer class.
All in all, to unlock long-term prosperity, Nigeria must prioritise the development of its middle class. This requires a three-pronged approach, combining economic reforms, investments in human capital, and robust governance. By learning from other developing countries and addressing unique domestic challenges, Nigeria can empower the hitherto marginalised segment, creating an enabling environment for economic growth and long-term prosperity.
Developing the middle class is not merely a socioeconomic goal; it is a strategic imperative for sustainable development. By harnessing the latent potential within Nigeria, we can pave the way for enduring economic growth and social stability, ensuring prosperity for generations to come.
Samuel Adeleke Adelaja: Head, Partnerships at Airtel Business Africa; Investment Director at Airtel Africa.
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