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Poverty in Nigeria: Some New Facts

Mark Roland Thomas's picture
The World Bank and the Nigerian Bureau of Statistics (NBS) have recently completed an in-depth analysis of Nigeria’s last set of household survey statistics, which were compiled in 2010 but until recently not fully understood.

The results suggest strangely mixed conclusions. In certain ways, poverty trends in Nigeria over the past decade were better than has been widely reported, where a story of increasing poverty has been the consensus. And yet poverty is stubbornly high, disappointingly so given growth rates.

Three facts stand out.

First, GDP growth numbers can be misleading in an economy that is heavily driven by natural resources. At today’s prices oil makes up 95 percent of Nigeria’s exports and 75 percent of government revenues. Annual GDP growth has averaged about 8 percent over the past decade. Yet nationally poverty has hardly moved, falling from 64 percent of the population in 2004 to just under 63 percent in 2010 (using the definition preferred by the NBS, which treats children the same as adults in the defining the consumption needs that underpin the poverty calculations).

Second, lack of progress on poverty in the presence of high growth in average incomes can only mean rising inequality. According to our simulations, rising inequality has more than halved the poverty reduction that would have otherwise resulted from growth. And in Nigeria rising inequality inevitably means a widening gulf between North and South. In the conflict-affected North, household welfare indicators have stagnated. This fuels local perceptions of exclusion… and that can entrench conflict: a fragility trap.

Third, in a country where the states are responsible for many public policies, including social programs and infrastructure investments, there are good examples of reformist states in Nigeria. In some, poverty has been rapidly reduced and urban agglomeration effects could continue to drive growth and poverty reduction, as long as the right policy mix is applied. The most notable example is Lagos State, home to the nation’s largest city and industrial hub. Here, thanks to sustained job creation in the private sector, both poverty and inequality have declined rapidly. Even allowing for statistical error, Lagos has probably halved its poverty rate in less than a decade.

This all adds up to a delicate policy balance to be struck. The development strategy for Nigeria has to reflect the acute needs of the country’s poorer regions while not stifling the dynamism of the main engines of the economy, Lagos and other cities. A strategic approach to building infrastructure for spatial integration with the dynamic cities, and recognition of the special needs caused by rapid urbanization, must accompany upgrades to service delivery, learning from best practices across states, and targeted approaches to enhance welfare in the North.

Nigeria has the resources; the challenges are mostly political.

Comments

Submitted by Badaki Iyanu. on

I strongly agree with this opinion of yours. Private-Public partnership alone cannot solve these enormous challenges of Ours as a country. Hands must be on deck to resolve every of this issues. Nigeria good people,great nation.

Submitted by gb on

Please can you explain further, how the NBS arrived at this 64% national poverty rate. 'consumption needs that underpin the poverty calculations'?

Submitted by Mark Thomas on

Thanks for your question. Poverty lines are calculated by assessing the cost of a basic consumption basket for each member of a household, usually based on calorific intake needs. There are different ways of doing this, some that assume that children need less calories than adults, some that treat adults and children as equal in this respect. The NBS approach that leads to the 64% number uses the second approach, also known as the "per capita" method. The poverty headcount rate is then the percentage of the population with reported consumption in the survey less than the poverty line calculated in this way.

Submitted by Moses Braimah on

Very good analysis. However, what is missing is a proper understanding and analysis of the informal sector in your report.
In Nigeria, the informal sector is the main engine and stabiliser of the economy. It absolves all the shocks and poor policies execution by government at various levels. Nigeria is still a sleeping giant! Watch out guys. Soon and very soon the giant will be woken up from its slumber.

Submitted by Obodo Ejiro on

Are these numbers based on assumptions? We have not had an average growth rate of 8% of the past decade and oil accounts for almost 90% of government revenue, not 75%.

Submitted by Mark Thomas on

Thank you for your comment. The numbers I used are from the most recent Nigeria Economic Report published by the World Bank, using National Bureau of Statistics data. 2012 real GDP was 2.7 times larger than in 2000 (see pages 9-10), which implies an annualized growth rate higher than 8%. Other data sources may give slightly different growth rates based on technical differences but the basic point will remain that Nigeria's reported GDP growth over the past decade has been high. The same report cites oil-derived revenue as 75% of the consolidated budgetary revenues.

Submitted by David on

Nigeria like many other countries around Africa are trying the best to pull from "povertivity" :) There is huge shortage of infrastructure and housing for instance - but they are doing all the best

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