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.