Picking up the pace of poverty reduction in Nigeria

Nigeria aspires to lift all of its people out of poverty by 2030. This is an ambitious target, as even before COVID-19 struck, some 4 in 10 Nigerians lived below the poverty line—about 80 million people. Some of the key drivers of poverty in Nigeria and potential poverty-reducing policies are considered in detail in a new report, A Better Future for All Nigerians: Nigeria Poverty Assessment 2022.  

Looking at a snapshot of poverty at a single point in time can only take us so far in developing the policies that Nigeria needs to meet its target. What we really need to know is how poverty has changed in Nigeria over time. 

Assessing poverty trends has long proved difficult in Nigeria. The 2018/19 Nigerian Living Standards Survey (NLSS) provided the first official estimates of poverty in more than a decade. Yet, given a range of improvements made to the questionnaire—especially on how food consumption was measured—it is difficult to compare this directly with the poverty estimate from the previous official household survey in Nigeria, the 2009/10 Harmonised Nigerian Living Standards Survey (HNLSS).^{1, 2}

Nevertheless, two specialized statistical techniques, summarized in a new paper, can help us construct poverty trends for Nigeria. First, we can “back-cast” Nigeria’s poverty rate, using the 2018/19 NLSS as a springboard in combination with sectoral GDP estimates. Second, we can impute consumption—and, in turn, poverty—into a decade-long survey containing many key non-monetary indicators, the General Household Survey-Panel.

Whichever approach we use, it seems that poverty reduction in Nigeria was at first slow and then stagnated in the decade before COVID-19 (see Figure 1).³  While there was some progress in the first half of the 2010s, this was reversed after the 2016 recession (induced by falling oil prices) hit and population growth started outstripping real GDP growth. This stalling progress on poverty broadly matches the path of non-monetary indicators, including education and access to basic infrastructure, from Nigeria’s Demographic and Health Survey (DHS). Subsequent projections suggest that COVID-19 has worsened poverty in Nigeria even further.
 

<sup>1. The 2016 Nigeria Poverty Assessment also identified several anomalies in the 2009/10 HNLSS consumption data.
2. Naively comparing these two surveys would suggest that poverty dropped by more than 17 percentage points in the decade to COVID-19.
3. The fact that back-casting and survey-to-survey imputations—two totally different techniques with totally different underlying assumptions—yield such similar results, adds robustness to these findings.</sup>
 

Figure 2. Stalling poverty reduction in Nigeria in the decade prior to COVID-19

_{Note: Estimates exclude Borno. Poverty rate calculated using the international poverty line of US$1.90 2011 PPP per person per day. Population estimates taken from the United Nations, via the World Development Indicators. Further details on back-casting and survey-to-survey imputations provided in Lain, Schoch, and Vishwanath (2022). Imputed estimates to be included in the World Bank’s official global poverty measurement. Source: 2018/19 NLSS, GHS, and World Bank estimates.} 

Moreover, when per capita incomes were growing in the early part of the 2010s, it appears that richer Nigerians benefited more than poorer Nigerians (see Figure 2). Richer Nigerians also lost out more when the 2016 recession struck. Thus, the fortunes of the rich waxed and waned in line with Nigeria’s growth, much more so than the poor. This matches labor market indicators from the same period. When the 2016 recession hit, the shift towards farming as a key coping strategy to try to maintain incomes was more pronounced among Nigerian workers in the top 60% of the consumption distribution than those in the bottom 40%.
 

Figure 3. Consumption for richer Nigerians is more closely linked to Nigeria’s growth prospects 

^{Note: Estimates exclude Borno. Further details on survey-to-survey imputations provided in Lain, Schoch, and Vishwanath (2022). Source: 2018/19 NLSS, GHS, and World Bank estimates.}

These findings chime with global evidence that poverty is becoming clustered in certain regions—such as Nigeria’s poor, largely rural north—in large countries. What is more, poverty in Nigeria is also entrenched in the areas most affected by climate and conflict shocks. Therefore, there is a critical need for policies that can help poorer people in poorer areas. 

Given these patterns, what can be done to make growth work for Nigeria’s poor? 

In the short-run, three immediate policies can help poor Nigerians recover from the COVID-19 crisis and, since COVID-19 has exacerbated inequality across many dimensions, such policies directly support redistribution.  First, distributing vaccines quickly and equitably remains vital for curbing the direct health threat of the virus, especially given uncertainty around new variants. Second, learning losses from school closures still need to be reversed to reduce long-term consequences for human capital; this may involve encouraging children to go back to school when it is safe and adopting low-tech remote learning solutions that work for the poor when needed. Third, social protection should be expanded to offset income losses and prevent households falling into, or further into, poverty; with shocks and uncertainty proliferating, exemplified by the global economic impact of the conflict in Ukraine, this could help build household resilience now and in the future. 

Yet Nigeria also needs at least three types of deeper, longer-term reforms to foster and sustain pro-poor growth and help raise people out of poverty. With Nigeria’s young population continuing to grow, the urgency of these reforms cannot be overstated. Now is the time to ensure that the country seizes its potential demographic dividend.

First, macroeconomic reforms, including to fiscal, trade, and exchange rate policy, could help diversify the economy, invigorate structural transformation, and create good, productive jobs, especially wage jobs that offer the best pathways out of poverty. Despite crude oil’s vast contributions to exports and government revenues, less than 1% of Nigerians are employed in mining and extractives, underlining the need to allow other, more labor-intensive sectors to flourish. Government spending could also be increased for pro-poor causes, such as health, education, and infrastructure—the main concerns among Nigerians themselves—by improving revenue collection and redirecting spending from expensive subsidies that benefit the rich more than the poor.

Second, structural transformation and the creation of productive wage jobs on a large scale may not happen overnight, so policies to boost the productivity of farm and non-farm household enterprises will be crucial in the meantime. For farms, this includes developing new and more resilient crop varieties, as well as investments in storage, transport, and market access. For non-farm household enterprises, policies that ease credit constraints could be especially important.

Third, for Nigerians to seize the opportunities available to them, the bedrock of infrastructure needs to be strengthened. The correlation between monetary poverty and access to electricity, adequate drinking water, and improved sanitation is extremely high in Nigeria. Yet information and communication technologies, including mobile phones, could also be used to help boost access to jobs and markets and to support the rollout of social protection programs and other redistributive government policies. 

The specifics of poverty-reducing policies will depend on redoubling efforts to gather and analyze data regularly. New official household survey data, the collection of which should start later in 2022, will provide far more detailed insights into changes in poverty over time —as well as into key drivers, constraints, and corrective policies—than even the back-casts and imputations discussed above. By investing in data, Nigeria can build trust, accountability, and transparency, taking substantial strides forward along its pathway to poverty reduction. 

Nigeria Poverty Assessment 2022: A Better Future for All Nigerians