Economic Growth and Poverty in Nigeria: is Growth Pro-poor?

Published: 2021-07-12 20:00:05
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Category: Economy, Poverty, Africa

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There has been an increase interest on the effect of growth on poverty reduction among households in recent years. The linkages between growth, poverty and inequality have often witnessed tensions between macro and microanalysis. Although it may seem natural for a general agreement at the macro level, it is also useful if careful approach using micro level analysis is adopted. The World Bank and International Monetary Fund (IMF) emphasized that the best possible means of achieving a reduction in poverty among households is through an increase in the Gross Domestic Product (GDP); thus they advocated for a pro-poor growth. A pro-poor growth is a growth that significantly leads to reduction of poverty among households as defined by the Organization for Economic Cooperation and Development (OECD) report. Miles and Scott (2005) were of the view that growth that leads to a reduction of poverty could be seen through its interactions with issues of inequality. The authors noted that if growth benefit accrues only to the rich segment, then it only enhances inequality thereby leaving poverty reduction unaffected. Thus the GDP growth would produce a widening level inequality and poverty ‘immiserizing growth’. The African Development Bank (AfDB) (2008) report indicated that a deterioration in the growth rate as shown in most emerging economies is as a result of a continuous decline in the standard of living of the people that leads to poverty. The World Bank (2000) report stated that issues about reduction in poverty have attracted much attention and debate in development literature for past twenty years. A measure of success had now been equated with progress made on reduction of poverty in the development cycle.
During the periods 1970s and 80s, a major pre-occupation was with growth, the need to grow the economies and incomes. The World Bank report noted that economic growth was regarded as prerequisite for an improved social welfare. Equally, in the 1980s most emerging economies embarked on adjustment programmes geared towards economic growth enhancement, as a result, positive growth rates were recorded. During the 1990s, a dominant view was that economic growth was a prerequisite for poverty reduction; hence it was noted that countries that recorded high economic growth witnessed reduction in poverty. The concept of poverty has evolved overtime, it has witnessed many stages of transition beginning from 18th century.The second transition in the evolution started during the terminating period of colonialism when issues of poverty started emerging as it affected developing economies. If one were to cite one problem, the problem that has posed a challenge to development experts, global leaders and international agencies, has always been issues regarding poverty as it affects households in developing economies. Africa is considered to be the only region among the developing countries where number of households that are living below poverty line ($1.00) per day has continued to increase for the past 25 years. The poverty measures according to the World Bank’s standard, is the number of people living on less than one United States (US) dollar while an alternative measure is less than two dollars a day. By these standards the authors noted, many households are left with not enough to provide clean, adequate sanitation and food as well as not having enough to provide basic education and health care services. Over 2.8 billion people worldwide were living on less than two dollars per day in the 1990s. This has resulted in the increased number of people living in abject poverty.
Reducing the world population living in poverty became the major issue in the United Nation’s Millennium Development Goals (MDGs) aimed at reducing by half, the number of people living under less than one dollar per day. This measure involved a reduction in poverty rate from 29 percent to 14 percent of the global population as well as a reduction in the number of poor people from 1.2 billion to 890 million by the year 2015. In response, beginning in the early 1990s, witnessed changes in donor objectives and behavior; they placed the poor as the major objectives policy of development assistance in the continent. Aid agencies and civil society organizations advocated development strategy towards achieving “pro-poor growth” in Africa. In Nigeria, for the past three decades, over 300 billion US dollars were realized from the sale of crude oil alone. This amount should have led to a greater socio economic transformation, but due to corrupt practices among the leadership, the country is placed among the 25th poorest countries in the world. The growth rate recorded by the country in the last twenty years could not translate into employment opportunities and reduction in poverty for the citizens.
The African Development Bank (AfDB) further study in 2010 noted that Nigeria also witnessed a decline in its per capita income from US $1600 in 1980 to US $1160 in 2008. The Nigerian Living Standard Survey (NLSS) (2010) report noted that there was a drop in the rate of poverty from (65.6%) in 1996 to 57.8% in 2004 and 38.7% in 2008 respectively. There was an increase in non-poor from 34.4% to 42.2% in 2004 while in 2008, there was a drop in the rate of poverty to (31.0%). When this relative poverty measure was further disaggregated to two levels of poverty, about 20% were core poor, 38.1% moderately poor and 42.2% were non-poor. The report indicated that about 10% of the population under study had moved from Core Poor to Moderate Poor. The study equally noted a change in percentage of the moderate poor, which stood at 36.3% in 1996, declining to 38.1 % in 2004 and 30.3 % in 2008 respectively. Interestingly, there was an increase in the Non-Poor rate from 1996, 34.4 % to 2004 42.2% but a significant drop to 31.0% in 2008. The report further noted that in 1996 urban non-poor was 41.8 percent as against 64.7 percent in 2004 and 38.2 percent in 2008. It was an indication of a remarkable achievement on the urban dwellers consumption patterns.
There were 3 percent positive changes in the moderate poor from 33.0 percent to 29.8 percent. The growing urban poverty noticed in 1996 (25.2%) has completely disappeared to 5.6% in 2004. Most importantly Rural Non-poor moved from 30.7percent in 1996 to 35.9 percent in 2004 and 26.8 percent in 2008. The moderately poor also changed negatively from 38.2percent to 40.5percent in 2004 while the core poor of 31.6 percent in 1996 dropped to 23.6 percent 2004 and then witnessed an astronomical jump to 73.2 percent in 2008.
Economic reform in Nigeria was taken to a higher platform with the launching in mid – 2004 of National Economic Empowerment and Development Strategy (NEEDS). The package recognizes the fact that for economic reform to be successful it must be anchored on institutional reform, hence the latter forms a key component of NEEDS. This marks a notable departure from earlier reform efforts. Like earlier reform packages adopted by the country, this approach considered growth as a prerequisite for a poverty reduction. A real gross domestic product (GDP) growth rate of between 5 and 7 percent was the target for the period 2004 to 2007, with non-oil GDP expected to grow at between 7.3 and 9.5 percent during the periods. Statement of the Problem Many Economists and development experts would argue that igniting economic growth and sustaining it is the best possible way in the fight to reduce poverty among households. Cross-country studies on economic growth and poverty reduction indicate that a 1 percent economic growth increment leads to an average of 1.5 percent reduction in poverty level. However, the Asian Development Bank (ADB) (2004) report noted that there is a disparity across countries on how recorded growth has transformed into a reduction in poverty. The report stated that variation in economic growth can explain only around 45% of the variation in poverty reduction. This argument on the interaction between economic growth and poverty is that poverty reduction is associated with recorded economic growth but it does not mean a perfect suggestion. In the first place, what are the policies that can sustain growth? How to ensure that recorded growth creates opportunities for the poor?
The rate of rising poverty in Nigeria has led to a number of empirical researches aimed to understand the interaction between poverty reduction and growth. Many research works are one sided in the sense that they particularly focused on how various government policies affect poverty reduction and not if the growth performance are pro-poor. The argument in the theoretical literature on whether a country should achieve economic growth and then ensures that recorded growth is pro-poor or embark on poverty reduction that leads to growth of the economy is still unclear and therefore requires further empirical works especially for the case of Nigeria.

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