ECONOMIC GROWTH, POVERTY AND INEQUALITY LINK: NIGERIA EXPERIENCE

Transcription

1 ECONOMIC GROWTH, POVERTY AND INEQUALITY LINK: NIGERIA EXPERIENCE Adegboyega, R. Raymond Department of Accounting Banking and Finance Olabisi Onabanjo University Ago - Iwoye, Ogun State Abstract While poverty reduction has become the main goal of development efforts, there is an ongoing sometimes-heated debate about the elements that should be at the center of the sensible poverty reducing strategy. By definition, poverty reduction in a given country is a function of the changes in average income and changes in income inequality. Rapid and sustained economic growth utilizing a new individual strategy calls for proficient use of the natural advantages of modern infrastructure, which further serves as a poverty reducing strategy. Also the World Bank has argued that a high rate of economic growth is the most effective strategy for reducing poverty. The paper investigated the relative impact of economic growth and changes in equality on poverty. The result of our study showed that both material and social resources do have impact on poverty in Nigeria. The study concluded that there would have been more progress in poverty reduction, particularly in the context of MDGs, if growth had been more equitable than available evidence suggests. In other words, there is room to make growth more pro-poor to enhance rapid reduction in poverty. Keywords: Economic growth, Poverty reduction, Inequality Introduction Section 1 The questions of inequality and poverty and their relationship to economic growth are critical issues in development economic literature. During the last thirty years, however, interest in the problem of inequality and poverty in the less developed countries has been rekindled, especially in Sub-Saharan Africa (SSA). The growing interest is due to the broadening of the objectives of Structural Adjustments Programmes to include a social dimension. Government and donors alike now realize that a successful adjustment programmes cannot ignore the needs of the poor. The empowerment of the marginalized poor has been extensively articulated in Non-Governmental Organization (NGO) literature in Asia while current World Bank literature also seems to insist on similar considerations of poverty. 147

2 The economics of poverty has reoccupied a central position on the academic research agenda. Apart from the relative poor performance of countries in terms of poverty and mean distribution, the unresponsiveness of poverty and inequality in developing countries to policy prescriptions could help to explain this resurgence. Nigeria is a country that has experience a high incidence of poverty and inequality in the last four decades. The country had witnessed a fall in its Gross Domestic Product (GDP) from an annual average rate of 10.5 percent in 1985 to 3.2 percent in 2007 (ADB 2008). The recent rebasing which has doubled Nigeria s gross domestic product for 2013 to 80.3 trillion Naira or about $490 billion may not have major positive benefits for the vast majority of Nigerians, 84.5 percent of whom made less than $2 per day as of Subsequently, the country also witnessed a decline in its per capita income from US $1600 in 1980 to US $1160 in 2008 (ADB 2010). One of the consequences of these declines is the rate of poverty which has increased from 28.1 percent in 1980 to about 88 percent in 2002 (FOS various issues). While rebasing has also increased per capital income to an average income of $2,688 per citizen in 2013, but this growth has not generated enough jobs and its effect on poverty is not yet clear. Available evidences suggested that there are increasing number of poor people in Nigeria, % in 1980, 46.3% in 1985, 42.8% in 1992 and 65.6% in 1996, an increase of percent between 1980 and 1996 (FOS, 1999); it was at its highest peak of 88% in 2002 and remained constant at 54% between 2004 and 2010 (NBS, 2011). Over the same period, percentage of population in core poor category rose from 6.2 to 29.3 percent, an increase of 380 percent. These have been largely traced to the adverse macro economic performance of the economy that was largely dictated by the effects of adverse economics shocks (internal and external) and the adjustment reforms that were initiated in response to these shocks. Other indicators of performance especially the social indictors of poverty painted similar picture of rising number of poor people in Nigeria. The Central Bank of Nigeria bulletin (2000) showed that while population per physician was on the increase, infant mortality rate stabilized at 114 per 1000 births for about five years ( ). Also NBS (2010) stated further that infant mortality has fallen by over a fifth in five years, from 100 deaths per 1,000 live births in 2003, to 75 deaths per 1,000 live births in Recent interventions including Integrated Management of Childhood Illnesses that reflect the underlying causes of child deaths, have contributed to these successes. This is a far cry from infant mortality rate of 10 per 1000 births found in developed countries. Inequality also worsened during this period, being greater than 50 percent (Gini coefficient) for female and male-headed households. 148

3 The worrisome aspect of this phenomenon is the spatial difference in the incidence of poverty and inequality in Nigeria thus while, rural poverty were highest in 1980, 1992 and 1996, that is 28.3%, 66.0%, 69.3 respectively, urban poverty levels were just 17.2%, 37.5% and 58.2% respectively over the same period (FOS, 1999). Rural poor declined less remarkably to 63.3 percent in 2004 while the urban poor also declined remarkably to 43.2 percent in 2004 but in 2010 rural poor increased to 69% and the urban increased to 54% (NBS, 2011). The Household Economic Situation in 2006, compared with 2005, showed that 32.0 percent and 30.9 percent of households in rural and urban Nigeria, respectively, were worse-off (CBN, 2006). According to the survey, 13.0 percent of the households in urban Nigeria had difficulty satisfying their basic food needs, which was below the national figure of 13.9 percent. Almost two-thirds of the households in the country considered themselves poor and this was more prevalent in the female-headed households (68.8 percent). A greater percentage of the households in the rural areas (65.5 percent) were recorded to be poor while the urban areas were 56.8 percent in 2006 (CBN, 2006). While poverty reduction has become the main goal of development efforts, there is an on-going sometimes-heated debate about the elements that should be at the centre of any sensible poverty reducing strategy. By definition, poverty reduction in a given country is a function of the changes in average income and changes in income inequality. But this simple identify raises some obvious questions on what should be the high balance between pro-growth and pro-distribution intention poverty strategy: Should a poverty strategy have a growth bias or instead mainly concentrate on employment to poor to benefit from growth? Is inequality affected as a general rule by growth? Does lowering inequality promote or hinder economic growth? How does the level of initial inequality affect the impact of growth on poverty reduction? All these questions are explored in this paper, drawing on a survey of recent literature on the relationship between growth, poverty and inequality (Ijaiya, Ijaiya, Bello and Ajayi, 2011). Following from the above therefore, this paper set out the overall objective of investigating the relative impact of economic growth and changes in inequality on poverty in Nigeria. Specifically the following research questions are the core of this paper. 149

4 1. Do material resources such as food, shelter, income, etc. impact on Poverty? 2. Do social resources such as education, health, etc. have any effect on poverty level? 3. What is the effect of income inequality on poverty level? The rest of this paper is divided into four sections. Section two dealt with the conceptual framework while section three highlighted the problems of economic growth, poverty and economic inequality. Section four dealt with data analysis and interpretation and section five contained the conclusion and recommendations. Section 2 Conceptual Framework Progress on poverty reduction has become a major measure of success of development policy. In the 1970s and 1980s, the pre-occupation was with growth, the need to grow the economies and incomes. Thus, growth was seen as a prerequisite for improved welfare. Many developing countries in the 1980s implemented structural adjustment programmes (SAP) aimed at enhancing growth. Following these programmes, many countries recorded positive real growth rates. The development literature in the 1990s was dominated by the view that growth is central to any strategy aimed at poverty reduction. Studies suggested that countries that made noticeable progress on poverty reduction were those, which recorded fast and high growth rates (World Bank 2000, Dollar and Kraay, 2000). This view was somewhat modified to suggest that it is not growth per se, but the structure of growth that matters (Ravallion and Datt, 1996, Mellor 1999). It has further been recognized that income inequality matters when it comes to making progress on poverty reduction. It is noted that little progress can be made in poverty reduction when inequality is high and rising (Addison and Cornia, 2001). This contradicts earlier theories of development which suggested that inequality is good for growth and, therefore, for poverty reduction through growth. This has, therefore, called attention to the role of inequality in the growth and poverty reduction process. Absolute poverty is a condition in which a person or community is deprived of, and or lacks the essentials for a minimum standard of well being and life. Since poverty is understood in many senses, these essentials may be material resources such as food, safe drinking water, and shelter, or they may be social resources such as access to information, education, health care, social status, political power or the opportunity to develop meaningful connections with other people in society (World Bank, 1995; Olayemi, 1995; Sancho, 1996; and World Bank, 2000). 150

5 Using this measure, 54.7% of Nigerians were living in poverty in 2004 but this increased to 60.9% (or 99,284,512) in 2010 (NBS, 2011). Poverty may also be defined in relative terms. In this view some disparities or wealth disparities are seen as an indicator of poverty and the condition of poverty is linked to questions of scarcity and distribution of resources and power. In 2004, Nigeria s relative poverty measurement stood at 54.4% but increased to 69% (or 112, Nigerians) in 2010 (NBS, 2011). Poverty may be seen as the collective condition of poor people or of poor groups and in this sense entire nation-states are sometimes regarded as poor. Although the most severe poverty is in the developing world with evidence of poverty in every region but in developed countries, examples include homeless people and ghettos. Poverty is also a type of religious vow, a state that may be taken on voluntarily in keeping with practices of piety. Economic growth is a market-based strategy and under this strategy attention is focused on those involving in the engineering of micro and macro economic policies and programmes in a manner that would ensure rapid growth of the economy. There are two anchor points for the attractiveness of the use of the economic growth strategy in poverty reduction. There are the need to generate income earning opportunities for the poor to enhance the prospects for job creation and thereby expand the scope of the poor to make use of their most abundant asset, labour, and produce additional resources of government that can be ploughed back for the provision of programmes for poverty reduction. The experts opined that the poor, benefit from economic growth strategy results because it is usually accompanied by improvement in the allocation efficiency of resource use. They maintained that this has the secondary effect of reducing distribution in relative prices; exchange rate regimes and trade policies. In Nigeria, where poverty is predominantly rural, economic growth strategy may engender favourable movements of terms of trade in favour of agriculture, pushing the rural income up. Changes in GDP measure the growth of an economy. An increase in GDP reflects increased productivity, hence, increased output of goods and services. It is, therefore, believed that as the output of goods and services increases, employment, and incomes rise, prices reduce and ultimately, poverty is alleviated. These benefits 151

6 of growth are indeed very significant and it is believed that, over time, these benefits would trickle down to the poor to banish poverty. These, therefore, explain the emphasis attached to growth as a panacea for poverty eradication. This emphasis is expressed in Rostow s growth theory that postulated the gradual elimination of poverty within societies as the economies grow. A more elucidating theory of growth is that by Simon Kuznets (1955) who used his U-shaped curve to hypothesize the existence of inequality at the early stage of growth and the eventual equality in the long run, as growth increases (Sagbamah, 1997). Growth strategy is seen as a veritable instrument for diversifying and developing human beings as ensuring sustainable poverty reduction. In the view of the World Bank, minimum growth of about 6.5 percent will be required to effect any positive change on the rate of poverty in Nigeria. The recent rebasing revealed that Nigeria s economy grew by 12.7 percent between 2012 and 2013, making it one of the fastest-growing in the world but its effect on poverty is not yet clear. The anti-poverty strategy of the World Bank (2001) depended heavily on reducing poverty through the promotion of economic growth. However, some considered this approach does not actively or directly work to reduce or eliminate poverty. The World Bank argued that an overview of many studies showed that: Growth is fundamental for poverty reduction, and in principle growth as such does not affect inequality. Growth accompanied by progressive distributional change is better than growth alone. High initial income inequality is based on poverty reduction Poverty itself is also likely to be a barrier for poverty reduction; and wealth inequality seems to predict lower future growth rates. However, recent data have introduced fresh challenges to the proposition that growth alone is what is required for poverty reduction. World Bank (2009) and Ijaiya et al. (2011) have demonstrated that using the Botswana, China, Brazil and Nigeria experience, deliberate poor policy actions may be inevitable in order to meaningfully reduce poverty. This position is taken having regard for two standard points. First is the failure of the popular trickle down effect of growth on the poor. That in these countries even at high growth rates, inequality still persists. Second, is the non-participation of some proportion of the poor especially the vulnerable groups in the growth process and their inability to seize the benefit of growth. 152

7 Again, not all growth-inducing policies improve the well being of the poor. For example, growth strategy anchored on capital intensive technology hardly benefit the poor while employment and income inducing growth strategy that encourage the participation of the poor in the growth approach as noted by Obadan (1997) is essentially a market based strategy. So, complementary strategies or programmes become necessary in order to take care of those who fall through the cracks of the market. Furthermore, the experience of SAP in Nigeria has shown that policy reform geared towards inducing growth hurt the poor. This was why in many African countries that have undergone policy reform; there was subsequently the implementation of SAP with human face. The structure of the human face component of growth inducing reform must engender capital development, social service, safety nets and so on. These represent the necessary complement to growth strategy that can benefit the poor on sustainable basis. Inequality and poverty and their relationship to economic growth were emphasized in some periods in the history of economic thought, and relegated to the background in others. During the last thirty years, however, interest in the problems of inequality and poverty in the less developed countries (LDCs) has been rekindled, especially in Sub-Saharan Africa (SSA). This growing interest is due to the broadening of the SAPs to include a social dimension. Governments and donors alike now realize that successful adjustment programme cannot ignore the needs of the poor. The empowerment of the marginalized poor has been extensively articulated in non-governmental organization (NGO) literature in Asia. The general belief is that the poor are disproportionally located in the rural areas and are primarily engaged in small-scale agriculture and its associated activities. The majority of the very poor are, therefore believed to eke out a living from subsistence agriculture, either as small-scale farmers or low paid farm workers. The remaining poor are located partly in rural areas, and partly on the fringes of urban centres where they engage in various forms of self-employment such as street hawking, trading and petty services. The Trend of Poverty in Nigeria A chronological review of poverty situation in Nigeria showed that it has been a long-standing issue. In 1993, when the nation witnessed the first positive oil shock there was a dramatic positive impact on most indicators. Real per capital incomes and per capital private consumption rose sharply between 1993 and 1994, and there was a dramatic increase in real wages, particularly in the non-agricultural sector. Poverty declined during this period, the 1995 to 2000 were characterized 153

8 by mixed picture and mild progress in welfare and poverty improvement. For instance, average per capital income continued to rise rapidly until 2000, but private consumption per capital remained stable. Real wages in agricultural sector continued to rise until 1996, after which they remained relatively constant until There was however, a sharp fall in real wages in the non-agricultural sector, proportion of people in poverty did not decline over this period. The scourge of poverty on a significant proportion of the Nigerian population has been charted in the past by a series of four consumer expenditure surveys implemented by the then Federal Office of Statistics: in 1960, 1992 and Over the 16-year period, the report of the surveys indicated that poverty was most widespread in the rural areas and also feminised. The desire and commitment of the government to tackle the deplorable high incidence of poverty pointed to the need to develop a baseline survey, the Nigeria Living Standard Survey (NLSS), 2003/2004 for the monitoring and evaluation of the various governments anti-poverty programmes such as National Poverty Eradication Programme (NAPEP), National Economic Empowerment and Development Strategy (NEEDS), Nigeria Millennium Development Goals (MDGs) and the most recent Vision In table 1 below the national incidence of relative poverty increased sharply both between 1980 to1985 and between 1992 and The national incidence of relative poverty dropped from 65.6 percent in 1996 to 54.4 percent in 2004 representing 11.2 percent decline over the period. A decomposition of growth between 1980 and 2006 into growth and redistribution shows that about 90 percent of poverty increase are due to fall in real incomes. While it remained constant at 54% between 2008 and This disaggregation by sector showed a sharper decline in the urban areas between 1996 and 2004 but increased in In the urban areas it declined from 58.2 percent in 1996 to 43.2 percent in 2004, which represented a decline of 15.0 percent. In the rural areas, it declined from 69.8 percent in 1996 to 63.3 percent in 2004 representing 6.5 percent decline (NLSS, 2008) and increased in 2010 to 69.7 percent (NBS, 2011). 154

9 Table 1: Trend in Poverty level in Nigeria between 1980 and 2010 in (%) Year Poverty level (%) Estimated population in poverty Source: CBN Bulletin Percentage Population Poverty Figure 1 below shows the actual and targeted poverty incidence in Nigeria for proportion of the population living on less than $1 (PPP) per day. At the year 2000, the percentage of the population living in relative poverty was 60 per cent. This is supposed to fall to per cent in 2015 in line with the MDG1 target. In 2007, which was the mid-point for implementation of the relevant MDG programmes in Nigeria, the percentage of the population living in extreme poverty should have fallen to per cent, if the MDG target was to be met. The data for 2004, 2008 and 2010 showed that 54.4%, 54.4% and 54% respectively of the population live in relative poverty. of in Urban Rural m m m m m m m

10 Figure 1: Actual and targeted poverty incidence in Nigeria One of the peculiar characteristics of macroeconomic change and poverty dynamics in Nigeria is the paradox of growth without poverty reduction. In the case of Nigeria, what is becoming clear is that rapid economic growth though important is an insufficient condition for poverty reduction. The result of the 2007/2009 survey revealed that the national incidence of poverty using food consumption of 2000 calories limit was 36.6 percent but when disaggregated by sector gave 26.5 percent and 44.1 percent for urban and rural areas respectively. However, the national incidence of poverty combining food consumption of 2900 calories with a component of non-food was 54.7 percent. Further sectoral disaggregation showed urban poverty rate of 43.1 percent and rural poverty rate of 63.8 percent. The Dollar per day gave a national poverty incidence of 51.6 percent. The urban poverty incidence was 40.1 percent compared with rural poverty incidence of 60.6 percent (NLSS, 2010). 156

11 The subjective measure of poverty, which was a self-assessment, indicated a national incidence of poverty of 75.5 percent, which disaggregated into 70.7 percent for urban areas, and 79.2 percent for rural areas. This measure generally increased poverty results because it is based on perception of the people. The Gini coefficient was used as a measure of inequality in the report. The national Gini coefficient was , while those for urban and rural areas were and respectively. These high figures at all levels are manifestations of poverty and inequality in the distribution of income (NLSS, 2010). The status of health survey result revealed that about 8.0 percent of the population consulted health care providers because of low level of awareness, poor facilities and high cost. The quintile analysis showed that about a quarter (25.56 percent) of population in the first quintile (the poorest) and more than half of the population (56.0 percent) in the fifth quintile (least poor) consulted medical doctors. The same survey indicated reasonable consultation of traditional healers by all levels of quintiles. About 12.0 percent of the population of the first quintile and 8.0 percent of the population of the fifth quintile consulted traditional healers (NLSS, 2010). Education is a good measure of human development. The correlation of levels of education with levels of poverty serves as a good measure for manifestations of poverty across the quintiles. The findings showed increasing trend of ever attending school with increasing level of quintile. About 70.0 percent of the surveyed households had ever attended school. The ability to read and write in English language could determine the voicelessness and powerlessness of the population. The results showed that about half (52.1percent) of the households could read and write in English language. The quintile results showed an increasing figure with increasing levels of quintile. The poorest quintile had 0.1 percent compared with 66.1 percent of the least quintile. On the highest level of education attended, about half (48.0 percent) of the households in the first quintile had no education compared with 25.0 percent of the households in the fifth quintile (NLSS, 2010). The net enrolment ratio in primary education in Nigeria was 68 per cent in Since then, it has shown a slow but steady increase, especially over the past years. As at 2008 the gross enrolment ratio stood at 88.8 per cent. Progress recorded from 2004 to 2010 showed that net enrolment has been on the increase (Multiple Indicator Cluster Survey 2011). The housing conditions of households can also serve as proxy for welfare measurement. About two-thirds (60.0 percent) of the households lived in single rooms, while about one quarter (24.1 percent) of the households lived in whole 157

12 buildings. Seventy percent of the households used firewood as the main source of fuel for cooking, more than a quarter (26.6 percent) used kerosene, while only 1.1 percent used gas. The use of mud for wall construction was highest (58.5 percent) for the poorest households, while the use of cement or concrete was highest (66.0 percent) for the least poor households. The overall access to safe water in the households was 58.3 percent. The usage of unprotected well or rainwater was highest (23.0 percent) in the poorest quintile while the usage of pipe-borne water was highest (28.0 percent) in the least poor quintile, the fifth quintile (Harmonized Nigeria Living Standards Survey, 2009). Male-headed households were more likely to be in poverty. The trend results showed for male-headed households that relative incidence of poverty varied increasingly from 29.2 percent to 58.2 percent from 1996 to The results for the female-headed households also varied increasingly from 26.9 percent to 43.5 percent from 1996 to The literacy rate was highest for the males who could read and write in English. The rates were 59.8 percent and 44.6 percent for male-headed and female-headed households respectively. The overall average of school attendance was 54.0 percent for males and 46.0 percent for females (NLSS, 2010). The quintile analysis showed a high degree of disparity on expenditure pattern. The poorest per capita expenditure were N4, on food and N3, on non-food, while the least poor per capital expenditures were N29, on food and N39, on non-food. The urban households expended more on food and non-food compared with rural households. The urban households per capita expenditure on non-food almost doubled that of the rural households. The figures were N25, and N13, respectively. The per capita household expenditures on food were N18, and N16, in urban and rural areas respectively, which still showed higher expenditure in urban areas. The rural households expended more of their income on food (NLSS, 2010). Between 1990 and 1995, there was clearly a serious deterioration in welfare and increase in poverty during this period, average per capital income, private consumption per capital; real wages in both agricultural and non agricultural activities fell after The 1995 to 2002 were characterized by real income, per capital private consumption and overall welfare of Nigerian that remained below 1990 situation. Between 1993 and 1999, real wages in agriculture and non agriculture fell while real per capital income, real per capital consumption and real wages were at lower than what they were in So, over this period welfare was lower and poverty higher than the pre oil boom years of the early 1970s. 158

13 Table 2: Cross-Country Comparison Of Social Indicators. Year Brazil Bangladesh Nigeria Philippines Gabon Undernourished (% of total population) Life-expectancy at birth (years) GDP per capita (PPP US$) Human development index Gini (inequality index) na Adult literacy above age 15 (%) Poverty incidence (%) Source: Human Development Report, 1990, In spite of the fact that Nigeria ranked high among other countries in terms of gross domestic output, most social and economic indicators have relegated the economy to a category of underdeveloped country. From the above table 2, the Human Development Index (HDI) ranked Nigeria lowest. The HDI is a composite index that reflects three indicators: life expectancy at birth; educational achievement, which is a combined measurement of adult literacy (two-thirds weight) and the gross primary, secondary and tertiary enrolment ratio (one-third weight); and per capita GDP (in PPP US$). The three indicators are important factors in measuring the state of deprivation in a state. Poverty in Nigeria is characterized by high illiteracy level, prevalence of malnourishment, high incidence of major disease outbreak, gender inequality, income disparity and unemployment. Looking at the Gini index, there is a clear indication that Brazil has the highest inequality rate. Holding from past records, there has been a slight decline in the coefficient. Nigeria and Philippines also have high income disparity among her social class. This is attributable to corruption. 159

14 In table 3 below, a simulation of growth and poverty dynamics undertaken by the World Bank revealed that the aggregate economic growth of not les than 7.5 percent will be required to improve the level of poverty. Indeed to achieve a decline in poverty, growth in the economy should not be less than 7.5 percent. Table 3: Growth Rate and Poverty Simulation between1996 and Year growth scenario Head count index percent Depth percent Severity percent Gini index GROWTH RATE = 6.0 P.A GROWTH RATE = 7.0 P.A Source: D. Olu Ajakaye & V.A. Adeyeye, The Nature of poverty in Nigeria,

15 It was stressed that for growth to move in the same direction with poverty reduction, it has to be growth with equality. The poor must also actively take part in the growth process through among other things the full utilization of their greatest asset, their labour. Poverty reduction strategies that are put in place must also fully factor in the attributes of the poor. Therefore, what should be seen as planning defeat in poverty reduction initiatives in Nigeria is that, as at the time Nigeria experienced economic growth, the participation of the poor optimal utilization of their labour and full factoring of their attributes in programming poverty reduction strategies were missing. So GDP growth rate did not translate to poverty reduction in Nigeria. As seen in Table (4) poverty head count index was 27.2 percent in In 1985, 1992 and 1996 they were respectively 46.3, 42.7 and 65.6 percent. From the table, it can be seen that while some growth can be observed in the economy, poverty is also in the increase. This depicted a paradox of growth moving in the same direction with increase in poverty. Table 4: GDP Rate and Poverty Measures Year GDP at 1984 Factor Cost (N billion) Source: CBN 2011 GDP Growth Rate Poverty Head count 161 Index

16 Section 3 Problems of Economic Growth, Poverty and Economic Inequality Essentially, there are a number of problems with the economic growth strategy. First, although economic growth is necessary for poverty reduction it is not sufficient, as growth alone cannot overcome the entire important factors that contribute to poverty. Although, in general, policies fostering economic growth facilitate poverty reduction, some types of growth clearly do not help the poor. For example, capital intensive or skill intensive industrialization and commercialization project can delay reduction in poverty among the unskilled and assetless. The centripetal forces of growth with increasing returns can draw resources away from background regions, as economic geographers have repeatedly shown, increasing poverty for those left behind. Large development projects demanding the environment may uproot and disenfranchise sections of the poor from their traditional habitats and restrict their access to polled resources. In most of these cases, those who gain can afford to compensate the losers, but in the actual political process, they seldom do. Second in most developed regions with high growth rates, there has been continuing poverty, thus raising doubts about the trickle down effect. For example, World Bank reports indicated that the quality of life for the poor in China improved rapidly in the early 1980s driven by first rural growth. But later, despite steady GDP growth, poverty reduction slowed in the mix 1980s as the locus of expansion sighted to urban and coaster regions. Thirdly, the benefits of growth have often been concentrated in some societies, contrary to the need of them to be widely shared for growth to have the greater impact on poverty. The distribution of growth, in turn, is critical in determining which groups benefit from expanding employment and income earning opportunities. Emphasizing growth in agriculture in remote poor region, or urban slums could improve the extent to which various groups, including the poor benefit. Fourthly, the economic growth approach is essentially a market-based strategy. Complementary strategies/programmes have to be evolved to take care of those who fall through the cracks of the market. Fifthly, policy reforms not only contribute to economic growth, but also work to the disadvantages of the poor. Some reforms particularly those associated with stabilization programmes can hurt the poor. Therefore, governments have to be 162

17 attentive to the adverse effects of reforms polices on the poor and some others who lose out (e.g. civil servants who are laid off). Other problems militating against the alleviation of poverty and economic inequality in Nigeria are: Government policy shift in government State of infrastructure Enabling environment- Political and economic Level of literary Access to education in term of creativity High level of corruption and poor ethical standard Inadequate security. Section 4 Data Analysis And Interpretation To place both our overall and specific objectives in proper perspective, and empirically measure the direction of economic growth, inequality and poverty in Nigeria, we followed the model of Aigbokhan (2008). Based on our conceptual framework calibration of (material resources and social resources) and the theoretical arguments, we specified our equation based on extension of the work of Aigbokhan (2008) by including health, per capita income and access to information or social status as the case may be. Hence, our equation is thus given as: GDP = a 0 + a 1 Age + a 2 Sex + a 3 Edu + a 4 Hlth + a 5 PCI +A 6 SS + E Where GDP = Gross domestic product which is used as a proxy for economic growth. a 0 = intercept. Age = Age of the household heads Sex = Gender of household heads Edu = Level of education of household head Hlth = Health status of household head PCI = Per capita income SS = Social status of household head E = error term. 163

18 Results of findings Table below revealed our regression estimates. Our estimates were based on Aigbokhan s (2008) survey data on poverty determinants in Nigeria. Regression Results: Variables Co-efficient Std. error t-values P values Constant ** Age Sex *** Education * Health Per capita income e -012 Social status R 2 = F ( ) = Adj. R 2 = DW = Prb > F No of observation Variance Inflation Factors (VIF) Minimum possible value = 1.0 Values > 10.0 may indicate a collinearity problem Age Sex Education Health Per-capital-income Social Status In order to justify the estimation technique used, autocorrelation and multicollinearity tests were carried out. Since R 2 is less than Durbin Watson value the model is not spurious and there is no autocorrelation among the variables. Also, the variance inflation factors (VIF) for the variables were less than 10, so there is no multicollinearity. The regression result as presented above showed that, the level of health and social status increased as the education level of household heads moved up. This was evident in the positive sign of the coefficient of evaluation and some t-values. 164

19 However, this trend and obtained signs suffix it to say that, with less educational attainment, health status as well as the social status will be lower, hence the more likely the poor. It should be noted this is consistent with the evidence in Table 4. Our result here is corroborated by the results of Aigbokhan (2008). Further, the result showed that, the health profile is lower, and this is likely to be dominant in larger households. The effect of this trend however is that as there are more larger household, welfare, social status and educational attainment, as well as per capital income decline, hence a higher probability of being poor. The reverse is the case where households are small. On the part of the sex and age variables, their statistical values were pretty low, but quite significant as determinants of poverty. (For clarity see Aigbokhan, 2008). In sum our variables revealed that, as they show decline, the GDP (which is a measure of economic growth) will also fall. In this wise therefore, we can tentatively, based on our specified objective that, both material and social resources do have impact on poverty in Nigeria. As regards our third objective, we drew up a submission from the first and the second objectives that, for health, education, per capita income variables to be on the decline and thus having significant effect on overall output measured by the GDP, it thus impressed on us that, income have significant roles for; better education attainment better health services Improvement in social strata etc. If the above assertion is therefore recognized, the level of income will impact on the macro economic aggregates, hence an increased level of income will jerk up GDP and vice versa. 165

20 Section Five Conclusion Nigeria economy experienced sluggish growth rate in the 1980s up till the late 1990s. During the period, poverty incidence rose markedly from 28.1 percent in 1980 to 65.6 percent in 1996 and it remained constant at 54% between 2008 and Income inequality also rose from 0.43 in 1985 to 0.49 in Ironically, this period witnessed a resurgence of interest of the international development community in the issue of poverty and equity. With the increased international focus on poverty reduction, the democratic government, which came into office in May 1999 quickly, embraced the concern and initiated a number of economic and institutional reforms aimed at improving economic management and good governance. Government specifically introduced poverty alleviation programmes and policies. The national living standard survey conducted in 2003/2004 by the National Bureau of statistics thus provided the first opportunity to assess the impact of these reforms on poverty and inequality within the context of the much improved growth rates recorded since Analysis based on the survey data suggested that poverty incidence fell from 65.6 percent in 1999 to around 54.4 or 57.0 percent, based on NBS estimates and estimates of Aigbokhan, Recall the evidence by Ravallion (2001) and Addison and Cornia (2001) that rising inequality slows down the rate of poverty reduction, given the growth rate, and that for growth to appreciably reduce poverty in the face of high inequality, a growth rate in the neighbourhood of 9 percent is required. On the basis of this argument, and the fact that measured income/expenditure inequality in Nigeria remained at in 2004 (0.49 in 1996) and growth rate averaged 6.1%, it could be inferred that the official estimate of 54.4 percent may be an underestimation (Aigbokhan, 2008). It could be concluded that poverty incidence showed a marked decline since the 1990s in Nigeria, just as the economy witnessed impressive real growth rate. However, based on prevailing level of inequalities in both income and non-income dimensions of welfare, it could be argued that poverty incidence may be higher than official estimates suggested, and more progress in poverty reduction, particularly in the context of MDGs, would have been recorded if growth had been more equitable than available evidence suggested. In other words, there is room to make growth more pro-poor to enhance rapid reduction in poverty with growth. 166

21 Recommendations In view of the various review and analysis carried out based on the above findings and conclusions drawn, the following recommendations are made: Radical change of the economic system through restructuring Improving the social environment and abilities of the poor Investing in basic and technical education to raise the supply of skilled labour. Improving social health care Encouragement of good governance The governments can directly help those in need especially for those most at risk, such as the elderly and people with disabilities in terms of monetary or food aid. Inequality can be reduced by progressive taxation, wealth tax and inheritance tax. REFERENCES Addison, A. and G.A. Cornia (2001): Income Distribution Policies for faster Poverty Reduction, UNU-WIDER Discussion Paper No. 2001/93 (September). African Development Bank (ADB) (2008): Economic and Social Statistics on Africa. African Development Report New York: Oxford University Press. African Development Bank (2010) Gender, Poverty and Environmental Indicators on African Countries 2010 Abidjan: ADB. Ajakaiye, D. Olu and Adeyeye, V.A. (2992): The nature of poverty in Nigeria, Nigerian Institute of Social and economic Research (NISER) Ibadan, Niser monograph, series No 13. Akeredolu, Ale (2000): Social Revolution in Antidote to poverty, The Punch Friday December 8, page 12. Amartya, Sen (1982): Poverty and Famine: An Essay on Entitlement and Deprivation Oxford University Press. Atoloye, A.S. F. (1997): Strategy for Growth led Poverty Alleviation in Nigeria CBN Economic and Financial Review, vol. 35, No 3. Alayande, B. (2003): Decomposition of Inequality Reconsidered some evidence from Nigeria development policy Centre, Ibadan. Aigbokan, B.E. (1997): Poverty alleviation in Nigeria: Some macroeconomic issues. Nigerian Economic Society Annual Conference proceedings (edited). 167

22 Aigbokan, B.E. (2000): Poverty, Growth and Inequality in Nigeria: a case study, African Economic Research Consortium Research Report No. 102 (October). Aigbokan, B.E. (2008): Growth, Inequality and Poverty in Nigeria. United Nations Economic Commission for Africa (UNECA), Addis Ababa, Ethiopia. ACGS/MPAMS Discussion Paper No. 3 (February). Betson David M and Jennifer, L. Warlick (1998): Alternative Historical Trends in Poverty. American Economic Review, , in JSTOR. Canagarajah, S; J. Ngwafon and S. Thomas. (1997): The evolution of poverty and welfare in Nigeria, Policy Research Working Paper No (January). Dollar, D. and A. Kraay (2000): Growth is Good for the Poor, World Bank (Mimeo) (March). Deaton, A. (1997): The analysis of Household Surveys A macroeconomic Approach to Development policy. Baltimore: John Hopkins University Press, for the World Bank. Egware, L. (1997): Poverty and Poverty Alleviation: Nigerian Experience, Research and Financial Review 39, NO 2, Fakiyesi, O.M. (2001), Encouraging growth to reduce poverty in Nigeria, CBN Economic and financial, CBN, Abuja. Economic and Financial Review vol. 39, NO 2. Fei, J.C.; G. Ranis and S. Kuo. (1978): Growth and the family distribution of income. Quartely Journal of Economics, vol. 92, 1 (Feb): Firebaugh Glenn (2000) Empiricism of World Income Inequality: American Journal of Sociology 104: in JSTOR. Foster, J.; J. Greer and E. Thorbecke (1984): A class of decomposable poverty measures. Econometric, 52, 3 (May): Gblobal competitiveness report (2006): World economic Forum, (1) ( Org/en) Growth and Poverty Reduction: Cross-Country Evidence ( 2004). Gordan, David, M. (1972): Theories of Poverty and Underdevelopment: Orthodox, Radical and Dual labor Market perspectives. Greer, J. and E. Thorbecke. (1986): A methodology for measuring food poverty applied to Kenya. Journal of Development Economics, 24: Grootaert, C. and R. Kanbur (1990): Policy-oriented analysis of poverty and the social dimension of structural adjustment. SDA Working Paper, Policy Analysis. Washington, D.C.: The World Bank, January. 168

23 Haveman, Robert. H. (1987): Poverty Policy and Poverty Research, University of Wisconsin Press. Huppi, M. and M. Ravallion (1990): The sectoral structure of poverty during the adjustment period: Evidence for Indonesia in the mid-1980s. Policy Research and Economics Working Paper 529, The World Bank. Ibru, C.A.O (2000): Poverty Alleviation from the Grassroots: Problems Prospects and Modalities: The Nigerian Banker (July December). Ijaiya, G.T.; Ijaiya, M.A.; Bello, R.A and Ajayi, A.A. (2011): Economic Growth and Poverty Reduction in Nigeria. International Journal of Business and Social Science. Vol. 2 No. 15; August. Kakwani, N. (1990): Poverty and economic growth with application to Cote d Ivoire. Living Standards Measurement Survey, No. 63, The World Bank. Kanbur, R. (1987): Measurement and alleviation of poverty. IMF Staff Papers, vol. 34, No. 1 (March): Maasland, A. (1990): Methods for measuring the effect of adjustment on income distribution. Policy Research and Economics Working Paper 474, The World Bank (August). Mellor, J.B. (1999): The Structure of Growth and Poverty Reduction, (Mimeo) World Bank, Washington D.C. Menjo, f. Baye (1998): Inequality and the Degree of Poverty among Public Sector Workers in Cameroon, Faculty of Economics Management, University of Yaounde, Yaounde, Cameroon. Olayemi, J.K. (1995): A Survey of Approaches to Poverty Alleviation. A Paper presented at the NCEMA National Workshop on Integration of Poverty Alleviation Strategies into Plans and Programmes in Nigeria, Ibadan, Nov. 27- Dec. 1. Obadan, I. Mike (1997): Analytical Framework of Poverty reduction, Issues of Economic Growth Versus other strategies. Patrick, E. Archibong (1997): Nigeria: Towards a realistic and integrated anti poverty strategy. Department of Economics, Faculty of Social Science University of Uyo, Uyo. Poverty Growth and Inequality World Bank org (http;;/web. World Bank org/ WEBSITE/EXTERNAL/TOPICS/ENT POVERTY/ENT PG 1/0). Poverty Reduction Strategy Papers (PRSP). http// org/external/np/prsp/ prsp.asep). 169

24 Ravallion, M. and M. Huppi (1991): Measuring changes in poverty: A methodological case study of Indonesia during an adjustment period. World Bank Economic Review, vol. 5, No.1 (January): Ravallion, M. and B. Bidani (1994): How robust is a poverty profile? World Bank Economic Review, vol. 8 No. 1, (January): Ravallion, M. and G. Datt (1996): How Important to India s Poor is the Sectoral Composition of Economic Growth? World Bank Economic Review vol.10, pp Rector, Robert E and Johnson, Kirk, A. (2004): Understanding Poverty in American (Http: // tempovety summary, Heritage foundation January 15, No Sagbamah, James.E.I. (1997): Macroeconomic Issues In Poverty Alleviation: The Nigerian Experience. In Poverty Alleviation in Nigeria, Proceedings of the 1997 Annual Conference of Nigerian Economic Society. Sancho, A. (1996): Policies and Programs for Social Human Development. A hand book produced by the United Nations World Summit for Social Development. International Centre for Economic Growth, San Francisco. Smeedin Timothy, M. Michael O Higgins and Lee Rainwater (1990) Poverty, Inequality and Income Distribution in comparative perspective, Urban Institute Press. Taddesse, M.; B. Kebede and A. Shimeles (1997): Economic reform, growth and poverty in Ethiopia: Evidence from household panel data. Interim report presented to the African Economic Research Consortium Biannual Workshop, Nairobi, December. The disturbing Rise of global income inequality edu/-xs/ papers). The Geography of Poverty and Wealth ( org/pdf/pah2.pdf) by Jeffrey D. Sacks. United Nations Development Programme (1998): Poverty Analysis Manual: With applications in Benin, Univesite Laval, Canada. World Bank (1995): Distribution and Growth: Compliment not Compromise. Policy Research Bulletin 6(3) May-July 6. World Bank (2000): Attacking Poverty, World Development Report 2000/2001, Oxford University Press, Oxford. 170