Inequality and Development in Nigeria

ImageImageIn 2011, it was reported that 80% of the world’s wealth was in the hands of 20% of the richest population. In many developing countries inequality remains on the rise even as the population of absolute poverty declines.  More broadly, comparative studies by the IMF, UNDP, UNICEF and the World Bank shows that inequality is detrimental to development and sustainable economy growth thereby, having a direct negative impact for long-term poverty reduction.

Sometime in September 2012, one of Africa’s wealthiest men Aliko Dangote, caused an upset uproar with the announcement that he was offering to pay graduates willing to drive trucks half a million Nigerian Naira monthly. Qualifications for this driving position included requirement of HND, OND, and BSC; meanwhile the average truck driver in Nigeria earns between N40,000- N120,000 monthly depending on experience. As expected thousands of applications poured in and to the amazement of many, a PHD holder applied for this position and the whole country was awash by the idea of earning a PHD to drive a truck across the country. While this was nothing out of the ordinary considering the deepening intensity of unemployment rate in Nigeria, this was very significant in that it re-enforced the ideology that in Nigeria, education is just but a piecemeal and that inequality was taking permanent residency in this country.

As at the last census, Nigeria was 160 million in total population, I am certain the figure has increased, but for the sake of this post we are 160 million. The National Bureau of Statistics (NBS) analysis of the national consumption expenditure showed that 96million Nigerians have just 20% purchasing power in the country, what this means is that inequality is soaring and the “big fish” popularly known as the giant of Africa suddenly seems helpless. Despite economic growth since the inception of democracy, inequality continues to grow as much if not more. What could be the problem?

The questions lawmakers, economists, development practitioners and our “dear aid agencies” should be concerned about are as follows; (1) what is fueling the disparities between the minorities; the halves, “barely surviving” (middle class) and the most vulnerable (poorest of the poor) in our society? (2) What are the consequences? (3) What steps should be taken to reduce/ salvage the situation NOW?

Without a doubt, Nigeria’s economy is experiencing some level of growth but inequality is growing just as much, if not more. Before I proceed, I will like to state that I do not believe in the “good cause” of achieving “equality for all”. Equality exists only in the dictionary, in reality no country or individual will ever be totally equal to another, as each is separated by ‘common factors’ giving one an edge over another and in all scenarios the superior will go to great measures to protect this ‘common factor’. I am more inclined to the basic needs framework; providing equal opportunity for survival to all. Poverty can be defined as the lack of capacity to achieve a socially defined basic standard of living in any given society. As a result of political instability, the Nigerian economy was in dire stress in 1980s and poverty rate was sky-rocketing. Factors such as the decline in the price of oil; the country’s major source of income, the rise in international interest rate and the pressure of foreign debt contributed to the economic downturn of the 1980s.  As a result of inappropriate policies to counter-manage the above scenarios, the Nigerian economy was left vulnerable to economic mishaps.

In the mid-1980s, economic reforms focused on the structural adjustment framework. These reforms included devaluing exchange rates, budgetary and monetary contractions. It was proposed that these steps would revitalize the economic growth and thus close the widening gap between the rich and the poor. Two decades down the line, regardless of some level of growth recorded, it is still as though we have grown in population but things are getting worst.

Subsequently, economic growth was recorded as a result of the “structural adjustment reform of the mid-80s. This success prompted the “love affair” Nigerian law and policy makers have with the almighty “structural adjustment policy framework, an affair still waxing stronger till date, without taking into account that times have changed and the state of poverty and inequality is growing more monstrous than it was in the 1980s.  It is not enough to compare result achieved over two decades ago to the 21 first century, what we all need to consider is, the state of inequality in the country since then and to evaluate if the changes of the 1980s was tangible in wealth and income dissemination or further widened the gap between the poor and the very wealthy Nigerians. The question of whether or not such divergences exist is obvious in the current state of affairs in the country. Nigeria is plagued with high tension, terrorism, unemployment, civil and religious war and to certain extent hopelessness particularly for the youth population who have degrees with no jobs forthcoming, and are forced to indulge in menial, criminal or violent activities just to stay alive. The sad part is, their children will follow this same path if nothing is done to arrest the situation. Although some studies suggested there was a decline in poverty rate in the first seven years of the 1980s policy reform, there has been little or no agreement or proof of the definite impact these reforms had on inequality thus reducing poverty at a substantial rate in Nigeria.

One of the major causes of poverty and underdevelopment in poorer countries is income inequality. In Nigeria the case is even more severe, the rich is getting richer paying the poor peanuts to work for them, and the middle class is somewhat in between nonexistent and struggling to keep up while the poor is progressively deteriorating.

What is fueling the widening disparity?

Dimensions aimed at minimizing inequalities should be cardinal to any development strategy for Nigeria. Sadly however, the political connotations involved in this process is not in favor with most international communities and development agencies’ recommendation for poorer countries and this is understandable; international communities are not superior to the law of any country regardless of their good intentions. It is almost as though such recommendations shy away from conventional models that have worked for the western countries, which has also started to work for parts of Latin America.

Instead, recommendations offered and adopted by poorer countries including Nigeria are a one size fit “growth-plus-safety nets” models with strong attachment to the role of the private sector in inducing growth.  Although, such recommendations seem like an updated version of the discredited “Washington Consensus” it approaches growth from the “trickle down” principle, failing to target inequality specifically. There are a lot of factors responsible for widening the gap between the rich and the poor in Nigeria, but the points stated below stand out for me;

Structural Adjustment Policy (SAP)

It is as though the Nigerian policy makers are still living in the 1980s and are more inclined to this policy. The bigger picture of the SAP tends to minimize the role government should play, and rather emphasizes on what citizens must sacrifice in raising more capital for the state. The sad part of this is that, in a country rid with a long history of corruption, poverty and inequality, how can the state expect citizens to sacrifice themselves for a state that cares nothing about them? There is a reason why it is called “structural adjustment” policy meaning; development is shaping, lets re-align the economy to benefit the perceived growth. It tends to work better in a more stable society and Nigeria is clearly not ready for this form of framework.

Despite the IMF and World Banks suggestions that this will reduce poverty, it has been heavily criticized. Following the Washington Consensus and neoliberalism approach, SAP is often recommended to poorer countries for selfish reasons; ensuring debt repayment. As a result, SAP often propels poorer countries to spend less on education, healthcare and overall development, while debt relief and economic growth at all cost gains priority.

For example in November 2012, the Lagos state government abruptly decided to place a ban[i] on motorbikes used for public transportation otherwise known as “okada” rendering thousands of poor people jobless and without hope of feeding. I spoke to an ex-okada man recently and he said “I am a 42 year old uneducated man with a wife and 4 children, I used to make roughly N4000 ($25) on a good outing daily to support my family and send my kids to school and today I have no source of income, there is no assurance of feeding daily and my children have no hope for the future”.

In my opinion, if a government cannot provide basic needs and social security for the poor, it has no right to take away their source of income leaving them stranded for whatever reason. SAP diminishes the role of government and turns the attention to what the poor should sacrifice for the government to generate more income for the state. Some may argue that Okada are hazardous and have killed many due to high speed and recklessness, I agree but what we must all bear in mind is that okada riders are just trying to survive too.

In essence, the World Bank and the IMF encourage countries like Nigeria rid with extreme poverty to pursue economic growth at the detriment of the basic needs of the poor. In effect, the poor continue to suffer in the midst of economic growth while inequality continues to gain more ground.

The Private Sector

The private sector contributes to 80% of employment in the labor market yet, there are no laws in place to regulate it. This feeds the idea that education is irrelevant and all you have to do is fight hard enough to get in government so you can “loot your turn”. In some firms, graduates with B.Sc. earn monthly as low as N40, 000($250), graduates with 2-3 degrees on the average earn as low as N80, 000 ($500) monthly yet in the same firms  few “so called” high level executives earn N800, 000 upward every month, this are mere examples some cases are worse. What is obvious about this illustration is that the private sector who are also the elite of our society are determined to keep this widening gap increasing, that is why they will never pay good enough for the poor to level up to them or their children who are groomed to rule over the poor in the future and thus this vicious circle will continue unless something starts happening now. Our employment laws are nonexistent, why should we expect any better from the private sector?

The logic is simply this; the Nigerian government stands to gain more from the private sector than protecting its citizens, after all the government thrives on bribery and taxation from the private sector and big old “aid” money from the international communities why should they work for the poor? I have a lot of respect and admiration for Dangote, but the idea of employing a graduate truck driver baffles me and who can blame him? Nigerians are desperate and are willing to do anything to earn a living, at least he offered half a million Naira monthly to a truck driver while accountants, teachers or doctors do not earn half of that in two months.

What we all need to internalize is that, the private sector is market driven and will never put the good of the poor before its needs of making profit and maintaining power; it is strictly business, neither can they replace the government. Due to the failure of the state to induce and regulate growth in Nigeria, the private sector has become “the god” of our economy and society at large.

There are a lot of abuses going on in work places, but people are desperate and left without choices so they continue to get abused in order to put food on their tables. For example some employees work all year round without an entitlement to holiday; and if you live in the “global traffic headquarters” Lagos state, that means you do not get enough sleeping hours which could be harmful to the health. Some work all week and through the weekend without additional pay for overtime.

However, in the words of Ekiti state Governor Dr. Fayemi “let’s not allow perfect become the enemy of the good”; the private sector is keeping sanity in the Nigerian labor market, but without government interference in the labor market to induce and regulate growth, “inequality” will keep soaring.

 The Basic Need Approach

Following, the European Commission’s “Agenda for Change” in October 2011, it was suggested that poorer countries should focus on “Inclusive and sustainable growth”. The idea of Inclusive growth places a high demand on meeting the basic needs of the society’s poor and vulnerable people thus positioning them to benefit from the economic growth. However, this agenda fails to grapple with the political sensitivity attached to what inclusive growth should mean in context. In August 2012, the EU commission opened a dialogue on “social protection communication”. The dialogue documentation recommended suggestions that placed social protection otherwise known as safety nets or in basic language the “basic needs” approach at the heart of communicating with poorer countries about their development. 

Without a doubt, the poor need good health and food, to enable them participate in quality education and appropriate skills; which will in turn grant them the opportunity to participate in economic activities. However, debates about poverty reduction methodologies are often too pessimistic neglecting reality and fail to acknowledge the role of enabling the poor to fend for themselves by providing basic human needs. It has become broadly accepted that economic growth will not by itself induce development (Osmani, 2006) and that providing basic needs and amenities is vital to reducing inequality and poverty on the long run (Chambers, 1995). The advantage of the basic need approach hinges on the notion that investing in the basic needs of poor people will yield economic dividends overtime and has an equalizing effect which could over time lead to sustainable development. Yet nothing in our policies today is geared towards ensuring attainment of the basic needs for all. Instead, the government every now and then finds itself trying to frustrate the poor who are only trying to fend for themselves.

The fuel subsidy removal earlier this year, although is a good idea as a non-transparent government, but asking the poor citizens to sacrifice and accept subsidy removal in order for the state to raise income is ridiculous. The appropriate approach would have been aligning development goals to meet the basic needs of the people in preparation for subsidy removal. The manner in which this was done will further increase the already growing gap between the rich and the vulnerable. Only the basic- need approach can reduce inequality and poverty rate in Nigeria.  This leads me to my final point;

The Role of Government

Nigerian government wants to seat back and watch the private sector and seasonal handout projects such as the YOUWIN and others do what it is supposed to do as a government. As demonstrated by China, the apprehension of the relevance of effective institutions has prompted the reassessment of the role of the state from an economic acceleration perspective. The World Bank(1989) ascertains that the major cause of underdevelopment in Africa is as a result of poor governance; indicating that the African states are unable to channel political power to managing state affairs and resources to benefit the poor. Acemoglu (2005) argues that both powerless and toxic states can stifle investments, and that the achievement of OECD countries has been to develop a combination of politically weak but economically strong states and as such, the economy continues to grow and the “powerless” continue to suffer.  Social, economic and political institutions extend along one another and affect developmental outcomes collectively. Thus, developmental success is predicated on negotiating institutional arrangements. The argument is that in theory, economic growth can reduce poverty, but in practice, strong efficient capacity (institutions) needs to be established to engineer and regulate growth and development processes to favor the vulnerable in Nigeria.

 Policy Implications

Regardless of the reported economic growth in Nigeria, poverty and inequality have worsened. What this means is that “the magical trickle-down effect” has failed to trickle down. This may be due to the disposition of the growth pursued and the macroeconomic policies that inhibits it. For example, there was an extensive abasement in the macroeconomic policy perspective. Although it did not prevent growth from happening, it was still unable to translate into reducing inequality, possibly because our economic growth is oil and private sector focused but for obvious reasons, cannot benefit the poor.

Secondly, the issue of dissemination relative to the concept of the disappearing middle class should be of utmost concerns for policy makers. If our government is concerned about sustainable development, the challenges of the middleclass should be of great relevance as the political expedience of policy reforms could be greatly influenced by what happens to this dynamic.

Furthermore, as evident by the current state of violence and terrorism in the country, broadening inequality will increase social tension, which may force policy makers to adapt self-governing measures contradictory to long term equality plans; for example wasting resources by paying thousands of dollars monthly to militant and now negotiating with boko haram to keep (temporary peace) while millions of children go to bed on an empty stomach daily in this country.  As a result, policy makers need to be more attentive to areas of meeting the basic needs of the poor, to ensure consistency in development. Also, our policies need to be well aware of the causes of the imbalance between the rich and the poor, so as to enable channeling resources to off-set such imbalance.

Thirdly, we cannot move forward if we continue to avoid the socioeconomic infrastructural facilities. In a slight divergence; China has Shanghai while Nigeria has Lagos as capital cities, but there is no comparison between the two cities. Infrastructural development is paramount in development. More broadly, the acknowledgment of the relationship between quality education and poverty reduction prompts an urgent need for Nigeria. Policy steps need to take actions that can improve access to and quality of education in Nigeria.

Lastly, our government, not the private sector, not investors, not international community, not aid money either, but our government, needs to become the frontier of development and start planning for the long-term growth.

In conclusion, its 2013,  Kogi, Benue, Edo, Delta, Anambra, Cross Rivers, Bayelsa, Kwara and Niger states were all heavily affected by flood last year; a lot of people were displaced, some died in the process. Victims were given relief from federal, state and international communities. However, are state governments planning for this year’s rainy season or suddenly forgotten about rainy season and flooding until it happens again?  Temporary handout is already out of fashion; our government needs to catch a quick train to the future.

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About rebeccaidd

Fun, passionate, inquisitive exploring development
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12 Responses to Inequality and Development in Nigeria

  1. Pingback: Inequality and Development in Nigeria | rebeccaidd

  2. Pingback: Rebecca Enobong: Inequality and Development in Nigeria | Under40preneur

  3. Adulugba inalegwu says:

    This is an excellent work, it made me to understand the society we are better. May the almighty God continue to inspire you with more knowledge and understanding. And above all wisdom.

  4. Pingback: Inequality and Development in Nigeria | YNaija OPINION

  5. Patience Essien says:

    This is quite inspiring. Infact, I am taking it up from here for my PHD Dissertation.

  6. You are blessed with knowledge of expression in your writing. The topics are fascinating.
    Please I need Rebecca’s full name

  7. Ibrahim Lawal says:

    An outstanding article. Please, am seeking your assistance; am doing a project on income inequality and I intend to narrow my scope to Nigeria and currently searching for data. I will appreciate your advice and guidance.

  8. Emmanuel Adeleke says:

    This is one of the best articles I have come across . I think the recommendations are quiet good and I will like to compliment it by with structural transformation in Nigerian economic landscape. Structural transformation induce economic development and at the same time comes with inclusive growth which results to decline in inequality.

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