Source: The Conversation – Africa – By Stephen Onyeiwu, Professor of Economics & Business, Allegheny College
The Nigerian economy grew at a robust rate of 3.4% in 2024, the highest it has been since 2019 (except 2021 when the COVID rebound occurred).
This should have been cheering news, worthy of firecrackers and champagne-popping. Rather it came with a catch: the country’s poverty profile worsened.
In its annual review of the country, the World Bank applauded Nigeria for its economic reforms. These include the removal of fuel subsidies, liberalisation of the foreign exchange market and maintenance of a contractionary monetary policy. This is a policy of raising interest rates, reducing money supply and increasing borrowing costs to rein in inflation.
But the bank also drew attention to the fact that the country’s poverty profile has become grim. About 31% of Nigerians lived in poverty prior to the COVID-19 epidemic. Since then, an additional 42 million have become poor, increasing the poverty rate to about 46% in 2024.
Poverty is even worse in Nigeria’s rural communities: 75.5% live on US$2.15 or less per day (based on 2017 prices). The average poverty rate for sub-Saharan African countries was 36.5% in 2024 and 0.8% for East Asia and the Pacific.
Nigeria’s poverty rate would have been higher if the multidimensional poverty index had been used. In addition to income, the index considers access to education, health, decent housing, nutrition, sanitation, electricity and water. Access to these critical services has worsened for many Nigerians, despite improvements in macroeconomic stability.
Read more: Poor rural infrastructure holds back food production by small Nigerian farmers
A challenge for policy makers is how to translate impressive macroeconomic outcomes into high-paying jobs, lower poverty rates and access to health, good sanitation, education, electricity and affordable housing. The question is even more acute for people in rural areas.
As an economist who has studied the Nigerian economy for over four decades and lived in a rural community, I believe Nigeria needs a radical shift in its economic policy approach.
One major step should be a change in the country’s growth drivers. Oil, information and communications technology and finance are the major drivers of growth in Nigeria.
These sectors are not employment-intensive, and they require skills that most Nigerians don’t have. Because of the lack of employment opportunities in these sectors, most Nigerians gravitate towards the informal sector, which accounts for about 90% of employment in the country.
By continuing to urge Nigerians to be patient for economic reforms to have a positive impact on their living conditions, the Tinubu administration appears to assume that improvements in macroeconomic performance will eventually manifest in lower unemployment and poverty rates. This notion of “trickle-down economics” is misconceived and illusory.
The government needs to intentionally create transmission mechanisms through which economic growth and macroeconomic stability can raise living standards.
Fostering growth with development
Concerted efforts will be needed to target poverty in general, and rural poverty in particular.
Five key policies could get Nigeria closer to this goal:
Building productive capacities: People who live in rural areas in Nigeria are eager to work and full of creative ideas and entrepreneurial spirit. But they lack the resources and opportunity to fully unleash their potential.
Building their productive capacities would entail giving them access to basic education, technical and managerial skills, and other productive resources such as tools, equipment, finance and land. The government should identify the comparative advantage of different rural communities, and put in place policies that encourage those communities to use their comparative advantage and distinctive competencies.
Opportunity to diversify incomes: In developed countries, many people hold multiple jobs. Most rural dwellers in Nigeria, however, rely on agriculture as their only source of livelihood.
Because of limited access to inputs and modern technology, and outdated agricultural practices, their productivity is often very low. Their low income makes it difficult to save and invest in education, health and housing.
Non-agricultural activities, especially manufacturing, need to be located in rural communities, to give rural dwellers the opportunity to diversify their income sources.
Agriculture-led industrial strategy: This would involve the location of manufacturing plants close to the sources of agricultural raw materials.
Nigerian manufacturers locate their factories in urban areas. The result of urban-biased development strategy in Nigeria has been the lack of employment opportunities in rural communities, and a decline in the rural population, from about 85% in 1960 to 46% in 2023.
Moving manufacturing to rural areas would require massive investment in infrastructure such as electricity, water, roads and health services.
Read more: Nigeria’s new blue economy ministry could harness marine resources – moving the focus away from oil
Ending patriarchy and male domination: Women disproportionately bear the burden of rural poverty in Nigeria. A study in rural south-east Nigeria found that the poverty rate among women was 98%, compared to 85% for men. Men are often given preference regarding access to land, education, skills acquisition and financial inclusion.
Women are also imbued with the responsibility of caring for children, the elderly and the sick, as well as household chores. This leaves them with little time for paid work or opportunities to acquire marketable skills.
Ability to absorb shocks and vulnerability: Rural poverty is often exacerbated by shocks and vulnerability such as extreme weather conditions, attacks by insurgents and other criminal groups, and illness. With no safety nets, and little or no saving, most rural dwellers are unable to withstand shocks.
The Tinubu administration plans to disburse N25,000 (about US$17) each to 60 million Nigerians. But these kinds of support are too small, non-pervasive, irregular and unpredictable.
Read more: Nigeria needs to close the financial inclusion gap for women smallholder farmers
What India and China have to teach
Nigeria could do well to borrow from the Indian model of an institutionalised safety net.
India issues “ration cards” to eligible households. The cards enable poor people to purchase essential food items such as grains, milk, eggs, cooking oil and bread at subsidised prices from designated stores.
Nigeria could finance this kind of programme with a special tax on oil companies and financial institutions, which frequently post huge after-tax profits.
China has had an impressive record of poverty reduction. Using the US$1.90 poverty line, China’s poverty rate decreased from 88.1% in 1981 to 0.3% in 2018.
The fall in rural poverty is even more dramatic, from 96% in 1980 to 1% in 2019.
This reduction was accomplished in stages, starting with an increase in agricultural productivity. It then shifted focus to the development of non-agricultural sectors of the economy, including manufacturing. These sectors were able to draw surplus labour from the agricultural sector, giving them skills that led to higher wages and poverty alleviation.
Read more: Poor rural infrastructure holds back food production by small Nigerian farmers
Next steps
The World Bank in its report noted that addressing pressing social and humanitarian challenges remains critical to ensuring inclusive and sustainable growth in Nigeria.
Cash transfers and social assistance programmes could provide temporary relief for the poor in rural communities. But a long-term solution is to build their productive capacities and transform rural communities in ways that provide opportunities for income diversification.
– Nigeria’s economy is growing but rural poverty is rising: 5 key policies to address the divide
– https://theconversation.com/nigerias-economy-is-growing-but-rural-poverty-is-rising-5-key-policies-to-address-the-divide-257152
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