ECONOMY - 20 DEC 2017

Inequality in Nigeria is worse than it looks

Inequality in Nigeria is worse than it looks
The government could focus on encouraging local manufacturing to create more job opportunities for low-income earners in Nigeria.

Your Nigerian Economist believes that a person’s economic prospects should be determined by her talent and skill, not by circumstances beyond her control. That a girl born into an underprivileged family in rural Nigeria should have a fair chance at life as a boy born to an affluent couple. And that such equity could be achieved if the government becomes more deliberate in giving all citizens equal access to opportunities.  

 

Nigeria is Africa’s largest economy, yet three in every five Nigerians live in poverty. Inequality has reached such extreme levels that the country’s five richest men – worth $29.9 billion – could lift 86 million Nigerians out of extreme poverty for one year. Worse still, poverty continues to rise, as recent reports suggest that Nigeria may become the country with the most poor people in the world by 2018.

Our economy has grown without creating adequate opportunities for the broader population. Resources are unevenly distributed, resulting in persistent inequities across generations and regions. The poor are poor because the rich are rich; such an exclusion of the common man in the growth process hinders long-term economic growth and weakens national solidarity, evident in recent terrorist activities and calls for restructuring.

 

Causes of Rising Inequality

Few job prospects met by a high concentration of economic opportunities (beyond agriculture) in a handful of cities like Lagos and Port Harcourt, have left residents of other cities to lag behind in wages and living standards. At the same time, Nigeria’s “tax system” perpetuates inequality. The government places a more onerous tax burden on the poor by way of multiple taxation of smaller businesses by the different levels of government and informal authorities while tax waivers are granted to big multinational companies.

Meanwhile, the country’s high cost of governance which irks many citizens, Your Nigerian Economist included, has also contributed to the growing inequality. In a country where over 60% of the population live in poverty, our lawmakers, a fraction of that population are some of the highest paid in the world earning as much as $118,000 a year. This high cost of governance comes at the expense of infrastructure and similar investments. Similarly, widespread bribery and corruption, whether in the form of withholding the salaries and pensions of civil servants, nepotism, or greasing the palms of police officers, continue to redistribute income away from the masses.

 

Dimensions of Inequality

Regional inequality in Nigeria is striking. Three of the country’s thirty-six states – Kano, Lagos, and Rivers – are home to numerous industries and large markets with Lagos State alone accounting for over 25% of national economic output. Together these states are home to 17% of the country’s population and counting.  The states are victims of mass emigration; every hour, 86 people migrate into Lagos, that’s over 2,000 people in a day!

The rural-urban divide is even more pronounced. According to the 2013 Nigeria Demographic and Health Survey, for every wealthy man you find in a rural area, there are nine wealthy men in an urban area. Rural dwellers perform worse on education and health outcomes as fewer children attend schools in rural areas (52%) than urban areas (71%) at each level of schooling. And more infants die in rural areas (86 per 1,000 live births) than urban areas (60 per 1,000 live births). In line with the rural-urban dichotomy, poverty in Northern Nigeria (67%) is significantly higher than in the South (55%).  

Inequality also cuts just as sharply across gender lines. In the World Economic Forum’s 2017 Global Gender Gap report, Nigeria ranked 122 out of 144 countries in its efforts towards increasing participation and expanding opportunities for women. Although women make up 49% of the population, they are under-represented in almost all areas – economy, governance, finance, etc. – to society’s detriment.

 

How Can We Solve Inequality?

Inspired by findings by International Monetary Fund’s 2017 Fiscal Monitor, Your Nigerian Economist believes that in light of Nigeria’s multi-dimensional inequalities, a multi-faceted approach comprising of fiscal policy, and labour and financial market reforms would be needed to tackle inequality.  

Education, health, and social welfare are three vital areas that address inequality yet their shares in the  government’s budget are among the lowest in sub-Saharan Africa. For example, in 2017, 7% of the budget was allocated to education and health each. By comparison, in Ghana these shares were 18.5% and 13.8% respectively (2015). On the fiscal policy side, higher investments in education and health care are needed to improve access and quality.

Furthermore, providing infrastructure particularly in underdeveloped regions will offer uniform opportunities to the underserved population. To do this, the Federal Government should adopt a stronger ‘Robin Hood’ approach – enforcing progressive taxation as often as possible, and closing unnecessary tax loopholes.

Sustainable policies and programmes that seek to address the cause of the problems faced by the poor and women would go a long way in reducing income and gender differences. For example, in the area of gender equality, political parties should implement quotas for women to increase our participation in political processes as recommended by the National Gender Policy.

There should be a continued focus on the agricultural sector to ensure national food security and increased employment. Providing loans to smallholder farmers will improve the economic prospects of rural dwellers. Also, local manufacturing should be encouraged to create more job opportunities. It is not enough for us to be the assembling point of automobiles, we should aim at building the local value chain for the automotive industry in Nigeria.

Economic growth means nothing to the man on the street if it does not translate to a better life. The vision is to build a society where our commonwealth is used to uncover the untapped potential of all citizens and raise our standard of living.

Mma Amara Ekeruche

Mma Amara Ekeruche

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