The Determinants And Measurements Of Poverty In Nigerian Economy

Project and Seminar Material for Economics

Project and Seminar Material for Economics


Abstract


This study takes a critical evaluation at the measurement and determinants of poverty in the Nigerian economy. Poverty concerns individual’s inability to cater adequately for the basic needs of food, clothing and shelter. It reflects inability to meet social and economic obligations; lack of gainful employment, skills, assets and self-esteem. It is anchored on limited access to social and economic infrastructures such as education, health, potable water and sanitation, thus limiting the chance of advance welfare to utmost level of capability.

Despite sustained rates of economic growth in Nigeria, statistics on incomes and social indicators show poverty to be widespread, severe and almost increasing. Although government poverty alleviation programmes feature in many communities, but their effectiveness in addressing poverty is constrained by patterns of political patronage. This has led to inequality in the distribution of facilities and services, leaving the inaccessible or socially and politically marginal communities unserved. While the alleviation of poverty still remains a major objective of development policy in Nigeria, the debate continues as to most effective way to achieve this objective.


Chapter One


1.1 Introduction

Poverty is one of the intractable problems facing mankind today. In 1995, an estimated 1.3 billion people out of the estimated 5.8 billion people in the world were living in the shackles of extreme poverty, living on less than one dollar a day (Human Development Report, 1998)

Poverty is a plague-affecting people all over the world and it is a condition that denies individuals the right to exercise their full potentials. There is no universally accepted definition of poverty, but poverty can be defined as having insufficient income to meet the basic human needs of life. If the real national income of a country is small that country will be poor, and a higher standard of living for its people can be achieved only by an increase in the total volume of production. Poverty has often been defined as a situation of low income or low consumption.

Essentially, it is not difficult to recognize the poor. The poor are those who are unable to obtain adequate income, find a stable job, own properties or maintain healthy living condition. They also lack an adequate level of education, cannot satisfy their basic health needs and their minimum basic needs of food, clothing and shelter. Poverty amidst plenty is a striking feature of the Nigerian scene. Nigeria is the richest in the continent yet millions of her people are poor. According to the Human Development Report (1998), Nigeria is one of the 25th poorest countries in the world and more than one third of her populace is not expected to survive beyond the age of 40. This is not the Nigerian dream. It is the Nigerian paradox. Poverty is a more serious problem in our society than in societies with much less income and wealth. Poverty amidst poverty is easier to understand and even condone but in a land of abundance, it is difficult to comprehend why some people are inadequately fed, clothed and sheltered. Poverty is a reality that needs to be studied, understood, appreciated and then eradicated.

However, attempt made to alleviate poverty in Nigeria has been fruitless. A true welfare package which should be aimed at sustaining and augmenting the living standard of the poor has not been formally implemented in Nigeria. The most recent poverty programme is the Poverty Alleviation Programme (PAP) introduced in 1999 by the Obasanjo administration which has only helped in elevating poverty in the country.

The proportion of poverty is often determined by the poverty line, usually based on the level of income or consumption expenditure by households, although poverty is felt and observed especially by the poor themselves. Poverty can be identified in two ways: Absolute and Relative Poverty. If the physical human subsistence that is nutrition, clothing and housing is not guaranteed, it can be referred to as Absolute Poverty and Relative poverty refers to a person or household whose provision with goods is lower than that of other persons or households.

Absolute and Relative poverty can also be seen from two perspective microeconomics and macroeconomics. In micro economics terms, poverty refers to a situation in which individual persons or households are not able to satisfy their basic needs. From a macroeconomic perspective, poverty exists when the average inhabitants of a country live below the minimum subsistence level. Thus, while the macroeconomic concept specifies the country, micro economic perspective is concerned with households or individuals.

Governments concern for the fate of the poor in developing countries has heightened in recent years but the economies of these countries were constrained with a rather hostile external and internal economic and environmental hardship. Some of these entanglement encountered are a recurring external debt-servicing burdens, disequilibrium in terms of trade, high and widespread unemployment, high rate of inflation, capital flight, low capacity utilization and high population growth. To that extent, sharp criticisms emanated from the various corners of the country about the inability of the government to design and implement strategies for meeting the basic human needs of the society so as to ensure a just and egalitarian society. Apparently, the plights of the poor and the need to rearticulate development programmes have dominated discussions of contemporary schemes.

However, Nigeria is yet to formulate a rehabilitative welfare package directed towards alleviating poverty problems despite the attention and seriousness it deserves. A large proportion of Nigerians in the rural area still lack access to the basic social services. This is unconnected with the nature of the strategies, which are broad based and not targeted at any particular group. Various development plans designed to cushion the social welfare of the people has not been implemented to the latter. Better still, the expenditure structures of the government really give credence and confirm her unflinching commitment to the people’s welfare. Yet, mass poverty has remained the most prevalent socio-economic problem in Nigeria society.

Finally, the indicators of poverty in Nigeria will remain alarming. Poverty alleviation in Nigeria requires among other strategies, the access of the poor to productive assets, the raising of their returns on the assets, increasing their access to education and health services, improving their employment opportunities and supplementing their resources with income or resource transfer.


1.2 Statement Of Research Problem

Poverty in Nigeria has continued to growth worse and wide spread. Despite the institutionalization of several poverty alleviation programmes, which are not universal, many have performed below expectation due to insincerity of purpose on the part of the government, bureaucracy and inability to distinguish between economic development planning and social development planning.

Firstly, the degree of inequality in the Nigerian economy and its effects on the overall performance of the economy need be highlighted. This shows fully the extent of poverty and reflects how easily thee rich are getting richer while the poor are getting poorer thus widening the inequality gap.

Secondly, the effectiveness of government programmes towards poverty alleviation needs to be examined. This helps reflects how concerned the government are in the area of eradicating poverty and how fully the policies adopted are implemented to ensure a measurable size of poverty eradication in the overall economy through employment of efficient work force and encouraging them through a good wage system.

Thirdly, the problem of the determination of the magnitude of poverty in the Nigerian economy and how it is been affected by total savings, private consumption expenditures and inflation rate. This problem exposes the ugly situation of the Nigerian economy in terms of poverty and its overall effects on local consumption of Nigerians, their savings due to reduced income in form of wages and investing power of Nigerians since the little earned goes to consumption.

Therefore, the relevant problem which the study seeks to find solution to is the degree of inequality in the Nigerian economy, ineffective government programmes towards poverty alleviation and determination of the magnitude of poverty in the Nigerian economy.


1.3 The Aim And Objectives Of The Study

The major objective of this research is to highlight how economic analysis can contribute to our understanding of the nature and causes of poverty among various socio-economic groups in Nigeria. Specific objectives of the research include the following.

  1. To highlight the degree of inequality in the Nigeria society and its implication on the overall economy
  2. To examine the relative effectiveness of government programmes towards poverty alleviation
  3. To determine how total savings, private consumption expenditures and inflation rate affect the magnitude of poverty in the Nigerian economy.

1.4 Statement Of Research Hypothesis

The following hypothesis were determined for testing

  1. HO: That the degree of inequality in the Nigerian economy does not have an implication on the overall performance of the economy
    HA: That the degree of inequality in the Nigerian economy will have an implication on the overall performance of the economy
  2. HO: That the government programmes are not effective in the alleviation of poverty in the Nigerian society
    HA: That the government programmes are effective in the alleviation of poverty in the Nigerian society
  3. HO: That total savings, private consumption expenditures and inflation rate will not affect the magnitude of poverty in the Nigerian economy
    HA: That total savings, private consumption expenditures and inflation rate will affect the magnitude of poverty in the Nigerian economy

1.5 Research Methodology

The methodology that was adopted in this research work was the use of econometrics and statistical approach. Notably among them is the use of regression analysis and analysis of variance (ANOVA).

The researcher made use of secondary type of data which were extractions from newspapers, textbooks, journals, magazines, and internet.


1.6 The Significance Of The Study

The significance of this research work is to determine the various causes of poverty so as to enable Nigerians move away from their poor status to that of a more satisfactory state, to see how the improved status of the people can be of benefits to the economic activities of the business firms and to assist the government in formulating and implementing programmes that would eventually eradicate poverty in the society.


1.7 Scope And Limitation Of The Study

The study covers the period 20 years spanning between 1987– 2007. The area of major concern is the causes of poverty, its magnitude and effect on the Nigerian economy.

Just like any other study of this nature in a depressed, under-developed or developing economy, the study met some setbacks as expected of an exercise of this nature.

Notable among these setbacks was that of inadequate information or materials like books, journals and periodicals to consult for knowledge development.

Another hindrance was that of money which restricted the coverage of the work at hand. The last hindrance was that of time which was shared among several activities.


1.8 The Review Of Relevant Literature

In the course of this research work, the works of various authors, professionals, businessmen and knowledgeable persons in the field was reviewed.


1.9 The Definition Of Terms / Concepts

Poverty:

On the surface, defining poverty would appear to be a simple matter. However, there are many perceptions to it. Among economist, poverty has often been defined as a situation of low income or low consumption. The classic definitions are as follows:

Human Poverty:

This is the lack of essential capabilities such as being literate or adequately nourished.

Income Poverty:

The lack of minimum adequate income for expenditure and maintain healthy living conditions

Extreme Poverty:

Indigence or destination usually specified as the inability to satisfy minimum food needs.

Overall Poverty:

This is the inability of an individual to satisfy essential non-food as well as food needs

Relative Poverty:

This is also called secondary poverty. It occurs as households overtime fall short of the resource to maintain their living standard. It changes across countries or overtime.

Absolute Poverty:

This is also known as primary poverty. It is a situation where households cannot meet the basic physiological survival needs (food, clothing and shelter). It is defined by a fixed standard.

Poverty Line:

It is that income level below which a minimum nutritionally adequate diet plus essential non-food requirements are unaffordable. It is a measure that separates the poor from the non-poor.

Human Development Index (HDI):

This measures the average achievement of a country in basic human capabilities whether they live a long and healthy life, educated and knowledgeable and enjoy a decent standard of living. The three key components of HDI are standard of living, knowledge and longevity. The attractiveness of the HDI, based on these three quantifiable components, is that it is simple, complex and objective rather than subjective.

Integrated Poverty Index (IPI):

IPI combines the population below the poverty line with the income gap ratio (the percentage income gap between the country and the country with maximum GNP per capita among countries under study), the distribution of income among the poor and the annual rate of growth of the GNP per capita.

Basic Need Index (BNI):

BNI uses education and health data to indicate social development.

Gender Development Index (GDI):

The GDI measures the magnitude of the disparity. Firstly, by expressing each of the three components of the HDI in terms of the female value as a percentage of the male value and secondly, by multiplying the overall HDI by the simple average female-male ratio to obtain the gender-disparity adjusted HDI.

Vicious Circle of Poverty:

It is conceived as a vicious circle of compounding circumstances that leave the poor with few, if any, choices. Individuals constrained within this circle experience little improvement from year. The common feature of poor people whether male or female or whether found in developing or developed countries is that they are constrained within the vicious circle of poverty.


1.10 The Plan Of The Study

This research work is divided into five (5) chapters.

Chapter one contains the background to the study, statement of research problems, aims and objectives, hypothesis testing, research methodology, significance of the study, scope and limitation, literature review and definition of terms.

Chapter two undertakes the review of relevant literature on poverty.

Chapter three considers the theoretical framework and features of poverty as well as delving to criteria for measuring poverty in Nigeria.

Chapter four focuses on the research methodology, data analysis and interpretation of results.

Chapter five contains the summary of findings, conclusions and recommendations.


The Determinants And Measurements Of Poverty In Nigerian Economy


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