Youth participation, unemployment and poverty in a democratic nigeria towards...
POVERTY
1. 1
ODUBOLA ISRAEL O.
POVERTY, UNEMPLOYMENT, HUMAN CAPITAL DEVELOPMENT
AND GROWTH IN NIGERIA
ABSTRACT
The study explored the synergy among poverty, unemployment, human
development and growth in Nigeria between 1985-2013. The Ordinary Least
Square technique was employed for the regression analysis. Poverty and
unemployment are interlinked and in conjunction, contributed adversely to the
growth of the economy. It was also gathered that the government has not
prioritized on human capital development by failing to give the education and
health sectors adequate budgetary allocation and attention. The results obtained
unveiled that the principal causes of poverty in Nigeria are unemployment and
inflation. Thestudy therefore recommends thatgovernment should bring up an all-
encompassing policy that will basically focus on poverty alleviation, job creation
and macroeconomic stability.
Keywords: Poverty, Unemployment, Human Development, Growth.
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CHAPTER ONE
1.1 INTRODUCTION
Nigeria is the most populous nation in Africa and the 8th in the world with a
population figure of about 170 million people based on the facts released by the
National Population Commission (NPC, 2012). In addition to this, the nation
boasts of being the largest economy in Africa as the GDP figure for 2013 and
2014 stood at N13526.25 and N14475.38 billion respectively (Economic Watch).
Despite these magnificent feats, the country is still faced with several
developmental, economic and political problems such as youth unemployment,
poverty, corruption, income inequality, population explosion and political
instability.
Unemployment has been one of the obstacles to attaining sustainable
development. In Nigeria, unemployment is more prevalent among the youths.
Every year, tertiary institutions turn out thousands of graduates in large mass with
no absorptive capacity in the labour market. Moreover, young people are more
likely to be employed in jobs of low quality, poor working conditions, poor pay,
engaged in dangerous works or receive a short term informal employment
arrangements. The inadequate employment situation of youths attracts a number
of socio-economic, moral and political effects such as armed robbery, thuggery,
vandalisation of government assets, corruption, prostitution, wastage and
underutilization of human resource. The prevalence of unemployment has birthed
the presence of poverty in the nation. Successive government has employed
several strategies to curb both challenges, but the results have not been
remarkable.
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Poverty in Nigeria is soaring with almost 100 million of its population living less
than a dollar per day despite the country’s status of the largest market size in
Africa. As the economy grows, the gap between the rich and the poor widens and
setting in poverty. Poverty in Nigeria is paradoxical in the sense that as the GDP
figures rises each year, the proportion of people wallowing in poverty also rise.
According to the National Bureau of Statistics (2011), the percentage of Nigerians
dwelling in absolute poverty (inability to meet basic necessities of life) rose from
54.7 % in 2004 to 60.9% in 2010. Based on the same NBS report, about 113
million Nigerians wallow in relative poverty. Relative poverty is the comparison
of the living standard of people living in a given society a specific period of time.
All poverty indicators reveals that the Nigerian government has failed to tackle the
issue of poverty. The absolute poverty measure unveils that about 60.9% of the
Nigerian populace are poor. The dollar per day measure and subjective assessment
measure puts Nigeria poverty profile at 61.2 % and 93.9%. Besides, a more
reliable and trusted indicator which is the Harmonized National Living Standard
Survey (HNLSS) disclosed that 69% of Nigerians are poor.
The hallmark of poverty in Nigeria in unemployment. Unemployment and poverty
are interlinked that both are interchangeably used for one another. It is very
possible for someone to be employed and still be poor, this clearly explains
underemployment. Underemployment is a subset of unemployment that reflects
the failure to utilize factor inputs (labour) to stimulating economic growth. Low
returns of labour and high rate of unemployment generates poverty. Poverty
makes it hard to invest in human capital development that would boost
productivity.
Households also face inter-generational poverty trap. They are faced with the
dilemma of either sending their children to school or to earn a sub-income. The
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social negative effect of unemployment breeds a sense of hopelessness. Structural
unemployment and poverty are one of the reasons for the prevalence of terrorism
in some regions of the country. Insecurity caused by the deadly Boko-Haram sect
and the Militants of the Niger Delta can be traced to poverty and unemployment
simply because if all the youths are fully employed, none will think of undertaking
catastrophic acts.
It can therefore be asserted that high poverty and unemployment level poses
greater threat to the nation’s economic prosperity, security and peaceful co-
existence. Thus, a giant step must be taken by the current administration at all
levels to combat with this menace.
1.2 STATEMENT OF THE PROBLEM
An average Nigerian man is a poor man. Nigeria is a nation mixed with affluence
and penury which means that large proportion of the country’s wealth is controlled
by the few elite leaving the masses with none. The divergence of macroeconomic
indicators and the day-life experience is a source of concern. Macroeconomic
indicators are not accurate yardstick to estimate the yearnings and needs of the
people.
The essence of every administration is to make life easier for the people. The true
success of any government is to reduce the prevalence of poverty, create wealth
and jobs, provide qualitative education and health facilities and invest in human
capital formation. Without these, developmental realm cannot be achieved.
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1.3 OBJECTIVES OF THE STUDY
The objectives of this research study are to investigate critically the main causes of
poverty in Nigeria.
1.4 RESEARCH QUESTIONS
Therefore, the questions raised in this study are
i. Why is an average Nigerian poor and unemployed?
ii. What are the necessary effective strategies to be taken by the government
to reduce the high rate of poverty and unemployment in Nigeria?
1.5 JUSTIFICATION FOR THE STUDY
Poverty and Unemployment is as old as man. Both evils are present in every
economy even in the advanced economies of the world. Many a research study
only focuses on the poverty and unemployment on economic growth. This study
expands the frontiers by investigating the specific factors that causes poverty in
Nigeria. It is no doubt that the study will be useful for the monetary and public
authorities, financial and non-financial institutions, academics and relevant
stakeholders in making sharp policies in curbing it. It will also be beneficial for
students and other researchers in their future research undertakings.
1.6 SCOPE OF THE STUDY
The study x-rays the impact of poverty and unemployment on growth and also
examines the determinants of poverty in Nigeria. The study makes use of
secondary data from the Central Bank of Nigeria statistical bulletin. The years to
be reviewed in the study ranges from 1985-2013.
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1.7 ORGANISATION OF THE STUDY
The study has been broken into five parts. The first chapter presents the
introduction. The second and third provides the literature review and research
methodology and model specification respectively. While the fourth and last
section explores the presentation and interpretation of results and conclusion and
relevant policy recommendation.
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CHAPTER TWO
REVIEW OF RELATED LITERATURE AND THEORETICAL
FRAMEWORK
2.1 THE CONCEPT OF UNEMPLOYMENT
One of the challenges obstructing Nigeria from attaining the height of economic
development is the high rate of unemployment experienced over years. The total
labour force encompasses people between the ages of 15-64, excluding students,
home keepers, retired and those who are disinterested from working.
Unemployment or perhaps the unemployed are group of people who are capable
and qualified to work but unable to find job to earn a means of livelihood.
Earlier school of economic thought gave much attention to the issue of
unemployment and treated it as something undesirable and injurious to the
economy. Economists from the era of Adam Smith to Karl Marx and to Keynes
expressed varying degree of concern to unemployment. The population in a
country is into two that is the working population and the dependent population.
The working population or the economically active population includes those who
are actively employed plus those who are unemployed (willing and able to work).
The economically inactive population constitutes those who are neither working
nor willing to work (Njoku, 2011).
The International Labour Organization (ILO) defined the unemployed as the
number of the economically active population who are currently without work but
actively seeking for job, also including those who voluntarily left their job and
those who were sacked from their work. The application of this definition has be
criticized , mainly for the purpose of comparison and policy formulation, as
different nations have varying zeal of commitment in tackling the menace
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(Akintoye, 2008). Moreso, housewives, who are willing and able to work, the
definition of the age bracket stands as a limitation to the definition given by the
ILO (Douglason and Gbosi, 2006).
Unemployment serves as an impediment to social progress. It represents a total
wastage of a country’s manpower resources. It leads to welfare loss in terms of
productivity thereby reducing income and living standard (Raheem, 1993).
Unemployment is a serious issue facing all the countries of the world especially
among the less developed countries in general (Rama, 1998) and the Sub-Saharan
African countries in particular (Umo, 1986).
2.1.1 FORMS OF UNEMPLOYMENT
The creation of full employment is a common macroeconomic goal every nation
strives to achieve. However, full employment does not imply a zero unemployment
rate. Full employment can be said to be achieved when the unemployment rate is
minimally low (between 3-4%). Every dynamic economy will certainly have some
unemployment, which is not harmful. The commonest types of unemployment are
structural unemployment, cyclical unemployment, frictional unemployment,
disguised unemployment, seasonal unemployment, residual unemployment,
voluntary unemployment and involuntary unemployment
Structural Unemployment:
Changes occur in market economies such that demand increases for some job skills
while other job skills are outdated and are no longer in demand. Structural
unemployment is said to occur when there is a mismatch between the worker’s
skill and technological advancement. For example, the invention of automobiles
increased demand for automobile mechanics and decreased demand for farriers.
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Frictional Unemployment:
This type of unemployment occurs because of workers who are voluntarily
between jobs. Some are looking for better jobs. Others may be moving to a
different geographical area for personal reasons and time must be spent searching
for a new job.
Cyclical Unemployment:
This occurs due to downturn in overall business activity usually during a recession
or deep depression. During a recession, total productivity will decline and as such
there will be less demand for labour simply because less labour will need to
produce less output.
Disguised Unemployment:
Disguised unemployment exists frequently in developing countries whose large
population creates a labour surplus in the labour force. When more people are
working than is necessary, the overall productivity of each individual drops.
Disguised unemployment is characterized by low productivity and frequently
accompanies informal labour markets and agricultural labour markets, which can
absorb substantial quantities of labour.
Seasonal Unemployment:
Seasonal unemployment occurs when there is a limited need for a kind of work to
be performed during a particular period during the year based on some factors like
deadlines or climate.
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Residual Unemployment:
It is the kind of unemployment that remains in periods of full employment, as a
result of those physically, mentally or emotionally unfit to work.
Voluntary and Involuntary Unemployment:
Voluntary unemployment is a situation when a person is unemployed not because
of not being able to find employment, but due to the fact of being unable to find
his/her own desired job. Sometimes, people reject employment opportunities if
they do not receive the desired wages or if they are not offered the kind of work
they wish to do.
On the other hand, involuntary unemployment occurs when a person is willing to
work at the prevailing wage rate yet unemployed. It is different from voluntary
because workers choose not to work because their reservation wage is higher than
the prevailing wage. In an economy with involuntary unemployment, there is
usually surplus of labour at the current wage rate.
Underemployment:
It is a situation in which a worker is employed but not in the desired capacity
whether in terms of compensation, hours, skills and experience. It occurs when a
worker is working for longer hours with a low pay in commensuration with his
qualification and skill. Technically, unemployed and underemployed often
compete for available jobs.
2.1.2 THEORIES OF UNEMPLOYMENT
Economists from time memorial have postulated different theories as regard
unemployment. Different school of thought conceived unemployment from
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different angle but the bottom line remains the same that unemployment decreases
national output. The theories of unemployment are
Classical Theory of Unemployment:
Classical unemployment occurs when the real wages are kept above the market
clearing wage, leading to surplus of labour supplied. The classical economists
believed that unemployment exists because the current wage rate is higher than the
wage rate employers are willing to pay their workers. Classical unemployment
indicates that the prevailing market wage rate is too high. They proposed that if
wages are more flexible (market-determined by the invisible hand), unemployment
will be solved.
Neo-Classical Theory of Unemployment:
The neo-classical theorists alluded that the labour market is similar to market for
any tangible products. According to them, unemployment is voluntary, that is
workers are unemployed because they have not found their suitable and desired job
or their wage cannot be reduced by their employers due to national labour laws.
This reflects the inability of the labour market to operate under perfect competition
either because there are monopolistic trends in the market or workers have limited
information about the position to be filled in. The inflexibility of setting wages
downwards and the lack of information leads to an unstable market equilibrium.
They proposed that conditions that will bring the existence of a perfect competitive
labour market where wages will be determined by the supply and demand for
labour should be established to terminate unemployment.
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Keynesian Theory of Unemployment:
This is a situation where low wage rates should produce higher employment levels,
but don’t because the economy is in recession and the employers are facing low
demand for their goods and service, consequently demanding for low amount of
labour. Keynes saw the lack of demand for jobs as potentially resolvable bythe
government by raising its aggregate expenditure.
Okun’s Law
Arthur Okun proposed the empirical observed relationship between unemployment
and losses in a country’s production. The gap version states that for every 1 percent
increase in the unemployment rate, a country’s GDP will be roughly an additional
2 percent lower than its potential GDP. The difference version describes the
quarterly change in real GDP and unemployment. The stability and application of
the law has been criticized.
Okun’s law is rather an empirical observation rather than a result derived from
theory. Okun’s law is approximate because factors other than employment such as
productivity affect output. In Okun’s original statement of his law, 2 percent output
increase corresponds to a 1 percent fall in cyclical unemployment rate. A 0.5
percent increase in labour force participation, a 0.5 percent increase in hours
worked per worker and 1 percent in output per hour worked (labour productivity).
Okun’s law states that a point increase in cyclical unemployment rate is associated
with two percentage points of negative growth in real GDP. The relationship
depends on the country and time period under consideration. The relationship has
been tested by regressing GDP or GNP growth on the change in the unemployment
rate. Martin Prachowny estimated about a 3 percent fall in output for every 1
percent increase in unemployment rate. He asserted that majority of this change in
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output is attributable to changes in other factors like capacity utilization and hours
worked other than unemployment. Holding these other factors constant reduces the
association between unemployment and GDP to around 0.7 percent for every 1
percent change in unemployment rate (Prachowny, 1993).
There are several reasons why GDP may rise or fall more rapidly than a rise or fall
in unemployment rate. As unemployment increases
a. A reduction in the multiplier effect created by the circulation of money from
employees.
b. Unemployed persons may drop out of the labour force after which they are
no longer counted in unemployment statistics.
c. Employed persons may work for shorter hours.
d. Labour productivity may decrease, because employers retain more workers
than they need.
One implication of the law is that an increase in labour productivity and size of
labour force can mean that real net output grows without net employment rates.
The gap version of the Okun’s law may be written as
(Y –Y*)/Y*= c(u-u*) where Y is the actual output, Y* is the potential GDP, u is
the unemployment rate, u* is the natural rate of unemployment and c is the factor
relating changes in unemployment to changes in output. The value of c ranges
between 2 and 3. The gap version can only be estimated and not measured thereby
making it difficult to apply. A more accurate form of the Okun’s law is the
difference or growth rate form that relates changes in output to changes in
unemployment.
Y*/Y= k-c▲u, where Y* is the change in actual output between two consecutive
years, ▲u is the change in unemployment rate between two consecutive years
and k is the average annual growth rate of full employment output. At as the
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present time in the US, k is about 3 percent and c is 2. The equation may be
written as
Y*/Y= 0.03-2▲u
2.1.3 FACTORS ATTRIBUTABLE TO HIGH UNEMPLOYMENT RATE
IN NIGERIA
Unemployment in Nigeria is pervasive among the youths. Over 65 percent of the
Nigerian youths are unemployed and if plans are not made to tackle this menace by
the youths, government and other stakeholders, the situation will become
incurable. The number of applicants for the Nigeria Immigration Service aptitude
test that took place on the 15th March, 2014 is a testament that unemployment is by
and large a national insult to the Nigerian economy. Policy makers should be more
interested in knowing the factors responsible for the high unemployment situation
and providing several ways to resolve it. Some of the factors responsible for this
‘evil monster’ are
Poor Educational Policy and Poor Personal Development of the Youth
It is quite unfortunate that the curricula used in the Nigerian tertiary institutions of
learning are in concordance with the demands of employers in the labour markets.
Anybody who wants to be employable must be knowledgeable and conversant with
the current trends within and outside of his area of discipline.
On the other hand, most youths or perhaps graduate cannot write understandably
well and speak fluently. Some of them are not proficient with the use of computer
and they are aware that any job that must be gotten in this ‘jet-age’ needs a sound
knowledge of computer, hence they become unemployable.
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Lack of Infrastructures
Nigeria is a consuming (import-oriented) nation rather than a producing nation. It
is when the country turns to a diversified producing economy that more jobs can be
created. The manufacturing, agriculture and construction sectors are the one that
can create more jobs and this will have a multiplier effect on the economy. These
sectors can meaningfully contribute to GDP when infrastructures like roads,
railway, water, power supply, telecommunications and financial services are put in
place.
Poor Leadership
Past leaders of the country should have projected the current state of
unemployment in the country and made strategic plans to mitigate its prevalence.
Proceeds realized from crude oil should have been diversified into other sectors of
the economy. Policies to create small scale businesses to the unemployed youths
and widows should have been implemented, but it is a pity that Nigerian leaders
are personal-interest driven and greed oriented.
Corruption
Corruption is one of the big troubles confronting the economic progress of the
nation. Though, people’s perception towards corruption is that it kills economic
growth and development, in contrary, a school of thought stressed that corruption
can improve the growth and wealth of a nation if the money and funds embezzled
are spent on productive and meaningful projects rather than siphoning it into their
personal bank accounts. It is crystal clear that almost Nigeria leaders embezzle
public funds, but at least the fund embezzled should be invested via establishing
industries and giving of grants and capital for setting up of small and medium scale
businesses. The few available vacancies in the civil service or government
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agencies should be based on ‘qualification and competency’ rather ‘connection or
long-leg’.
Others reasons amongst others are lack of savings and investment trait,
incompetent business skills and administration and bad attitude to work and
unattractiveness of the agricultural sector
2.1.4 UNEMPLOYMENT PROFILE IN NIGERIA
Table 1: Unemployment Rate in Nigeria (1985-2013)
Year Unemployment
Rate (%)
1985 6.1
1986 5.3
1987 7.0
1988 5.3
1989 4.5
1990 3.5
1991 3.1
1992 3.4
1993 2.7
1994 2.0
1995 1.8
1996 3.4
1997 3.2
1998 3.2
1999 3.1
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Figure 1: Trend of Unemployment Rate (%) in Nigeria (1985-2013)
2.2 CONCEPT OF POVERTY
There is no precise and specific definition of poverty because it cut across different
aspects from life spanning from physical, moral and to psychological of human
conditions. Different yardsticks have been devised to explain poverty. Poverty is
the inability to meet out needs (Watts, 2000). However, the term ‘needs’ is defined
differently across different cultures and generations as technology and changing
values alter the pre-requisites of an acceptable standard of living. This indicates
that the concept of needs includes the notion of what is traditionally regarded as
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necessary to lead one’s life as an integrated member of a particular society. Baratz
and Grisby (1972) defined poverty as a condition involving the some deprivation
and adverse occurrences that are closely related with inadequate economic
resources. Edozien (1975) argued that poverty is the inadequacy of income to
support a minimum standard of living.
The conventional definition is the inability to secure basic needs of life. Other
scholars angled poverty in terms of basic needs approach such as child mortality,
maternal maternity, prevalence of epidemic, life expectancy and quality of
education and health care facilities. Poverty to Grusky and Kanbour (2006) is the
occurrence of falling below a given income/consumption level or poverty line.
Poverty has been defined multidimensional using some approaches like the basic
need approach, the capability approach and human development approach. The
most widely accepted one is the human development index approach set by the
United Nations Development Programme (1990) which constitutes the three vital
part of human development namely life expectancy, educational attainment and
standard of living.
Poverty is the inability to meet the three core-values of development which are life
sustenance, self-esteem of the people and freedom from servitude. It is the severe
deprivation of basic needs of life and fundamental human right. It is a plague that
affects all countries of the world but more pervasive in less developed countries.
Poverty based on the World Bank definition, is the inability of an individual to
earn below a dollar (the international poverty line) in a day.
Olayemi (2012) conceptualized poverty into four components namely lack of
access to basic goods and services, lack of impaired access to productive resources,
inefficient use of common resources and exclusion mechanism effect. Poverty as a
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lack to basic needs is economic and consumption oriented. It explains poverty in
material terms and adopts consumption based approach to identify the extremity of
poverty and distinguish the poor from the non-poor. The poor are the individuals in
the society incapable of purchasing basic goods and services in the society.
Impaired access to productive resources sees poverty as the inability to have access
to agricultural land, physical capital and financial asset which leads to low
disposable income, low productivity, low savings and low investment. It also
focuses on the extent to which individual can utilize his available resources to
improve his material wellbeing. Poverty is the outcome of common resources used
inefficiently due to weak policy formulation, inadequate infrastructure and low
technical knowhow. All these translate to low productivity and hence low output
growth. Lastly, poverty can be due to certain mechanism in the system excluding
individuals from contributing to economic development including in a democratic
political setting. For instance, the discomfort index (composition of unemployment
and inflation rate), though of low economic importance but used by politicians to
present their scorecard to the public or to criticize their opponents policies and
performance.
Not frequently, no distinction is made between absolute and relative poverty.
Absolute poverty according to Webster (1993) is a situation in which people barely
exist, where the next meal may literally be a matter of life and death as the
cumulative impact of malnutrition and starvation affect all, particularly children
whose weakness gives them the tragic distinction of having the highest mortality
rate for any group anywhere in the world. Thus in this case, poverty takes an
absolute status, since there is nothing beyond it except death. Relative poverty on
the other hand, is quite difficult to define as an objective concept. Definition of
poverty along this line varies dramatically among officials, government agencies
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and academics. For example, Webster (1993) reported that in 1973 a representative
of the National Welfare Rights Organization in the United States estimated that a
family four needed a $7200 per year to satisfy their basic requirements below this,
the organization are regarded as poor. Yet in the same year, the US government
estimated the poverty line for a similar household at an income below $4500.
Using the concept of relative deprivation, Townsend (1979) eluded that individual,
families and groups in the population can be said to be in poverty when they lack
the resources to obtain the type of diet they want, participate in the activities and
have the living conditions and amenities which are customary or at least widely
encouraged in the societies they belong to. Their resources are seriously below
those commanded by the average individual or family that they are in effect
excluded from ordinary living patterns, customs and activities.
2.2.1 MEASURMENT OF POVERTY
There are many approaches to measuring poverty. The commonest among them are
Relative Poverty Measurement
Relative poverty is defined by reference to the living standards of majority in a
given society that separates the poor from the non-poor. Households with
expenditure greater than two-thirds of the total household per capita expenditure
are non-poor whereas those below it are poor. Furthermore, households with
expenditure less than one-third of the total household per capita expenditure are
core-poor or extreme poor while households with more than one-third but less than
two-thirds of the total expenditure per capita are moderate poor. Accordingly, the
poor category is sub-divided into those in extreme poverty and moderate poverty,
where extreme poverty is more severe than moderate poverty. Those in moderate
poverty are constituted by the growing middle class who are at the point of moving
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to the non-poor category. Also, the non-poor is also grouped into two namely the
fairly rich and the very rich (NBS report, 2012). The National Bureau of Statistics
report on poverty (2012) unveiled that relative poverty in Nigeria as at 2004 stood
at 54.4 percent (68.7 million out of 126.3 million people) but rose to 69 percent in
2010 (approximately 112.5 million people out of 163 million people). The North -
West and North- East geo-political zone had the highest poverty rate in the country
with 77.7 percent and 76.3 percent respectively. The South-West zones recorded
the least poverty rate of 59. 1 percent. Among the states, Sokoto received the
highest poverty rate of 86.4 percent while Niger state had 43.6 percent poverty rate
(NBS, 2012). It can therefore be said that poverty is more prevalent in the North-
West zone and less rampant in the South-West zone.
Table 2: Relative Poverty Headcount (1980-2010)
Year Poverty Rate (%) Population
(million) in
Poverty
Estimated Total
Population
(million)
1980 27.2 17.1 65
1985 46.3 34.7 75
1992 42.7 39.2 91.5
1996 65.6 67.1 102.3
2004 54.4 68.7 126.3
2010 69.0 112.5 163
Source: Harmonized National Living Standard Survey (2010).
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Absolute Poverty Measurement
It is defined in terms of the minimum requirements necessary to afford minimal
standards of food, clothing, healthcare and shelter. Using this measure, 54.7
percent of Nigerians were living in poverty in 2004 and rose to 60.9 percent in
2010 (99.3 million Nigerians). Among the geo-political zones, the North-West and
North-East recorded the highest poverty rate of 70 percent and 69 percent
respectively while the South-West had the least poverty rate of 49.8 percent. At the
state level, Sokoto had the highest poverty rate of 81.2 percent while Niger state
recorded the least poverty rate of 33.8 percent.
The Dollar-Per Day Measurement
This refers to the proportion of those living on less than $1 per day poverty line.
With this approach, 51.6 percent of Nigerians were living below $1 per day in
2004, but increased to 61.2 percent in 2010. Although, the World Bank standard
according to the NBS report in 2012 has to be marginally raised to $1.25 in
opposition to the $1 used when the survey was conducted. The North-West
geopolitical zone recorded the highest poverty rate of 70.4 percent while the South-
West region has the least rate of 50.1 percent. At the state level, the Sokoto state
recorded the highest poverty rate with 81.9 percent, while Niger state has the least
poverty rate standing at 33.9 percent (NBS report, 2012). Out of the 6 geopolitical
zones, poverty is more prevalent in the North-West but this does not mean that
poverty is not pervasive in other geopolitical zones.
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Table 3: Incidences of Poverty by Zones (%)
Zones Absolute Poverty Relative Poverty Dollar Per Day
North Central 59.5 67.5 59.7
North East 69.0 76.3 69.1
North West 70.0 77.7 70.4
South East 58.7 67.0 59.2
South South 55.9 63.8 56.1
South West 49.8 59.1 50.1
Source: Harmonized Living Standard Survey, 2010
Subjective Assessment Poverty Measurement
This involves inquiring from the populace through their opinions on whether they
themselves think they are poor or not.
Gini-Coefficient
This is a yardstick used to measure the degree of income inequality in a given
society at a particular period of time. Income disparity and poverty are interlinked.
A country with a high degree of income disparity will have poverty at its doorstep,
because the margin between the rich and the poor will widen profusely. The gini
coefficient or index ranges between 0 and 1. The higher the gini index, the more
the incidence of income disparity in such society. Gini index of 0 is perfect
equality (where all the citizens earn the same income) and 1 is perfect inequality
(where one person earns all the income and others earn zero income). Moreover,
both cases are unrealistic.
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2.2.2 CAUSES OF POVERTY IN NIGERIA
The main causes of poverty in Nigeria are unemployment, ignorance, high
inflation, environmental degradation, high population growth, poor governance and
the like. Poverty is more pervasive in the rural regions and more precisely in the
North West geo-political zone. The major causes of poverty in the rural region are
use of outmoded and inefficient system in agriculture and craft. Others factors
responsible for low income in the rural areas according to Abubakar (1995) include
inadequate infrastructures, lack of credit and marketing facilities, unfavorable rural
institutions as regard land tenure, illiteracy, ignorance and cultural and institutional
rigidities. Williams (1984) has also identified lack of viable non-farm employment
opportunities in the rural sector thereby leading to overcrowding on the land and
underemployment of labour. It should be added that even though alternative
occupations like traditional craft and petty trading do exist in most villages, yet
investigations have showed that incomes realized from these occupation is still
identical to the income gotten from farming.
In addition to the scarcity of renemeruative non-farming occupations during the
dry season, Hill (1982) mentioned the following additional factors as chief causes
of poverty particularly in a rural Hausa setting
i. Limitation of the farming season
ii. The unreliability of the climate especially as it concerns annual and
erratic distribution of rainfall within the famine season.
iii. The underutilization of labour resources during the famine season
resulting from the inability of many poor farmers to farm on a scale
which matches their labour resources and rudimentary nature of the
system of farm-labour employment and the dire shortages of working
26. 26
capital, which severely limits the scale and productiveness of farming
especially where the cultivation of the manure farmland is the preferred
agronomic system.
Unfavourable physical environmental conditions such as land desertification in the
North, water hyacinth in inland waterways and oil spillage in the Niger Delta, have
contributed to the economic fortune of the inhabitants of those areas of the country,
thereby worsening their level of poverty. Abubukar (2002) stated in corrobation
that 35 percent of the country’s land mass in the North has been desertificated. In
addition to this, unemployment is the major cause of poverty in Nigeria.
Unemployment has aggravated the incidence of poverty in Nigeria. Abubakar
(2002) noted that between 1985 and 1996, the tertiary institutions in Nigeria turned
out 1,110,000 graduates and only 90,000 (8.2 percent) were able to secure formal
jobs which rendered the remaining 93.8 percent jobless or underemployed during
the period.
The National Bureau of Statistics (1996) noted that the main causes of poverty in
Nigeria are unemployment, inflation rate, illiteracy, economic mismanagement,
poor governance, corruption, insecurity, high external debt burden, high incidence
of diseases, population and environmental degradation. In concordance, Ajakaiye
and Adeyeye (2001) alluded that the causal factors of poverty are low economic
growth, macroeconomic shocks, policy failures; labour market deficiency,
unemployment and underemployment lag in human development, debt burden,
disease, environmental degradation and criminal acts. Abubakar (2002) captured
the poverty occurring factors as macroeconomic distortions, corruption, bad
governance, bad debt, socio-economic factors, physical environment and high
population growth.
27. 27
2.2.3 POVERTY PROFILE IN NIGERIA
Poverty is still rampant in the Nigerian economy. Statistics revealed that poverty
incidence in Nigeria has been alarming since the 1980s. The United Nation
Development Programme Report (2010) stated that between 1980 and 1996, the
percentage of the core-poor rose from 6.2 percent to 29.3 percent and declined to
22.0 percent. There is the geographical dimension of poverty in Nigeria.
According to Aigbokhan (2000), poverty is severe in the rural areas than in the
urban areas. In 2004, 67 percent of the urban populace had access to potable water
whereas in the rural areas, 31 percent had access to such. In addition to this, 53
percent of the urban dwellers had access to sanitation services while 36 percent of
the rural populace was accessed to that (World Bank, 2002). This fact justified the
reason for the prevalence of disease in the rural areas simply because the living
condition is extremely low in the areas.
Garba (2002) alluded that the World’s per capita income was $7140 in 2003.
Nigeria’s per capita income in 2003 was $290, therefore making Nigeria one of the
poorest nations in the world. This relegated Nigeria to the league of other poor
nations like Togo ($270), Rwanda ($220) and Mali ($210). Other indicators of
development such as the life expectancy ranked Nigeria 155th out 177 countries in
the world and infant mortality rate ranked Nigeria 148th out of 173 countries
further buttressed the fact that Nigeria is paradoxical in nature-rich country, poor
people (CIA, 2009).
According to the Earth Trends (2003), 70.2 percent of Nigerians live less than $1
in a day and 90.8 percent live less than $2 daily. The total income earned by the
top 20 percent of the population is 55.7 percent while the total income earned by
the bottom 20 percent is 4.4 percent. This explains the alarming increase in poverty
28. 28
and the sharp inequality between the rich and the poor. Bayelsa state which has the
highest welfare per capita in Nigeria, recorded 26.2 incidence of poverty between
1995 and 2006 is still below the state that has the highest welfare per capita in
other countries like Accra, Ghana (2.4 percent), Douala, Cameroun (10.9 percent),
Baoteng, South Africa (19.0 percent) (World Bank, 2008). Using selected world
development indicators, the life expectancy at birth in 2006 for male and female in
Nigeria was 46 and 47 years respectively. Between 2002 and 2007, 27.2 percent of
children under the age of five were malnourished compared to 3.7 percent of the
same indicator in Brazil. The mortality rate of children below the age of five in
Nigeria was 191 per 1000 births in 2006. The situation is alarming compared to 69
per 1000 births in South Africa, 108 per 1000 births in Togo, 120 per 1000 birth in
Ghana and 149 per 1000 births in Cameroun (World Bank, 2008). This implies that
there is a general high level of poverty in Nigeria. Poverty is plentiful amidst the
poor in the Nigerian society. Nigeria is the 8th largest oil producing nation in
Nigeria and has the largest gross domestic product in the African continent but
contains the largest proportion of the poor in the Sub-Saharan region. There is a
wide income disparity between the rich and the poor which has resulted in the
resources of the nation in the hands of the few rich.
2.2.4 EFFECT OF THE PREVALENCE OF POVERTY AND
UNEMPLOYMENT
Poverty and unemployment are the developmental challenges behind the economic
stagnancy of Nigeria. Poverty and unemployment are interlinked and are positively
correlated with one another. The effect of poverty and unemployment in the
economy is adverse. Abubakar (2002) believed that poverty is always associated
with unemployment and in conjunction they produce unpleasant socio-economic
repercussion.
29. 29
Poverty and unemployment destroy hope, aspirations, self esteem, sense of
personal competency and happiness. They lead to religious clashes, ethnic
violence, terrorism, insecurity, prostitution, disorder, armed robbery, social
disorder, human trafficking, loss of output and income, para-suicide, depression,
gangsterism, and personal hardship, waste of human skills and resources, child
labour, abuse of human and civil rights and brain drain where highly skilled and
educated Nigerians migrate to other countries in search for greener pastures.
2.2.5 POVERTY ALLEVIATION STRATEGY IN NIGERIA
Successive administrations in Nigeria have formulated various policies and
programme to alleviate and reduce the incidence of poverty via the activities of its
ministries and agencies, partnering with international agencies and through the
creation of agencies with the exclusive goal on tackling the rising rate of poverty
and unemployment. At the inception of the Obasanjo administration, the Joda
panel was established to review various poverty eradication programmes initiated
by the previous administrations. Some of the agencies created by the past
administrations before the return of democracy in 1999 were
i. The National Directorate of Employment (NDE)
ii. Peoples Bank of Nigeria (PBN)
iii. Nigerian Agricultural and Cooperative Bank Ltd (NACB)
iv. Nigerian Agricultural Insurance Corporation (NAIC)
v. National Commission for Nomadic Education (NCNE)
vi. National Primary Healthcare Development Agency (NPHDA)
vii. National Agricultural Land Development Authority (NALDA)
viii. National Commission for Mass Literacy, Adult and Non-Formal
Education
30. 30
ix. Federal Agricultural Coordinating Unit (FACU)
x. Directorate for Food, Roads and Rural Infrastructures (DFRRI)
xi. Agricultural Projects Monitoring and Evaluation Unit (APMEU)
xii. Family Economic Advancement Programme (FEAP)
xiii. Industrial Development Centre (IDC)
xiv. Federal Department of Rural Development (FDRD)
xv. Federal Ministry of Agriculture, Water Resources and Power and Steel
xvi. River Basin Development Authorities (RBDAs)
xvii. Family Support Trust Fund (FSTF)
xviii. National Centre for Women Development (CWD)
xix. Nigerian Industrial Development Bank (NIDB)
xx. Nigerian Import-Export Bank
xxi. Nigerian Bank for Commerce and Industry (NBCI)
xxii. Nigerian Economic Reconstruction Fund
xxiii. Green Revolution (GR)
xxiv. Operation Feed the Nation (OFN)
Others are
i. National Empowerment for Economic and Development Strategy
(NEEDS)
ii. National Poverty Eradication Programme (NAPEP)
iii. Poverty Alleviation Programme (PAP).
It is worthwhile to know that the programmes and agencies aforementioned are
saddled with the core-responsibility of tackling poverty directly or indirectly
(through employment generation). Some of the commonest programmes are
explained below
31. 31
Rural Basin Development Authorities (RBDAs)
It was established by Decree 37 of August 1976 during MuritalaMuhammed
Administration. It is one of the earliest attempts to combat with poverty through
improved agricultural production. The main goal of RBDAs is the economic
exploitation and management of land and water resources of their respective
areas of operation with particular but varying emphasis on the development of
agriculture, fishing and human settlement, infrastructural facilities and the
improvement of the environment.
Operation Feed the Nation (OFN)
OFN was initiated in 1979 by General Olusegun Obasanjo. The programme
attempted to eradicate poverty through increasing food production on the
premise that availability of food will raise the nutritional level of the ordinary
Nigerian and invariably lead to high per capita income and standard of living.
OFN lasted till the emergence of the civilian administration of
AlhajiShehuShagari in 1979.
Green Revolution (GR)
The programme founded by ShehuShagari in 1979 shared the same objective of
tackling poverty through increased food production with the preceding military
administration of General Olusegun Obasanjo.
Directorate for Food, Roads and Rural Infrastructure (DFRRI)
DFRRI was introduced by Ibrahim Babaginda during his administration that
lasted between 1985 to 1992. DFRRI sought to open up rural areas through
construction of feeder roads and provision of basic amenities that would turn
them into production centers for the national economy.
32. 32
National Directorate of Employment (NDE)
It is an indirect measure taken by the government to tackle poverty via creation
of jobs.
NationalEmpowerment for Economic and Development Strategy (NEEDS)
NEEDS was designed in 1999 during the Obasanjo civilian administration. The
focus of the programme is to trigger the nation to economic development
through reducing poverty, generating job opportunities, creating wealth and
value.
National Poverty Alleviation Programme (NAPEP)
It was introduced in early 2001 and remains the current programme with the
core-goal of eradicating absolute poverty in Nigeria. NAPEP is supplemented by
the National Poverty Eradication Council (NAPEC), which is saddled with the
duty of coordinating poverty-reduction related activities of all relevant
ministries, parastatals and agencies. It has the mandate to ensure that wider
range of activities is centrally planned, co-ordinate and complement one another
so that the goals of policy continuity and sustainability are achieved.
NAPEP encompasses four schemes namely
Youth Empowerment Scheme (YES)
This deals with capacity acquisition, mandatory attachment, productivity
improvement, credit delivery, technology development and enterprise
promotion.
Rural Infrastructure Development Scheme (RIDS)
This deals with the provision of potable and irrigation water, transport (rural and
urban), rural energy and power support.
Social Welfare Service Scheme (SOWESS)
33. 33
This deals with special education, primary healthcare services, establishment and
maintenance of recreation centers, public awareness facilities, youth
development, environmental protection facilities, food security provision, micro
and macro credit delivery, rural telecommunications facilities, and provision and
maintenance of mass transit.
National Resources Development and Conservation Scheme (NRDCS)
This deals with the harnessing of the agricultural, water, social mineral
resources, conservation of land and space (beaches and reclaimed space)
particularly for the convenient and effective utilization by small scale operators
and immediate community. In short, NAPEP is concerned with youth
empowerment, rural infrastructure development, provision of social welfare
services and natural resources development conservation.
Poverty Alleviation Programme (PAP)
PAP was an interim measure designed in 2000 to address the problem of rising
unemployment and crime incidence particularly among the youths. It was
targeted at improving the material wellbeing of the populace. The primary goals
of PAP are to reduce the problem of unemployment and raise effective demand
in the economy, boost productivity and lastly to reduce the level of crimes in the
country. In line with these goals, PAP is targeted to
i. Provide at least 200,000 jobs for the unemployed
ii. Creating a credit system in which farmers will have easy access to loans,
aids and grants.
iii. Raise adult literacy rate from 51 to 70 percent by the year 2003
iv. Increasing health care delivery system
v. Training of at least 60 percent tertiary institution graduates
vi. Establishing and developing small and medium scale businesses.
34. 34
It is unfortunate that as strategic these programmes were, it failed to reduce the rate
of poverty, create job opportunities and empowerment and material wellbeing of
the people. Collin (2003) stressed that a number of factors militated against the
delivery of various poverty eradication programmes. The factors were lack of
targeting mechanism for the poor (most of the programmes were not poor-
focused), political instability, frequent policy changes, inconsistent
implementation, inadequate co-ordination of various programmes which have
resulted in each institution carrying out its own activities with resultant duplication
of efforts and inefficient use of the limited resources. Antai (2007) added that
severe budgetary, management and governance problems have afflicted most of the
programme resulting in facilities not completed, broken down, abandoned and ill-
equipped. Also lack of accountability and transparency made the programme serve
as a pipe for draining natural resources. In addition, over-extended scope of
activities of institutions resulted in resources being spread too thinly on too many
projects. Example of such is DFRRI and Better Life for African Women
Development which covered almost every sector and overlapped with many
existing programmes.
2.2.6 HUMAN DEVELOPMENT INDEX (HDI)
The HDI was created to emphasize that people and their capabilities should be the
ultimate criteria for assessing the development of a country and not economic
growth alone. The HDI can be used to question national policy choices asking how
two countries with the same level of per capita income can end up having different
human development outcomes. These contrasts can stimulate debate about
government policy priorities.
35. 35
The human development index is a summary measure of average achievement in
key dimensions of human development namely long and healthy life, being
knowledgeable and enlightened and having a decent standard of living. The HDI is
a geometric mean of normalized indices for each of the three dimensions.
The health dimension is assessed by life expectancy at birth component of the HDI
is calculated using a minimum value of 20 years and a maximum value of 85 years.
The education component of the HDI is measured by the mean of years of
schooling for adults aged 25 and expected years of schooling for children of school
entering age. Mean years of schooling is estimated by UNESCO institute for
statistics based on educational attainment data from censuses and surveys available
in its database. Expected years of schooling are capped at 18 years. The indicators
are normalized using a minimum value of zero and maximum aspirational values
of 15 and 18 years respectively. The two indices are combined into an education
index using arithmetic mean.
The standard of living dimension is measured by the gross national income per
capita. The goalpost for minimum income is $100 (PPP) and the maximum value is
$75000 (PPP). The minimum value for GNI per capita set at $100 is justified by
the considerable amount of unmeasured subsistence and nonmarket production in
economies close to the minimum that is not captured in the official data.
The HDI uses the logarithm of income to reflect the diminishing importance of
income with increasing GNI. The scores of the three HDI dimension indices are
aggregated into a composite index using the geometric mean. The HDI varies
between 0 and 1. HDI value of more than 0.8 signifies a very high human
development. HDI value between 0.799-0.700 represents high human
development. HDI value between 0.699-0.560 connotes medium human
36. 36
development while HDI value below 0.560 is represents low human development.
The HDI index does not reflect on inequalities, poverty, human security,
empowerment and gender disparity.
The table below shows the human development index and its components of
Nigeria compared with other African nations as at the year 2012.
Table 3: Human Development Index and its Components (2013)
World
Rank
Country 2013
HDI
2013 Life
Expectancy
at Birth
2013
Mean
Years of
Schooling
2012
Expected
Years of
Schooling
2012
GNI
Per
Capita
($)
2012
HDI
Index
55th Libya 0.784 75.3 7.5 16.1 21,666 0.789
63rd Mauritius 0.771 73.6 8.5 15.6 16,777 0.769
71st Seychelles 0.756 73.2 9.4 11.6 24,632 0.755
90th Tunisia 0.721 75.9 6.5 14.6 10,440 0.719
93rd Algeria 0.717 71.0 7.6 14.0 12,555 0.715
109th Botswana 0.683 64.4 8.8 11.7 14,792 0.681
110th Egypt 0.682 71.2 6.4 13.0 10,400 0.681
112th Gabon 0.674 63.5 7.4 12.3 16,977 0.670
118th South
Africa
0.658 56.9 9.9 13.1 11,788 0.654
123rd Cape
Verde
0.636 75.1 3.5 13.2 6365 0.635
127th Namibia 0.624 64.5 6.2 11.3 9185 0.620
129th Morocco 0.617 70.9 4.4 11.6 6905 0.614
37. 37
138th Ghana 0.573 61.1 7.0 11.5 3532 0.571
140th Congo 0.564 58.8 6.1 11.1 4909 0.561
141st Zambia 0.561 58.1 6.5 13.1 2898 0.554
143rd Sao Time
&
Principle
0.558 66.3 4.7 11.3 3111 0.556
144th Equatorial
Guinea
0.556 53.1 5.4 8.5 21,972 0.556
147th Kenya 0.535 61.7 6.3 11.0 2158 0.531
148th Swailizand 0.530 49.0 7.1 11.3 5536 0.529
149th Angola 0.526 51.9 4.7 11.4 6323 0.524
151st Rwanda 0.506 64.1 3.3 13.2 1403 0.502
152nd Cameroun 0.504 55.1 5.9 10.4 2557 0.501
153rd Nigeria 0.504 52.5 5.2 9.0 5353 0.500
Source: UNDP Report (2013)
2.2.7 MULTIDIMENSIONAL POVERTY INDEX
The multidimensional index (MPI) was developed in 2010 by the Oxford Poverty
and Human development initiative and the United Nations Development
Programme. It uses different factors to determine poverty beyond based income
levels. The MPI is an international measure of acute poverty covering over 100
developing economies. It supplements traditional income-based poverty measures
by capturing the severe deprivations that each person faces at the same time with
respect to education, health and living standards. The MPI assesses poverty at
individual level. If someone is deprived in a third or more of ten (weighted)
indicators, the global index identifies them as ‘MPI poor” and the extent or
intensity of their poverty is measured by the number of deprivations they are
38. 38
experiencing. The MPI can be used to create a comprehensive picture of people
living in poverty and permits comparisons both across countries, regions and the
world and within ethnic group, urban/rural location as well as other key household
community characteristics. This makes it an invaluable tool to identify the most
vulnerable people – the poorest among the poor, revealing countries and overtime,
enabling policy makers to target resources and design policies more effectively.
The index uses the same three dimensions as the Human Development Index;
health, education and living standards. These are measured using ten indicators
which are health (child mortality, nutrition), education (years of schooling, school
attendance), living standards (cooking fuel, sanitation, water, electricity, floor and
asset). Each indicator is equally weighted. A person is considered poor if in at least
a third of the weighted indicators of poverty denotes the proportion of indicators in
which they are deprived.
The MPI constitutes a sincere effort towards expansion as well as simplification of
poverty estimation. While HDI and MPI use the 3 broad dimensions of health,
education and living standards. HDI uses only single indicators for each dimension
of poverty while MPI uses more than one indicator for each one. This amongst
other reasons has led to the MPI only being calculated for 104 nations where data
is available for all these diverse indicators while HDI is calculated for almost all
countries. However, though HDI is thus more universally applicable, its relative
sparsity of indicators also makes it more susceptible to bias. Indeed some studies
have found it to be somewhat biased towards GDP per capita as demonstrated by a
high correlation between HDI and the log of GDPpc. This has led to the
abandonment of HDI as an accurate yardstick for measuring poverty and
development.
39. 39
The table below presents the MPI index and other poverty parameters of
developing African nations as at 2009.
Table 4: MPI Index and Other Poverty Parameterfor Some Selected African
Nations
Country MPI% of
people who
are poor
Average
Intensity of
MPI
Poverty
Percentage
Number of
People
living on
less than $1
a day.
Percentage
Number of
People
living on
less than $2
a day
Angola 0.452 77.4 54.3 70.2
Burkina
Faso
0.536 71.8 47.3 75.3
Cameroun 0.287 53.3 9.6 30.4
Cote’diovre 0.353 61.5 23.8 46.3
Egypt 0.024 6.0 2.0 18.5
Gabon 0.161 35.4 4.8 19.6
Ghana 0.144 31.2 30.0 53.6
Guinea 0.506 82.5 43.3 69.6
Kenya 0.229 47.8 19.7 39.3
Liberia 0.485 83.9 83.7 94.8
Mali 0.558 86.6 51.4 77.1
Morocco 0.048 10.6 2.5 14.0
Namibia 0.187 39.6 49.1 67.2
Niger 0.642 92.4 43.1 75.9
40. 40
Nigeria 0.310 54.1 64.4 83.9
Rwanda 0.426 80.2 76.8 89.6
South
Africa
0.057 13.4 17.4 35.7
Swailizand 0.184 41.4 62.9 81.0
Tunisia 0.010 2.8 2.6 12.8
Togo 0.284 54.2 38.7 69.3
Uganda 0.367 72.3 37.7 64.5
Source; Oxford Poverty and Human Development initiative (2011)
2.3 HUMAN CAPITAL DEVELOPMENT
Human capital development is the training, strengthening, fortifying and
energizing the human capital base of a country. Human resource and human capital
have been often being used interchangeably. Human resource refers to the mere
population (youth-adult size capacity) of a country while human capital refers to
the developmental and tactical training of the human resource. The human resource
of any country can be either a blessing or curse depending on how they are being
utilized.
Human capital development also connotes the process in which the human
resource of a nation is trained, exploited, harnessed and utilized. In other words, it
is the management of the human resource of a nation. Many researches conducted
revealed that one of the big difference between advanced economies and less
developed economies is how well they have invested in human capital
development. Advanced countries of the world have assiduously spent the
41. 41
resources of time, energy and finance on human capital development and it paid
off for them in terms of higher productivity and growth.
Human capital development is dissected into two components which are namely
education and health. Massive investment into these two sectors is a license for
economic boom, progress and prosperity.
2.3.1 EDUCATION
Education is the process of imparting knowledge, skills, attitude and norms to
people. Education is the greatest legacy that can ever be given to anyone.
Education is the answer to the poverty and misery of man. Education is the key to
exposure. The benefits of education to mankind can never be overemphasized. All
nations of the world must give extra attention to the educational sector because the
recipients are the leaders of tomorrow and if they are not properly educated or
imparted upon, they can become catastrophic to the nation.
Due to its importance, the United Nations Organization for Education, Science and
Culture recommended that at least 26 percent of any nation’s budget must be
allocated to the education sector. It’s worrisome that Nigeria has failed to meet the
required standard over years. Expenditure on education has not been sufficient to
transform the sector into greater height. Nonetheless, the education sector in
Nigeria has been bedeviled with various setbacks among are inadequate funding,
unstandardized teaching and learning curriculum, inadequate infrastructural
facilities, untimely payment of workers’ salaries and remuneration, incessant strike
actions by teaching unions, recruitment of incompetent teachers etc.
45. 45
Figure 3: Total Expenditure on Education in Nigeria in Million Naira, 1981-
2012
2.3.2 HEALTH
To the layman, health is the absence of illness or infirmities, but the concept of
‘health’ goes beyond this. The most comprehensive and encompassing of health
was given by the World Health Organization (1977), they defined health as the
complete well-being state of a man physically, emotionally, physiologically,
psychologically and spiritually.
46. 46
All nations are ensued to give their health sector full attention, because an healthy
worker is a productive worker, and a productive worker adds value to economic
growth of his country.
The yardsticks used for determining the Development of Health Sector of a
Country are
Life Expectancy: This is the minimum number of years an individual is expected
to live assuming the death rate is assumed to be zero. In other words, it is the
predicted life-span of an individual when subjecting the mortality rate to zero. Life
expectancy varies across different countries depending on their health and
environmental conditions. Life expectancy in the advanced world is higher
compared to the undeveloped countries.
Mortality rate: This is the ratio of total deaths to total population in a specified
community or area at a specified period of time. It is often expressed as the number
of deaths per 1000 of the population per time.
Maternal Mortality rate: This is annual number of female deaths per 100,000
live birth from any cause related to or aggravated by pregnancy or its management
excluding accidental or incidental causes.
Total Expenditure of Health: This is the total amount of money allocated to the
health sector for the citizens’ health improvement and provision of drugs and
health facilities.
47. 47
Table 5: Life Expectancy and Total Health Expenditure in Nigeria (1981-
2012)
Year
Life Expectancy in
Years
Total Expenditure on
Health (Nm)
1981 46 84.46
1982 46 95.95
1983 46 279.6
1984 46 190.2
1985 46 223.4
1986 46 360.4
1987 46 236.4
1988 46 443.2
1989 46 452.6
1990 46 658.1
1991 46 757
1992 46 1025.4
1993 46 2684.5
1994 46 3027.8
1995 46 5060.9
1996 46 5803
1997 46 11984.3
1998 46 16180
1999 46 18181.8
2000 47 44651.5
49. 49
Figure 4: Trend of Total Expenditure on Health in Nigeria (1981-2013)
2.4 EMPIRICAL REVIEW
Osinubi (2006) asserted find it worthwhile to explain the synergy among poverty,
unemployment and growth in Nigeria. He stressed that Nigeria is a nation blessed
with multifarious and multitudinous natural and human resources. But due to gross
mismanagement, adverse government policies, none and underutilization of
resources and non-channeling to resources for maximum benefits. As a result of
50. 50
these, Nigeria has been bedeviled with poverty and unemployment crisis.
Simbowale (2003) conducted a study between the linkage of macroeconomic
policies and pro-poor economic growth in Nigeria for the period 1960-2000. The
study unveiled among others that growth was weakly pro-poor. Again, those who
are below the poverty line have not enjoyed the dividends of growth and the
probability of it getting to them is decreasing at an increasing rate. Overall,
economic growth in Nigeria is not pro-poor.
Bello and Abdul (2010) examined the poverty situation in Nigeria by employing
the data on economic growth and millennium development goals (MDGs)
expenditure. The methodology adopted was panel data analysis, fixed and random
effects and the weighted least squares. The results revealed that a unit increase in
per capita income produced a unit increase of 0.6 in poverty level. Similarly, a unit
increase in MDG expenditure resulted in 11.56 unit rise in relative poverty. The
study concluded that economic growth and MDGs expenditure within the sample
period. Ibrahim and Umar (2008) assessed the determinants of poverty as well as
poverty coping strategies among family households in Nassarawa State, Nigeria.
The study employed sampling to select 150 farming households and the used of
cost of calorie method and discrimination analysis to explore the incidence and
determinants of poverty. The incidence of poverty was found to be high and its
determinants are size of household, size of income, number of household employed
outside agricultural and the number of adult literate. The major poverty coping
strategies include skipping of meals, reduction in the quantity of meals served and
engaged in wage labour. The study recommended that the farming households
should family households should be effectively involved in the formulation of
strategies for imparting knowledge on family planning to the household.
51. 51
Bakare (2010) examined the determinants of urban unemployment in Nigeria. The
determinants used were unemployment rate, demand for labour, and supply of
labour, inflation, unemployment, capital formation, capacity utilization and
nominal wage rate. The results indicated that rising nominal wage rate and rapid
population growth has multiplied the supply of labour relative to the absorptive
capacity of the economy and this is the chief determinant of unemployment in
Nigeria. Muhammad (2011) assessed the relationship between economic growth
and unemployment in Nigeria using the OLS technique for the period 2000-2008.
His result showed that unemployment is inversely related to GDP. A rise in
unemployment rate results in 65 percent fall in GDP. Durosimi (2012) did an
empirical investigation of the impact of unemployment on economic growth
between 1970-2010. The variables employed in the model were government
expenditure, broad money supply, unemployment rate and GDP growth rate-being
the explained variable. The results indicated that government expenditure and
money supply favors growth while unemployment rate was found to be significant
to the reduction of growth within the period reviewed. The study recommends
amongst others that the educational system should be restructured so as to enable
the youth to be self reliant and self employed
Downes (2008) investigated the necessary conditions for reducing unemployment
rate in Trinidad and Tobago for the period 1971-1996. Using the ECM estimated
by the OLS instrumental variables. He discovered that long and short runs changes
in RGDP and Real Average Earnings have a statistically impact on changes in
unemployment rate. While increase in GDP reduces the unemployment rate in
short and long terms but lower in the short run and increase in real average
earnings raises the unemployment rate in the long run.
52. 52
Onyedikachi and Nwabueze (2013) conducted a study on the linkage between
poverty a economic growth in Nigeria between 1990 and 2010 using the OLS
regression technique. The dependent variable is the economic growth indexed by
the GDP. The independent variables captured the three dimensions of the human
development index (life expectancy (health), adult literacy rate (education) and per
capita income (decent standard of living) and the discomfort index (unemployment
rate). The results indicated that life expectancy and per capita income were
positively related to GDP with their co-efficient being 0.09 and 0.45. on the other
hand, adult literacy rate and unemployment rate were adversely related to GDP
with the co-efficient of -0.003 and -0.01. They attributed the negativity of adult
literacy rate to the failure of the government to allocate at least 26 percent of the
budget to the education sector. It was also found higher life expectancy should
translates to increased economic growth, massive investment in education will lead
to economic growth, high per capita income will lead to growth. They advised that
government should embark to human development programme as the only panacea
to poverty. The study recommends amongst others that the educational system
should be restructured so as to enable the youth to be self reliant and self
employed. Chigbu (2012) explored the effect of poverty and unemployment on
growth in Nigeria between 1991-2010. The variables adopted were health
expenditure, health expenditure, agricultural expenditure, population and
unemployment rate. The results revealed that health expenditure, population and
unemployment rate have influenced on growth positively while education
expenditure and agricultural expenditure. The study noted that the causes of
poverty and unemployment in Nigeria are low economic growth, increasing
population, bad governance, macroeconomic instability, corruption, debt burden,
poor environment, neglect of the agricultural sector, poor health facilities and
inadequate education infrastructures.
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CHAPTER THREE
RESEARCH METHODOLOGY AND EMPIRICAL ANALYSIS
3.1 IDENTIFICATION OF VARIABLES
The variables that are employed in the study are annual time series secondary data
on poverty level (PL), GDP growth rate (GDGR), unemployment rate, (UMR),
population (POP), inflation rate (INF), total education expenditure (TEED), total
health expenditure (TEEH), external debt (EXD), corruption perception index
(CPI). The years reviewed covers the period of 1985-2013.
3.2 MODEL SPECIFICATION
Referring to Abubakar (2002), Ajakaiye and Adeyeye (2001) and NBS (1996), the
main causes of poverty in Nigeria are low economic growth, unemployment, high
inflation rate, high population, inadequate funding and delivery of the education
and health sector, foreign debt burden, corruption and bad governance.
In the same vein, the study seeks to examine the determinants of poverty in
Nigeria. The dependent variable adopted is the poverty level (PL) and the
independent variables are Growth rate of GDP (GDGR), unemployment rate
(UMR), population (POP), inflation rate (INF), total education expenditure
(TEED), total health expenditure (TEEH), external debt (EXD) and corruption
perception index (CPI). Stating the above expression using a function relationship
we have
PL= f (GDGR, UMR, POP, INF, TEED, TEEH, EXD, CPI)………………(1)
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Converting the above functional relationship in equation 1 into an econometric
model, it becomes
PL= b0+ b1GDGR+ b2UMR + b3POP + b4INF + b5TEED +b6TEEH + b7EXD +
b8CPI + u------ (2), where b0-b8 are the co-efficient of parameter estimate and u is
the disturbance term.
3.3 DISCCUSION OF VARIABLES
A. POVERTY LEVEL:
This is the unit of the proportion of the poor people (those below $1) in the total
population. It measures the number of the people who are inaccessible to the basic
needs of life such as food, cloth, shelter and education and health facilities it is the
explained variable.
B. GROSS DOMESTIC PRODUCT GROWTH RATE
The gross domestic product is the total market value of commodities produced
within the geographical boundary of a nation at a specified period of time. It is
equally seen as the market size of an economy. The GDP can either rise or fall in
relation to the base year. GDP growth is the percentage change in the GDP over
year. High growth rate is perceived to minimize the incidence of poverty.
Therefore, a negative relationship exists between poverty and growth rate. (b1<0)
C. UNEMPLOYMENT RATE
This is the percentage of those who are actively seeking for job but unable to get
one out of the total labour force (economically active population). The higher the
unemployment rate, the higher the intensity of unemployment. An average
unemployed man is a poor man because he currently did not have a means of
55. 55
livelihood to meet basic needs of life. Therefore a positive relationship exists
between unemployment and poverty (b2>0)
D. POPULATION
This is the total number of people living in a geographical setting at a particular
point in time. Increase in population makes an average income to decline because
it will spread on all heads. Also, rapid rise of population growth ahead of GDP
growth is a sign of underdevelopment and hence poverty. High population
translates to increased poverty. (b3>0)
E. INFLATION RATE
Inflation is the persistent and sustained rise in the general price level of goods and
services within an economy over a specified period of time. Inflation also arises
when the quantity of money exceeds the rise in output, or when the aggregate
demand exceeds aggregate supply at full employment equilibrium or when the
nominal wage rate exceeds labour productivity. Inflation weakens the monetary
mechanism of an economy and leads to the escalating increase in the price of basic
commodities which will be unaffordable by an average individual. High inflation
produces economic hardship for the citizens (b4>0)
F. EDUCATION EXPENDITURE
Education expenditure is the total amount expended to the educational sector for its
improvement, service delivery and rehabilitation. It is unfortunate that the
expenditure on education has not been sufficient to reduce poverty to the barest
minimum in Nigeria. Moreover, the Nigerian education is sub-standard because it
is usually under-funded by the government and the allocation that goes into the
sector is less than the required 26 percent of the proposed budget as laid down by
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UNESCO. Education being a component of human development is a veritable of
reducing poverty through skill acquisition. Thus, a negative relationship exists
between education expenditure and poverty (b5<0)
G. HEALTH EXPENDITURE
Health expenditure is the total amount expended to the health sector for its
improvement, service delivery and rehabilitation. It is unfortunate that the health
sector has not remarkable over years. The budgetary allocation to the health sector
is always less than 8 percent since 1980. A proof for the under-performance of the
sector is low life expectancy, high maternal and infant mortality rate, inadequate
access to health facilities and strike action by health workers among others.
Expenditure on health ought to suppress the incidence of poverty in Nigeria (b6<0)
H. EXTERNAL DEBT
External debt is the amount a country owed foreign agencies and countries. It is
debt incurred from outside the geographical limits of a country. External debt
raises poverty simply because the funds obtained will be repaid out of the
insufficient resources of the country ( b7>0)
I. CORRUPTION PERCEPTION INDEX
Corruption is the misuse of public power for personal illegitimate gains which
need not to be monetary. Corruption involves all form of embezzlement,
misallocation of resources, and misappropriation of funds, thuggery, godfatherism,
extortion, electoral malpractices, nepotism, money laundering and the like.
Corruption is present in every economies but in varying degree. Corruption is
found to be prevalent among the less developed economies. Corruption propagates
poverty because the money and resources meant for the welfare of the nation is
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siphoned but few people who are in authority and rendering them into destitution
(b8>0).
3.5 NATURE AND SOURCES OF DATA
The data employed in the study are secondary data obtained from the Central Bank
of Nigeria Statistical Bulletin, National Bureau of Statistics report and the United
Nations Development Programme report.
3.6 ESTIMATION TECHNIQUE
The study adopts the Ordinary Least Square technique using multiple regression
analysis. The technique will be adopted because it is the best unbiased estimator in
terms of efficiency, minimum variance, consistency, accuracy and depicting the
significance status of the parameter estimates. The Statistical Package for Social
Science (V.20) will be employed to run the regression among the variables.
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2007 0.417 6.972 12.7 143.854 5.4 186771.6 122400 431079.85 2.7
2008 0.42 5.984 14.9 147.81 11.6 210444.8 138179.7 493180.22 2.7
2009 0.462 6.96 19.7 151.874 11.5 223451.5 141879 590441.08 2.7
2010 0.612 7.976 21.4 156.051 13.7 235040.9 156896.8 689845.3 2.7
2011 0.637 7.356 23.9 160.342 10.8 287544 200278.9 567100 2.7
2012 0.715 6.332 25.7 164.752 12.2 321547 225760.8 653010 2.4
2013 0.736 7.161 23.9 169.282 8.5 335459 229850.3 988997.72 2.5
4.2 PRESENTATION OF REGRESSION RESULTS
Model Summary
Model R R Square Adjusted R
Square
Std. Error of the
Estimate
1 .847a
.717 .604 .221
a. Predictors:(Constant),CPI, EXD, INF, GDGR, UMP, POP, TEED, TEEH
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1
Regression 2.472 8 .309 6.334 .000b
Residual .976 20 .049
Total 3.448 28
a. DependentVariable:PL
b. Predictors:(Constant),CPI, EXD, INF, GDGR, UMP, POP, TEED, TEEH
Coefficientsa
Model Unstandardized Coefficients Standardized
Coefficients
t Sig.
B Std. Error Beta
1
(Constant) .341 .710 .481 .636
GDGR -.001 .009 -.020 -.130 .898
UMP .001 .018 .031 .075 .941
POP -.004 .008 -.328 -.548 .590
INF .001 .003 .041 .284 .779
TEED 2.059E-006 .000 .632 .552 .587
TEEH 3.639E-006 .000 .767 .650 .523
EXD -3.707E-009 .000 -.015 -.082 .935
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CPI -.113 .084 -.385 -1.347 .193
a. DependentVariable:PL
4.3 INTERPRETATION OF RESULTS
Correcting all the co-efficient of the parameter estimates to 2 decimal place, the
regression equation becomes
PL= 0.34 – 0.02GDGR + 0.03UMP -0.33POP + 0.04INF + 0.63TEED +
0.78TEEH -0.02EXD – 0.39CPI + u
The intercept of the equation is 0.34. This connotes that poverty incident is 0.34
units while subjecting all the independent variables to zero.
Gross domestic product growth rate is found to be negatively related to poverty.
This means that economic growth reduces poverty in Nigeria to an infinitesimal
degree. A one percent rise in economic growth produces a 2 unit fall in poverty
level while keeping other variables constant.
Unemployment and poverty are twined. Unemployment and poverty are positively
correlated in the Nigerian economy. A one percent rise in unemployment rate
generates a 3 unit rise in poverty level holding other variables fixed.
For population, it contradicts the a-priori expectation. Normally, higher population
leads to higher poverty incidence, but reverse is the case in the Nigerian setting
where population is found to reduce poverty. A one percent rise in population leads
to a 33 unit fall in poverty level holding other variables constant. This can largely
be attributed to rise in the per capita income over years.
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Inflation remained a causal factor of poverty in Nigeria. A percent rise in inflation
rate results in a 4 unit rise in poverty level. Rise in the price of basic goods of life
makes it difficult to be purchased a common man or household.
Total expenditure on education and health negated the a-priori expectation.
Education and health are supposed to be agents of poverty reduction. A percent
rise in education expenditure and health expenditure produces a 63 and 78 unit rise
in poverty level respectively keeping other variables fixed. This clearly showed
that the government has not put maximum attention to human capital development
which is very crucial for poverty reduction and wealth creation.
External debt and corruption affects poverty negatively. A percent rise in external
debt and a unit rise in the corruption transparency index generate a 2 unit fall and
39 unit fall in poverty level while keeping other variables unchanged.
All the explanatory variables are statistically insignificant as their probability
values are higher than the standard 0.05.
The co-efficient of determination is 0.847. This indicates that 84.7 percent of the
total variation in poverty level is explained by changes in the independent variables
stated in the model. The 15.3 percent unexplained variation is caused by other
factors affecting poverty which are included in the model.
The probability of f-statistics is 0.00 which is less than the standard 0.05. This
connotes that the overall influence of all the explanatory variables on poverty level
is statistically significant.
4.4 RESEARCH FINDINGS AND IMPLICATION
From the regression results above, it can be deduced that unemployment and
inflation rate propagates poverty in Nigeria. An unemployed man is an average
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poor man because he has no source of income to afford the basic life-requirement
commodity. The fight against poverty can be won by creating employment
opportunities for the youths and other destitute.
Inflation is the persistent and appreciable increase in the general price of all goods
and services sustained in an economy over a specific point in time. For inflation to
exist, the price increment must affect all commodities in the economy, the price
increment must affect all the sectors of the economy and the price increment must
be have been persistent in such an economy. One of the main effects of inflation is
that it makes basic goods and services to be unaffordable by a common man as a
result of the increase in its price. Little wonder it was found from the results that
high inflation stimulates the intensity of poverty incidence.
Abubakar (2002) alluded that low economic growth causes poverty in Nigeria.
Though, from the results gotten, GDP growth rate was found to have influenced
poverty reduction negatively within the reviewed years, but high or low growth
rate of GDP has not reflected in the material wellbeing of the people. As at today,
Nigeria is ranked as the largest economy in Africa and yet still ranked as one of the
poorest nation in the world. This confirms is that the country’s huge wealth and
resources are being spent and used by the few elites, thus rendering the masses into
penury. Economic growth, per capita income or GDP should and must be
abandoned as criteria of development because it neglects paramount developmental
issues in its computation.
Normally, increase in population should generate high poverty incidence.
Countries with high population are perceived to be poor. In the Nigeria setting,
population has not contributed to poverty during the estimated year. This can be
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linked to adoption of family planning practices, reduction in the number of
children be given birth to in a household and the like.
Health and education expenditure being components of human capital development
is expected to reduce poverty. One of the factors that distinguish developed nations
from the developing one is the amount of investment devoted to human capital
development. The results obtained indicate that increase in health and education
expenditure raises poverty level. This is attributed to the inadequate funding to the
sector, mismanagement of resources allocated to the sector, embezzlement of funds
meant for rehabilitation and infrastructures by top officials in the sector. Another
reason is low budgetary allocation to both sectors. Since 1980, the education sector
and health sector have not received above 10 percent allocation of the national
budget.
External debt is the fund, money, grants a country lend from other foreign
countries and agencies. The impact of external debt could either be positive or
negative depending on the managerial expertise and ability of the receiving
country. A properly managed debtincurred can boost economic growth and reduce
poverty if the funds are channeled in the right way and are dispensed judiciously
on productive things. On the other hand, external debt can retard growth and raise
poverty if the funds acquired are expended on less-prioritized projects. It can be
said to a certain degree, that external debt reduced poverty incidence
insignificantly in Nigeria within the years estimated.
Corruption impedes retards and paralyzes economic growth and development of
any country. Based on economic theory, corruption propels poverty. This connotes
that the money that needs to be enjoined by the ‘many’ goes to the hand of the ‘few
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elite’. On the other hand, corruption contributes to economic growth only if the
funds siphoned are spent productively on reasonable projects.
CHAPTER FIVE
5.1 SUMMARY OF RESEARCH STUDY
The major objective of every nation is to achieve a sustainable level of economic
development but there are several developmental challenges that could hinder its
attainment such as poverty, unemployment, population explosion, income
inequality, corruption etc. Poverty and unemployment are interrelated. Both
menaces are impediments to economic growth in Nigeria.
Almost 70 percent of Nigerians are below the poverty line while 92 percent of the
same people earn less than $2 dollar daily. The major causes of poverty in Nigeria
are unemployment, environmental degradation, population explosion, corruption,
debt burden, ignorance, illiteracy and inadequate health. Several administrations
have formulated various policies and programmers like DFRRI, NAPEP, NDE,
NEEDS, FEAP and the like. But as formidable as these initiatives were, they are
have failed to eradicate poverty to the barest minimum. Their failure can largely be
attributed to inadequate co-ordination and planning, bureaucracy, greed on the part
of those that initiated them, poor delivery to the target group. Based on the report
of the NBS, poverty is prevalent in the North West geopolitical zone and
particularly in the rural regions of the country.
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The national bureau of statistics revealed that 65 percent of the youths are
unemployed thereby has led to the under-utilization of human resource in Nigeria.
The major cause of unemployment in the Nigerian economy has been attributed to
the unabsorptive capacity of the unemployed into the labour market.
Unemployment has been recognized as the hallmark of poverty. The implication of
unemployment is, but not limited to loss of national output.
Though Nigeria is regarded as having the largest economy in Africa, but in aspect
of economic and human development, the country’s position has not been
remarkable. The indices of human development and multidimensional poverty
rankings have showed that Nigeria is still undeveloped in comparison to other
African countries such as Egypt, Libya, Equatorial Guinea and South Africa.
The study reviewed the synergy among poverty, unemployment, human
development and growth between 1985-2013. The Ordinary Least Square
Regression Technique via the Statistical Package for Social Science was adopted.
The poverty level was used as the explained variable while the explanatory
variables are GDP growth rate, unemployment rate, population, inflation rate, total
education expenditure, total health expenditure, external debt burden and
corruption transparency index. The regression results showed that unemployment
and inflation are the main causes of poverty in Nigeria.
5.2 CONCLUSION
The Nigerian economy is paradoxical in nature: wealthy nation but poor
inhabitants. Despite the country’s large size of GDP, the growth recorded is not
pro-people and has not reflected meaningfully into the material well-being of the
citizens.
66. 66
For Nigeria to attain the sustainable level of economic development, the
government must formulate an all-encompassing policy that will cover poverty
alleviation, job creation and revitalization of education and health sectors.
5.3 POLICY RECOMMENDATION
Based on the research findings, the following policy are forwarded and
recommended for consideration as regard the betterment of the Nigerian economy.
a. There should be a participatory approach in programme planning,
implementation and evaluation of poverty and unemployment programmes.
Stable macroeconomic policies such as rising inclusive growth, stable
exchange rate, single-digit inflation rate and low interest rate and
consistency in government policies is needed to achieve the minimization of
poverty and unemployment.
b. An enabling environment should be created for private investment to strive
as this will go a long way to reducing unemployment via usage of local
skilled manpower. The problem of incessant insecurity should be addressed
seriously as this poses a threat to foreign and local investment.
c. There should be a population policy that will limit population growth to a
level that will match the employment generation capacity of the economy.
d. Skill acquisition should be made a priority and be included in the curricula
of tertiary institutions so that graduates will be provider of employment
rather than a seeker. Government should provide soft loans, grants, aids and
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credit facilities so that people who have completed their acquisition training
can establish theirs in a small/medium way.
e. The fight against corruption should be intensified so that resources and funds
misallocated and mismanaged would be ventured into poverty and
unemployment reduction programmes.
f. The agricultural sector should be revitalized, restructured and made
attractive enough for youths to engage in it.
g. Basic infrastructures should be put in place in the rural areas so as to avoid
the situation of rural-urban migration and urban congestion.
h. Government should prioritize human capital development as this is the
panacea to the developmental challenges faced in Nigeria. Budgetary
allocation to the education and health sectors should be more than twenty
percent as proposed by the United Nations. Provision of adequate and
necessary facilities needed in both sectors should be implemented.
