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Poverty Reduction and Shared Prosperity
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- 7.Emerging Priorities and Government’s Agenda
6.Poverty Reduction and Shared ProsperityWhile the poverty rate in Nigeria declined by about 10 percent between 2004 and 2013, the number of poor didn’t decrease. A recent World Bank (the Bank) poverty assessment finds that poverty rates in Nigeria are significantly lower than official estimates. At the national level per capita terms, poverty rates declined from 46 percent in 2004 to 35.6 percent and 36.1 percent in 2011 in 2013, respectively. The official estimates were indicating a decline of only 2 percent from 64 percent to 62 percent between 2004 and 2010. However, given the rate of population growth (nearly 3 percent) between 2004 and 2011, the total number of poor did not vary. The trend also indicates that while there was some reduction in poverty between 2004 and 2011, the stagnation in the poverty rate and the increase in population between 2011 and 2013 offset each other. Poverty reduction was not commensurate with the strong GDP growth. For every 1 percent growth in GDP per capita, poverty declined by only 0.6 percent. Nigeria’s growth elasticity to poverty is half of the Sub Saharan Africa average and only one-fourth of that of Lower Middle Income countries. Three factors determined this low responsiveness. First, high growth rates have been accompanied by comparatively high population growth (2.7 percent per year). Second, Nigeria’s labor market shows a low capacity to absorb large numbers of new entrants. Third, inequality in terms of income and opportunities has been growing rapidly and has adversely affected poverty reduction; only half of the consumption per capita growth translated into poverty reduction. If inequality had not increased, poverty would have dropped by 18 percentage points rather than 10. The low elasticity of poverty reduction to growth can be attributed to the performance of NE and North West (NW) zones. Together these two zones experienced a stagnation in poverty rates while those were reduced in other zones. In 2004, the number of poor people residing in the NE and NW was 29 million and it increased to 37 million. The large poverty differential between the Northern and Southern regions of the country reflects a growing gap in various socioeconomic indicators and in economic opportunities. The overall picture is further complicated by divergent economic and social conditions in states. The coastal parts of the South West and South-South states can be considered middle-income economies that achieved important results with regard to poverty reduction but are facing the typical challenges of this group of countries such as urbanization, unmatched demand for quality services, and an unfavorable business climate. In contrast, the upper Northern states keep experiencing deep poverty, sluggish growth, and limited access to basic services and infrastructures. A set of policies will be needed to address structural challenges, such as combining distribution-blind interventions and poverty-targeted interventions. Distribution-blind interventions should give priority to diversifying the Nigerian economy away from oil. The poverty-targeted interventions can help reduce the gap between the Southern and Northern regions. Nigeria, in particular its Northern region, needs to enact policies, such as to improve access and quality of education, to obtain the kind of demographic dividend that has played an important role in the growth of East Asian and other economies. Reducing the North-South divide requires a renewed effort to provide greater access to basic social and infrastructure services. Finally, a well-targeted, national social protection system can help reduce the inefficiencies in the allocation of resources and boost the productive potential of individuals and communities by breaking the vicious circle that links inequalities in income and opportunity across generations. The current economic crisis has substantially reduced growth and has further limited the trickle down of growth to other regions in the country. Furthermore, the conflict in the NE and part of NW has aggravated the conditions facing the local population and thereby worsened many socio economic indicators. The new situation calls for additional analytical work to clarify the implications of these poverty dynamics for the CPS. 7.Emerging Priorities and Government’s AgendaThe GoN seeks to implement stabilization and recovery measures while addressing the medium and long-term development agenda, including efforts to improve security and combat corruption. The stabilization and recovery measures focus on (a) restoring macroeconomic resilience and growth; and (b) improving security in the NE and Niger Delta. Restoring macroeconomic resilience and growth will be critical not only for Nigeria but for West Africa as a whole, given the strong links between Nigeria and neighboring countries in trade and capital flows. The medium and long-term agenda is to promote job creation and build an economy led by a strong and responsible private sector; provide physical and economic infrastructure; enact social policies that would increase opportunities for the poor and vulnerable; and address climate change and other stressors. The GoN has shown commitment to improving governance. The financial and operational books of the Nigeria National Petroleum Company (NNPC) are open and momentum is building to press ahead with new legislation for the petroleum sector to increase its transparency and make it more competitive and attractive for investment. Financial audits of various agencies have been commissioned, while the Economic and Financial Crimes Commission has stepped up its investigations of alleged cases of fraud and corruption. The authorities have taken a number of institutional policy reforms for restoring macroeconomic resilience and growth. The introduction of a flexible exchange rate system on June 20, 2016, is expected to improve the supply of foreign exchange which had become a key bottleneck to non-oil growth. Additional measures have also been undertaken to increase non-oil revenues and control expenditures7. On the expenditure side, efforts are made to reorient towards capital expenditures, which were severely cut in 2015, as well as social sectors. The introduction of an Integrated Payroll and Personnel Information System is expected to help control the wage bill. The subsidy for kerosene has been eliminated and a rule-based pricing system for fuel has been introduced with no subsidy allocation in the budget8. An Efficiency Unit has been established in the FMOF in order to reduce overhead expenditures. Going forward, the GoN will need to deepen these stabilization and institutional reforms. While important fiscal measures underway both on the revenue and expenditure sides, recent results, especially on revenue generation, indicate that these are not sufficient. Additional measures are needed, including increasing the VAT tax rate and removing some of the tax waivers and exemptions. A comprehensive and coherent framework for monetary, fiscal, and structural policy reforms will help Nigeria restore its macroeconomic resilience and growth. Medium and long-term agenda for boosting non-oil growth and job creation. Agriculture, mining, infrastructure are key vehicles for increasing non-oil revenues, diversifying the economy and generating jobs. The Agriculture Promotion Policy (2016-2020), building on the Agriculture Transformation Agenda of the previous GoN, aims to increase agricultural productivity, drive job growth, and increase non-oil revenues. An overhaul of the mining sector is expected to reposition the sector as a major contributor to the Nigerian economy once commodity prices recover. The planned multi-billion-dollar infrastructure upgrade is expected to revive economic growth and help create jobs. Capital expenditure as the share of total budget has been increased to more than 30 percent in the 2016 budget. The emphasis is also on creating an enabling environment for industry, trade and investment; championing the cause of Nigeria’s micro, small and medium enterprises (SMEs) as a means of creating jobs and achieving inclusive growth; attracting long-term investment; and integrating into global value chains. The authorities attach strong importance to enhancing social inclusion. The draft National Social Protection Policy seeks to strengthen the role of social protection programs in distributing resources. In the health sector, the emphasis is on primary health care, particularly maternal and child health, and on reducing the vast inequities in terms of access and quality of services in the sector. The National Strategic Health and Development Plan is under review, and a new health policy is under preparation. Climate change agenda. Nigeria’s response to climate change is focused on (a) building a green economy and creating jobs (resuscitate the Great Green Wall, revive coastal economies and wetlands, waste-to-wealth initiatives, invest in national parks and green spaces); (b) taking climate action (reducing gas flaring9, developing renewable energy, recycling); (c) protecting the environment (reducing pollution, addressing soil degradation and deforestation); (d) addressing environmental governance (integrate environmental sustainability in development planning, implement its Intended Nationally Determined Contribution (INDC), develop participatory accountability mechanisms; and (e) building capacity. 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