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Human capital, capabilities and poverty in rural Nigeria

Olanrewaju Olaniyan and Abiodun S. Bankole

October 2005

SARPN acknowledges the African Economic Research Consortium (AERC) as the source of this document: www.aercafrica.org
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Introduction

Problem statement

Poverty is a multifaceted concept, which manifests itself in different forms depending on the nature and extent of human deprivation. In absolute terms, poverty suggests insufficient or the total lack of basic necessities like food, housing and medical cares. It embraces the inadequacy of education and environmental services, consumer goods, recreational opportunities, neighbourhood amenities and transport facilities. In relative terms, people are poverty-stricken when their incomes fall radically below the community average (World Bank 2000). This implies that such people cannot have what the larger society regard as the minimum necessity for a decent living. In precision terms, the poor can be defined as follows:

  • Individuals and households lacking access to basic services, political contacts and other forms of support;
  • Households whose nutritional needs are not met adequately;
  • Ethnic minorities who are marginalized, deprived and persecuted economically, socially, morally, and politically; and
  • Individuals and households below the poverty line whose incomes are insufficient to provide for their basic needs (World Bank 2001)
One important consensus in the literature on poverty is that, poverty is a rural phenomenon (World Bank, 1990; Fields, 2000). By this, it is acknowledged that rural communities are the worst hit by poverty. Unfortunately, the importance of the rural poor is not always understood, partly because the urban poor are more visible and more vocal than their rural counterparts. Incidentally, the rural sector is the predominant sector in the Nigerian economy. It plays some fundamental roles, which include job creation at relatively low unit costs, and thus remains the most important growth priority of the country. The AERC Collaborative Poverty I research finds that poverty is concentrated among rural population in Nigeria and it is everywhere higher than urban poverty for the period 1980- 1996 (see Okojie et al 2001). This specifically makes it necessary to investigate rural poverty further.

The Poverty situation is Nigeria is quite disturbing. Both the quantitative and qualitative measurements attest to the growing incidence and depth of poverty in the country. This situation however, presents a paradox considering the vast human and physical resources that the country is endowed with. It is even more disturbing that despite the huge human and material resources that have been devoted to poverty reduction by successive governments, no noticeable success has been achieved in this direction. The Human Development Report (UNDP, 1999) reveals that Nigeria is one of the poorest among the poor countries of the world. Nigeria ranks 54th with respect to the human poverty index (HPI) - making it the 20th poorest country in the world. It is also ranked 30th in gender related development index (GDI) while occupying 40th position from below in its human development index (HD1).

In line with the above, the quantitative poverty assessment by the Federal Office of Statistics (FOS, 1999), based on the analysis of a series of national consumer surveys over a 16 year period (1980-1996), shows that the incidence of poverty rose drastically between 1980 and 1985 on one hand and between 1992 and 1996 on the other, but decreased between 1985 and 1992. The 28.1 percent poverty incidence of 1980 translated to 17.7 million poor people in the country, whereas there were 34.7 million poor people in 1985 with an incidence of poverty of 46.3 percent. Despite the drop in the poverty incidence in 1992 to 42.7 percent, the population of the poor was 39.2 million, about 5 million more than 1985 figures. By 1996, 67.1 million people were in poverty with an incidence of poverty of 65.5 percent. The situation of poverty as at 2001 would have worsened, as there has not been any significant improvement in the quality of life (welfare) of the majority of the people. The bitter reality of the Nigerian poverty situation according to NISER (2003) is that more than 40 percent of Nigerians live in conditions of extreme poverty, spending less than N320 per capita per month. This expenditure would barely provide a quarter of the nutritional requirements for healthy living. As revealed by the survey, rural poverty increased by 22-percentage point in the period 1980-1985. Although this decreased slightly between 1985 and 1992, it soared in the following four-year period 1992-1996. In any case however, the percentage of the rural poor increased from 28.3% in 1980 to 69.8% in 1996 (FOS, 1999).

Human capital indicators of poverty also showed a very deplorable situation for Nigeria, Infant and under-5 mortality were 217 and 147 per 1000 live births respectively while maternal mortality was 9 per 1000 live births in 1996 (CBN, 1998). All these were critically above the average for developing countries and even for Sub-Saharan Africa. In addition, the preliminary health profile figures for 1999 as prepared by the Federal Ministry of Health (FMOH) indicate the major causes of mortality to include malaria which is 919 per 100,000; dysentery with 386 per 100,000, pneumonia with 146 per 100,000 and measles with 89 per 100,000. Gross primary school enrolment averaged 85.2 percent while adult literacy rate was 51 percent. Life expectancy, which was 54 years in 1990 and 52 in 1995, has dropped to less than 50 years since 1998. This lack of capabilities such as education, health and nutrition threatens to make poverty dynastic with descendants also becoming poor (World Bank, 2000).

The main asset of individuals and households in the rural sector of an economy is their bodies and literature has tried to capture this through concepts like labour power, labour availability and dependency ratio. The capacity to do work has even been captured through anthropometric measures such as body mass index (BMI). Evans (1989) noted that poorer people depend on physical work and are the personal cost of physical disability. As a result, bodies (main asset) of the poor are more vulnerable than those of the less poor because they are more exposed to sickness from unsanitary, polluted and disease-ridden environment both at home and at work. This affects their productivity and since they are the majority in the rural sector, it also deters rural development.

Poverty is increasingly being recognised as both a policy and economic problem in Nigeria. This is stressed by the Interim Poverty Reduction Strategy Paper in Nigeria as well as the Poverty and Vulnerability Assessment of the country. Although the documents provide trends and profile of poverty and vulnerability in Nigeria, they do not investigate the determinants of poverty. However, understanding the determinants of poverty is critical for policy analysis and the design of effective poverty reduction strategies. In some instances there have been few studies investigating the determinants of poverty in Nigeria (see Omonona, 2000 and Olaniyan, 2002). However, these studies do not explicitly consider capabilities as determinants of poverty despite the fact that capabilities dictate the state of deprivation and poverty among households.

This study therefore examines the links between human capital, capabilities and poverty in the rural sector of the Nigerian economy. Specifically, we shall characterise the effects of various forms of human capital and capabilities on poverty status in rural Nigeria.



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