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Introduction
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.
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.
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 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).
As a result of the high incidence of poverty, the contemporary question in Nigeria, however, is to what extent does social capital contribute to poverty reduction? How does membership of a social network assist in improving welfare? What type of social capital is welfare enhancing? Do poor people participate in social networks? Answers to these and other questions will largely assist in fashioning institutional strengthening to complement infrastructure provision and increase human capital development to empower the poor. Grootaert (1999) observes that emerging consensus concerning differences in economic outcomes at the level of the individual household or at the level of the state, cannot be fully explained by differences in traditional inputs such as land, labour and physical and human capital alone. According to him, there is a growing recognition of the roles of "social-capital" in affecting the well being of individuals, households, communities and nations. This recognition, that social capital is an important input in the production function of an individual or household has some implications. It suggests that institutional or social capital must complement human and physical capital before the full benefits of any development programme is derived.
Studies in Nigeria have shown that the poor derive more benefits from their membership of local associations compared with public instituted organisations. Besides, the effectiveness of the different organisations in alleviating poverty is well documented (See World Bank, 1996; Olayemi et al, 1999; Okumnadewa, 1998; and World Bank/DFID, 2000). For instance, the World Bank and DF1D in collaboration with the National Planning Commission carried out a National consultative and qualitative poverty assessment, tagged "Voice of the poor" in 1999 to feed into the World Development Report 2000/1. It was revealed from the study that across all the geopolitical zones of Nigeria, there is the absence of competent and responsive non-governmental organisations (NGOs). Instead, the poor refers to local community based organisations (CBOs) as the main safety net for their well being. The diversity of these CBOs testifies to their roles in social support networks for all the communities interviewed. Prominent among these social safety nets are religious groups, traditional leadership, educational institutions, women's group and traditional financial institutions among others. Since a key finding of the study is that poverty is linked to the inability of individuals and households to reciprocate and support other people, to build and use social capital within the community and the wider environment, the role of local level institutions in providing this opportunity to maintain reciprocity is crucial for the poor to be able to keep a sense of dignity in their lives. (World Bank/DFID, 2000).
The realisation of the potency of the local level institutions and associations in poverty reduction is no longer in doubt in the World as seen in the preceding paragraph. One may even be tempted to claim that the failure of the several interventionist poverty reduction programmes of the Nigerian government can be attributed largely to the neglect of social capital as an important input in poverty reduction. This is because studies such as Narayan and Pritchett (1997) in Tanzania and Grootaert (1999) in Indonesia have shown econometrically that the ownership of social capital by households has strong effects on household welfare. It was found that the magnitude of poverty reduction through social capital exceeds that of education (human capital) and physical capital owned by the households in their independent studies. Glewwe and van der Gaag (1988) and World Bank (1990) have, however, stated that the very first step at helping poor households out of their poverty is to understand the nature and extent of their poverty. This is because, if effective policies to reduce poverty are to be formulated and successfully implemented, more
knowledge about the characteristics and correlates of poverty is crucial. Presently, there appears to be a general dearth of study on estimating the impact of demographic, human capital, occupational, locational, and physical capital on poverty among Nigerian households not to talk of the recently identified social capital.
Furthermore, there have been numerous studies on poverty in Nigeria, but few on inequality. Incidentally, the importance of unequal access to opportunities, assets, income and expenditure cannot be overemphasised as it plays important roles in reducing poverty and spurring the economy to long-term development. In Nigeria the poor are not just the rich with less money, but are the poorest of the poor. Households are not only poor; they also suffer from vast inequality in incomes, in assets (including education and health status), in control over public resources, and in access to essential services as well as pervasive insecurity (World Bank, 2000). The distributional consequences of economic growth is therefore one of the main policy issues in Nigeria. Although economic growth is important for the success of any economy, it becomes less effective for poverty in the face of massive inequality. Given the depth of inequality in Nigeria, growth may not be enough without giving attention to easing inequality and eliminating barriers that constrain poor people to benefit from a growing economy and to contribute to that growth (Iwayemi et al, 2000). Unless distributional elements are included in developmental programmes and reforms, it will be
difficult to solve human development crisis, which might also deter the development of the economy. Rather it has been pointed out that in high inequality countries, up-front actions that are both growth promoting and equity enhancing may be the only realistic option for development to be sustained (Estudilo, 1997).
This study thus attempts to provide an update on household expenditure inequality among different regions in Nigeria and then investigates its factors and forces by decomposing the inequality into within-group and between group components so as to help
identify policy directions for the future. Several factors have been identified as having affected income and expenditure inequality in Nigeria. They include the level of education, age distribution of household heads, gender, household size and location (geopolitical zones). All inequality measures reported in this study refers to household per capita expenditure data.
The study also presents a decomposition analysis of the overall income inequality into both swithin-group and between-group components.
Footnotes:
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Department of Agricultural Economics, University of Ibadan, Ibadan
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Department of Economics, University of Ibadan, Ibadan
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Development Policy Centre, Agodi GRA, Ibadan
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