CHAPTER ONE

INTRODUCTION

1.1              BACKGROUND OF THE STUDY

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

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

Essentially, it is not difficult to recognize the poor.  The poor are those who are unable to obtain adequate income, find a stable job, own properties or maintain healthy living condition.  They also lack an adequate level of education, cannot satisfy their basic health needs and their minimum basic needs of food, clothing and shelter.  Poverty amidst plenty is a striking feature of the Nigerian scene.  Nigeria is the richest in the continent yet millions of her people are poor.  According to the Human Development Report (1998), Nigeria is one of the 25th poorest countries in the world and more than one third of her populace is not expected to survive beyond the age of 40.  This is not the Nigerian dream.  It is the Nigerian paradox.  Poverty is a more serious problem in our society than in societies with much less income and wealth.  Poverty amidst poverty is easier to understand and even condone but in a land of abundance, it is difficult to comprehend why some people are inadequately fed, clothed and sheltered.  Poverty is a reality that needs to be studied, understood, appreciated and then eradicated.However, attempt made to alleviate poverty in Nigeria has been fruitless.  A true welfare package which should be aimed at sustaining and augmenting the living standard of the poor has not been formally implemented in Nigeria.  The most recent poverty programme is the Poverty Alleviation Programme (PAP) introduced in 1999 by the Obasanjo administration which has only helped in elevating poverty in the country.

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

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

Governments concern for the fate of the poor in developing countries has heightened in recent years but the economies of these countries were constrained with a rather hostile external and internal economic and environmental hardship.  Some of these entanglement encountered are a recurring external debt-servicing burdens, disequilibrium in terms of trade, high and widespread unemployment, high rate of inflation, capital flight, low capacity utilization and high population growth.  To that extent, sharp criticisms emanated from the various corners of the country about the inability of the government to design and implement strategies for meeting the basic human needs of the society so as to ensure a just and egalitarian society. Apparently, the plights of the poor and the need to rearticulate development programmes have dominated discussions of contemporary schemes.  However, Nigeria is yet to formulate a rehabilitative welfare package directed towards alleviating poverty problems despite the attention and seriousness it deserves.  A large proportion of Nigerians in the rural area still lack access to the basic social services.  This is unconnected with the nature of the strategies, which are broad based and not targeted at any particular group.  Various development plans designed to cushion the social welfare of the people has not been implemented to the latter. Better still, the expenditure structures of the government really give credence and confirm her unflinching commitment to the people’s welfare.  Yet, mass poverty has remained the most prevalent socio-economic problem in Nigeria society.

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

1.2              STATEMENT OF THE PROBLEM

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

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

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

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

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

1.3              OBJECTIVE OF THE STUDY

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

i.      To highlight the degree of inequality in the Nigeria society and its implication on the overall economy

ii.     To examine the relative effectiveness of government programmes towards poverty alleviation

iii.    To determine how total savings, private consumption expenditures and inflation rate affect the magnitude of poverty in the Nigerian economy.

1.4              RESEARCH HYPOTHESES

Hypotheses One

Ho:      That the degree of inequality in the Nigerian economy does not have an implication on the overall performance of the economy

Hi:      That the degree of inequality in the Nigerian economy will have an implication on the overall performance of the economy

Hypotheses Two

Ho:       That the government programmes are not effective in the alleviation of poverty in the Nigerian society

Hi:      That the government programmes are effective in the alleviation of poverty in the Nigerian society

1.5       SIGNIFICANCE OF THE STUDY

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

 1.6 SCOPE AND LIMITATION OF THE STUDY

This study is primarily concerned with the determinants and measurements of poverty in Nigerian economy. This study coversfederal ministry of women affairs and social development. The researcher encountered some constraints, which limited the scope of the study. These constraints include but are not limited to the following.

a) availability of research material:The research material available to the researcher is insufficient, thereby limiting the study   

b) time:The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

1.7 DEFINITION OF TERMS

POVERTY: Poverty is a multifaceted concept, which may include social, economic, and political elements. Absolutepoverty, extreme poverty, or destitution refers to the complete lack of the means necessary to meet basic personal needs such as food, clothing and shelter.

ECONOMY: The system of trade and industry by which the wealth of a country is made and used. An economy is the large set of interrelated economic production and consumption activities which aid in determining how scarce resources are.

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concerned with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study 

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