CHAPTER ONE

INTRODUCTION

1.1 Background to the study

Poverty and inequality are among the most crucial problems facing developing economies today (Boateng et al 2000) and have attracted a lot of attention among analysts in Nigeria during the past few decades. Poverty and inequality are profoundly endemic in many countries, especially in less developed countries. There have been several reports on poverty trends in Nigeria, that is, on changes in the incidence, depth and severity of poverty over time. For example, poverty rate increased from 46.3 percent in 1985 to 65.6 percent in 1996 (Nigeria Bureau of Statistics (NBS), 1996). Although there was a drop in poverty rate to 54.4% in 2004 (NBS, 2004), the number of people living in poverty is still above 70 million. In fact, Nigeria is among the poorest countries in the World with a Human Development Index (HDI) of 0.470 ranking 158th among 177 countries (UNDP, 2007) Thus, poverty reduction is undoubtedly one of the highest ranking issues in the national strategies of Nigeria and the most potent issue in the current international development agenda. This is reflected in Millennium Development Goal (MDG) 1, the vision statement of most bi- and multilateral donor agencies and in poverty reduction policy papers of most developing countries, for instance, the Nigeria National Economic Empowerment and Development Strategy (NEEDS).

Nigerian governments at all levels have embarked on several programs in order to alleviate poverty incidence and severity. Some of such programs according to Osinubi (2003) include National Directorate of Employment (NDE), the Family Support Program (FSP), the National Agricultural Land Development Agency (NALDA), Directorate for Food, Roads, and Rural Infrastructure (DFRRI), Family Economic Advancement Program (FEAP) and National Poverty Eradication Program (NAPEP). Minimum wage policy and Universal Basic Education (UBE), according to Oyekale et al (2008) are also means of combating poverty. However, given the low response of households to escape from the scourge of poverty, it can be said that many of these programs have not made significant impacts.In order to design policies for poverty reduction, it is important to understand its magnitude and processes that cause and deepen it. Hence, at the heart of poverty reduction policies is the question of what indicators are being considered (the

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issue of measurement). Poverty measurement is the quantitative assessment of the level and depth of poverty of individuals or in aggregate, for a group or region, country or across the world. It can also be seen as an index synthesizing all information available about the poor (Dercon 2005). Given a distribution of one or several indicators of individual’s welfare and poverty line (suitably adjusted, if need be, for differences in individual needs, family composition and prices faced), such a measure yields a single index that summarizes the extent of poverty generated by the distribution. Poverty measurement is very important in poverty alleviation/poverty reduction targeting. For instance, it is not enough to define the concept of poverty theoretically, but to identify the poor and measure the extent of poverty. The measurement of welfare and of poverty plays an essential role in the current debate over the policies for the fight against poverty. This measurement will, among other things, allow for a differentiation between the poor and the non-poor, the introduction of optimal approaches to poverty reduction or estimates of the errors of inclusion or exclusion of individuals from the poor population. In the same vein, poverty measurement makes possible, poverty comparisons in time and space and equally enables us to identify the primary correlates of poverty.

Overtime, different approaches have evolved in the quantification (measurement) of the extent of poverty. These approaches to poverty and inequality measurement involve the traditional or conventional approach to the measurement of poverty and inequality, which is money-metric and uses income and/or expenditure data and a number of alternative approaches that make use of various other socioeconomic indicators to measure poverty and inequality. The income or consumption method uses a specified subsistence income level, referred to as the poverty line. A person is said to be poor if his/her income falls below the poverty line. There are currently two main methods of setting the poverty line in the conventional money-metric procedure, i.e. the Cost of Basic Needs (CBN) and the Food-Energy-Intake (FEI) methods. The CBN approach considers poverty as a lack of command over basic consumption needs, and the poverty line as the cost of those needs, while the FEI method defines the poverty line by finding the consumption expenditures or income level at which a person’s typical food energy intake is just sufficient to meet a predetermined food-energy requirement.

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These methods described above are objective measures of poverty (quantitative) from which the absolute and relative poverty lines can be derived. Poverty can also be measured subjectively (qualitatively). This is a self-professed poverty measure based on questions to households about their perceived situation.

Though the money-metric measure of poverty has achieved tremendous progress over the decades, the well-being of a population and, hence its poverty, which is a manifestation of insufficient well-being, depends on both monetary and non-monetary variables. The Human Development Report published by the United Nations Development Programme (1997) states that a lack of income only provides part of the picture in terms of the many factors that impact on individuals’ level of welfare ( e.g. longevity, good health, good nutrition, education, etc). This re-echoed the multidimensionality of poverty and gave further impetus to the importance of the multidimensional approach to poverty measurement - integrating both monetary and non-monetary approach in poverty measurement or at best, measuring poverty with the aid of money and non-money metric attributes.

Unlike the conventional income/consumption measures, multidimensional poverty measurement does not only view poverty as insufficient income or consumption but also sees poverty as insufficient outcome with respect to health, nutrition, and literacy etc. Multidimensional measurement of poverty and inequality sees poverty in terms of the functioning and capabilities of individuals as espoused by Sen (1985). Multidimensional measurement of poverty involves a broader measurement of poverty that goes beyond just income measures. In fact, it entails the measurement of poverty using such indicators as health, education, life expectancy, household assets which have been acknowledged as a better measure of poverty since meaningful poverty reduction is predicated on the individual’s ability to accumulate productive assets. The importance of multidimensional poverty measure cannot be overemphasized. This is because the broader definitions of poverty do allow a better characterization of poverty and they therefore increase our understanding of poverty and the poor.

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1.2         Statement of the Problem

In spite of the importance of multidimensional measure of poverty and inequality in enhancing the knowledge and understanding required to promote a sustainable campaign against poverty at the National and State levels, previous efforts at measuring poverty in Nigeria have always focused on monetary measures of poverty such as income/expenditure as indicator of poverty and income distribution as the basis for inequality analysis. Measurement of poverty and inequality in Nigeria has rarely focused on the level of assets or distribution of assets and other non-income indicators as the objective of policy programme. For example previous efforts in analyzing poverty and inequality in Nigeria namely, Van da Walle (1990); Ogwumike (1987), (1991); Ogwumike and Odubogun (1989); World Bank (1991); Canagarajah et al (1997), Aigbokhan (2000); Ogwumike et al (2006), Okumadewa et al (2006), and various studies by National Bureau of Statistics all used uni-dimensional measures. Also while the current Nigeria national Gini coefficient value of 0.42 shows an unequal distribution in monetary terms, little is known about the distribution of other welfare attributes. These uni-dimensional poverty measures, at best, only lead to partial understanding of poverty and often, to unfocused or ineffective poverty reduction programmes. This is because they do not give comprehensive information about the poor especially in terms of other attributes and as such lead to limited knowledge of the problem since the different dimensions of poverty and the correlates are not known. Unfortunately, the Core Welfare Indicator Questionnaire Survey (CWIQ) report only carried out a preliminary descriptive analysis of some indicators without rigorous statistical analysis to decompose these indicators into different poverty and inequality components. Thus, in order to have a multifaceted approach to fighting poverty and inequality, there is the need to carry out a multidimensional analysis of poverty and inequality in Nigeria. This forms the bedrock of this research. The study was carried out using the CWIQ data 2006 from the National Bureau of Statistics.

1.3         Objective of the study

The general objective of the study is to carry out multidimensional analysis of poverty and inequality in Nigeria. Specifically, the study:

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Constructed a relevant multidimensional poverty profile of Nigeria (static) as well carried out a multidimensional poverty mapping of Nigeria

Carried out poverty sensitivity analysis using composite indicators.

Carried out a spatial inequality analysis using composite poverty indicators.

As a follow-up, carried out inequality decomposition analysis (within-group and between-group contributions to overall inequality) using composite indicators.

Estimate the correlates of poverty using composite poverty indicators. And above all, come up with some recommendations to improve the methodology of identifying who are the poor in Nigeria as a tool for better designed and targeted poverty alleviation policies.

1.4                 Hypothesis

Given the nature of the study which concentrates on profiling and mapping of poverty in Nigeria, it does not lend itself to statistical test ( it produced incidences, depth and severity and poverty maps). However, the objective of estimating the correlates of multidimensional poverty can be tested statistically; hence we raised a hypothesis on it.

Socio-demographic factors do not significantly correlate with multidimensional poverty in Nigeria.