CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Risk, vulnerability and poverty appear to be the major challenges many households face in developing economies especially in the Sub-Saharan Africa. As a result, these issues have become central in the policy agenda not only in these countries but also in the international multilateral institutions such as the World Bank, the International Monetary Fund (IMF), the Food and Agricultural Organisation (FAO), among others. For example, these issues were the focus of the 2013 Annual World Bank Conference on Development Economics. The reason for bringing the issue of risk, vulnerability and poverty in policy debate recently is not far-fetched. Starting from the Asian Financial Crisis of the late 1990s, the Tsunami of 2004, the Financial Crisis of 2007 to 2009, and rise in world food prices due largely to drought in many parts of the world, many households have fallen deep into poverty while many others have become poor.

Exposure to risk may be seen as one of the many dimensions of poverty. Poor households are typically more exposed to risk and least protected from it. This exposure has a direct bearing on wellbeing, perhaps even more important is how risk exposure causes poverty or increases the depth of poverty. Risk and other factors may lead to unacceptable outcome in well-being. The manifestation of risk (as a shock) also leads to undesirable welfare outcomes (Hoogereen, Tesliuc, and Vakis, 2004). A shock can push an already income poor household further into poverty, or drive a non-poor household below the income poverty line. These linkages between risk and poverty define vulnerability. In particular, whereas poverty reflects an unacceptable level of well-being, (risk related) vulnerability is seen as “the exposure to uninsured risk leading to a socially unacceptable level of well-being”. According to Chaudhuri (2003), poverty is an ex-post measure of a household’s well-being. It reflects a current state of deprivation, of lacking the resources or capabilities to satisfy current needs. Vulnerability on the other hand, may be broadly construed as an ex- ante measure of well-being, reflecting not so much how well of a household currently is, but its future prospect are. What distinguishes the two is the presence of risk - the fact that the level of future well-being is uncertain. The uncertainty that households face about the future stems from multiple sources of risk – harvest may fail, food prices may rise, the main income earner of the household may become ill etc.

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Several factors can expose households to risk and hence make them vulnerable to poverty. These include natural disasters such as flooding, impact of climate change, crop failure, and some are man made factors such as wars, communal clashes, kidnapping, etc. According to Satterthwaite; Saleemuul; and Mark; (2007), the scale of the devastation to urban populations and economies caused by extreme weather events in recent years highlights their vulnerabilities. Worldwide, there has been a rapid growth in the number of people killed or seriously impacted by storms and floods and also in the amount of economic damage caused; a large and growing proportion of these impacts are in urban areas in low- and middle-income nations. According to Olorunfemi (2011), flooding affected more than three million people in selected urban areas in Nigeria between 1983 and 2009. He argues that climate change is likely to have been a factor in much of this, but even if it was not, it is proof of the vulnerability of urban populations to floods and storms whose frequency and intensity climate change is likely to increase in most places.

Olorunfemi (2011) further stated that Nigeria is vulnerable to climate change impacts due to its geography, climate, vegetation, soils, economic structure, population and settlement, energy demands and agricultural activities. The location and size of, and the characteristic relief in Nigeria give rise to a variety of climates ranging from tropical maritime climate characterized by the rainforest along the coastal and southern section to the tropical hinterland climate associated with the Sahel in the north eastern section of the country. Currently Nigeria population is approaching 170 million impacting on the physical environment through their various activities within an area of 923,000 square kilometres. According to Gwary (2008), sixty per cent of the people live directly on the natural resource base as farmers, cattle rearers and fishermen while the informal sector constitutes the bulk of the economic activities in the urban areas. Technology adaptation is low and rudimentary leading to low output and high levels of poverty.

There are growing concerns that poverty is not reducing due to lack of understanding of its dynamic nature and vulnerability to poverty (Adepoju and Yusuf, 2012). The authors argue that the inability of previous programmes and strategies to put a commensurate dent on the incidence of poverty in Nigeria suggests that the major issue is not that households are poor but the probability that a household if currently poor, will remain in poverty or if currently non-poor will fall below the poverty line (that is, household vulnerability to poverty). To them, vulnerability to poverty is one of the factors that explain the ever-increasing level of poverty.

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1.2 Statement of the Problem

Poverty in Nigeria worsened since the 1980s and became pervasive in the 1990s. For example, the number of those in poverty increased from 27% in 1980 to 46% in 1985; it declined slightly to 42% in 1992 and increased very sharply to 67% in 1996 (Ogwumike, 2001). This has continued such that every measure of poverty ranks the country at the bottom list of nations. The Core Welfare Indicator Questionnaire (CWIQ) survey conducted by the National Bureau of Statistics (NBS) 2006 revealed that over 67 percent or two-thirds of Nigerian’s rural population was poor. The Human Development Index (HDI) of 0.423 ranks the country 142 out of 169 countries in 2010 with estimated Gross National Income (GNI) per capita of $2156, life expectancy at birth of 48.4 years, multidimensional poverty index (MPI) of 0.368 (UNDP, 2010) and more than half (54.4%) of the population below poverty line in 2004 of which 36.6% of the total population are living in extreme poverty (NBS, 2005). The Human Development Index for 2012 ranks the country 153 of 186 countries and the NBS (2013) frightening statistics about 112 million of the 160 million Nigerians live below poverty line. By the figure it means 67 percent of entire population is finding it hard to eke out bare existence. The HDI value for 2014 and 2015 of 0.514 placed Nigeria in low development category positioning it at 152 out of 188 countries and territories.

Poverty reduction is one of the challenges facing the country and the greatest obstacle in the pursuit of sustainable socio-economic growth with the rural areas being worst affected. At the beginning, the National Consumer Survey (NCS) data set series were used in proffering answers to such questions according to Adewoye and Ekezie (2010) as: who are the poor (the vulnerable groups) and where are they located? Why are they poor and what are they doing? The NCS data series supported the production of poverty profile for Nigeria (1980 to 1996) which served as a benchmark for monitoring and evaluation of various government anti-poverty programmes and policies. Some of such programmes according to Osinubi (2003) include National Directorate of Employment (NDE), the Family Support Programme (FSP), National Agricultural Land Development Agency (NALDA), Directorate for Food, Roads and Rural Infrastructure (DFRRI), Family Economic Advancement Programme (FEAP) and National Poverty Eradication Programme (NAPEP). Although other attempts have been made to increase growth through industrialization and reducing poverty severity which includes the Structural Adjustment

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Programme (SAP) that stressed greater realization of the need for policies and programmes to alleviate poverty and provide safety nets for the poor. SAP failed because it had no human face in its implementation and did not emphasize on human development which thereby aggravated socio-economic problems of income inequalities, unequal access to food, shelter, education, health and other necessities of life. Also in 2004, the National Economic Empowerment Development Strategies (NEEDS) was introduced as Poverty Reduction Strategy paper (PRSP) to anchor on a tripod: Empowering people; promoting private enterprise and changing the way the government does its work (reform government and institution) and has its equivalent in the states and local government, the Millennium Development Goal (MDG) now proposed as Sustainable Development Goal (SDG), the Vision 20:2020 and 7- Point Agenda. According to Anyanwu (2011), they have also been periodic reviews of salaries/wages and tax rates and allowances as well as pensions for increasing purchasing power of civil and public servants by successive government in reducing poverty (rural and urban). Despite the initiation of these programmes, the poverty profile has not made any remarkable impact in Nigeria.

The failure of these strategies and programmes to minimize or curb the poverty incidence in Nigeria is a clear indication that the issue of risk and vulnerability has not been properly addressed. Previous poverty reduction programmes in Nigeria did not fully achieve their objectives and these raise two important issues (Alayande and Alayande, 2004). Firstly, it is not sure whether the country lacks sufficient capacity to mitigate the social risks faced by households and communities, or whether the country has not paid sufficient attention to the issues of risk and uncertainty that are important for the understanding of the dynamics that often lead households to perpetual poverty. Vulnerability is a probability that a household may be currently poor and will remain in poverty or if currently non-poor will fall below the poverty line. If policy makers design poverty alleviation policies in the previous year, “the poor” who receive income support may have already escaped from poverty and the “non-poor” who do not receive income may have slipped into poverty due to various unanticipated shocks (e.g. increase in the relative price of food or an illness incapacitating the main bread winner) (Jha and Dang, 2009).

Reducing poverty will not be possible if risk and vulnerability and their effects on the poor people are not accounted for and neither can risk and vulnerability be stabilized without

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acknowledging that ending poverty is an utmost priority. According to World Bank Group (2016) Poor people are disproportionately affected not only because they are often more exposed and invariably more vulnerable to climate related shocks but also because there have fewer resources and receives less support from family, community, financial system, and even social safety nets to prevent, cope and adapt.

Poverty in Nigeria contradicts the country’s immense wealth and has been described as a paradox ( Obadan, 2004) and as poverty in the midst of plenty ( World Bank, 1996). This is unarguably because it contradicts the growth theory. With the country’s growth in Gross Domestic Product (GDP) from 3.7 percent in 2004 to 7.8 percent in 2010 (World Bank, 2013), it is expected that the growth will reduce the poor segment of the population through trickle-down effect.

Adepoju and Yusuf (2012) argued “that sustained economic growth and development in Nigeria cannot be achieved without the alleviation of poverty. To reduce poverty sustainably, however, reducing household vulnerability through increased ability of government to identify, assess and respond to potential crisis situations and improve households’ ability to recover quickly when exposed to shocks are also necessary. This has become imperative as policy makers only weigh the current poverty status of a household, without taking into cognizance, the possibility that a household not poor now, might fall into poverty in the future.” This ex post measure of development needs to be replaced by indicators that recognize that anti-poverty policies need to be forward-looking and incorporate the hazards affecting whether individuals or households are in poverty or are likely to fall into poverty, that is their vulnerability (UNU, 2008). In the absence of such information, it is extremely difficult for policy makers to enact relevant policies and programmes that can help in risk/vulnerability-led poverty reduction.

Irrespective of the importance of risk and vulnerability to promote a sustainable campaign against poverty at all levels, previous efforts have always focused on the current poverty status of households, without recognizing the probability that a household not poor now, might fall into poverty in the future. Some others have neglected the role of risk and vulnerability to poverty.

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These approaches require attention of expanding the focus to different quantitative dimensions of poverty beyond just income poverty and vulnerability headcount.

Previous efforts in analyzing the status of poverty in Nigeria namely, FOS (1999); Okojie et al. (2000); Alayande and Alayande (2004); Ogwumike et al (2006); Okumadewa et al (2006); Oni and Yusuf (2008); Oyekale and Oyekale (2008); and Adepoju and Yusuf (2012); and other studies by National Bureau of Statistics neglected other risks such as risks of exclusion from informal support system, policy credibility and vulnerability reduction policies. In order to have a comprehensive framework of poverty dynamics, there is need to carry out analysis of risk and vulnerability to poverty in Nigeria using cross sectional data as a second best solution since panel data is not readily available in Nigeria for this kind of study. Hence, our study is different from existing studies in the sense that we adopted the framework proposed by Christiaensen and Subbarao (2001) and Chaudhuri, Jalan and Suryahadi (2002) to estimate vulnerability as expected poverty using cross sectional survey to conduct an in-depth analysis of risk and vulnerability to poverty in Nigeria.