How soon can Nigeria end poverty?

When I attend meetings such as the recently concluded Annual Meetings of the World Bank and the International Monetary Fund (IMF), I think three things are important.

First, to understand the context in which such meetings hold. The background for the 2016 annual meetings was the enormous and growing uncertainty in the global economy, subdued growth, a renewed onslaught on global trade and the call for the reinvigoration of fiscal policy towards growth.

Second, I look out for the perspectives at the meetings. By this, I mean the ideas, insights, thoughts in relation to both the background, and how participants see the future. In this context, the meetings reinforced the message for international collaboration, provided the theoretical underpinnings necessary to end the broad anaemic growth we have seen in the last few years, and made loud calls for actions on fiscal policies. The message was that countries should dismantle isolative policies, protectionism, and reinforced the message that monetary policy cannot do it alone. Essentially, that we need to access all options on fiscal and structural reforms and to see some actions on the part of fiscal authorities.

Thirdly, and most importantly, my focus in such meetings is how these affect Nigeria. Nigeria is important to me, especially at this time and on many fronts. For the purpose of this piece, I will focus on how the background, deliberations and debate affect the future of poverty in Nigeria. To start with, my summary of how countries that have made progress in reducing poverty very significantly in the last forty years is:

Progress on poverty has largely been made at the back of political determination that drives the necessary economic reforms that bring about growth, rising incomes and the reduction in poverty. While international bodies such as the World Bank and the IMF have contributed to this progress by sometimes providing the theoretical underlying factors, the most single important factor to reducing poverty is the political determination that helps drive the economic reforms, policies, changes that are required. While there are peculiarities in the manner in which countries such as Japan, South Korea, China, and India in the last decade have done it, they start by working on a very strong external position through the expansion of trade, reserves, and the improvement of savings and higher levels of investment.

Let us turn to Nigeria. Here, the poverty argument is interesting given the extensive number of dimensions. First, the 2010 available data on poverty released in 2012 was flawed and since then, there is no widely acceptable data on poverty.

However, given the speedy deteriorating conditions in the economy, it is expected that poverty is increasing. The increase in poverty we currently see, especially since growth rate started to fall in 2014, from over 6 percent to -2 percent at the end of the second half of this year, come from a number of underlying trends.

As income falls, exchange rate deteriorates, prices rise, salaries stagnate, real income falls, a number of people that were initially in the border poverty line of less than US $ per day, have now entered poverty bracket. We do not know how many of these have entered the poverty bracket in the last two years, but it is easy to tell from personal experiences that Nigerians are getting poorer and poorer.

Essentially, the deteriorating poverty conditions reflect the implications of income effects of the last two years.  However, wealth effects mask the severe dramatic fall in income during the period: poverty would have falling lower than we have seen in the last two years except for wealth effects. In the 1980s, evidence show that, depending on the number of years of strong growth before the slump, the wealth effect may take up to 2 – 5 years. But the point is that, no matter how long it takes for the wealth effect to vanish, there are two key points to note. The first is that the situation is worse than we currently think. Second, it shows that we are in a more desperate situation than people would want to believe, especially those holding public offices across the country.

In Washington DC last week, the Minister of Finance, Kemi Adeosun and the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, as expected, made determined efforts to communicate Nigeria’s economic challenges, the work being done and extract commitments from the international community to support Nigeria’s growth. Because these are public servants, each aware of his or her legacy in the dynamics of Nigeria, will continue to do their best in the circumstances.

But it is that circumstances that we need to change. There is nowhere in the world where we can expect long term economic growth, sustained prosperity and significant reduction in poverty without policies that address the specific needs and raise the potential of our diverse communities across the country.

And I do not know how that can be done in an environment in which the majority of our states, local governments are economically dumb, deaf, and isolated. We surely need fiscal and structural reforms to unlock the vast potential of the country.

Whatever efforts is being made in Abuja today are just mere tweaking and incremental. To lift the majority of Nigerians from poverty, we need multiple centres of policies to do so. I thank you.

Ogho Okiti