Poverty Tracker and Nigeria: Raising The Red Flag

Proshare

Friday, July 06, 2018 / 04:00 PM / Proshare Research 

Download PDF Here

 

Executive Summary 

According to the World Bank, an individual or person who lives or earn below $1.9 per day is considered to be extremely poor. In line with this, the bank asserted that Nigeria currently has the highest number of extreme poor individuals (thus overtaking India) following results from the World Poverty Clock which showed that 86.99 million Nigerians fell within the extreme poor category in 2017. Most importantly, it brought to bear the dire position of the nation’s social well-being, as its dependency ratio continues to grow. 

With the present population dynamic, 45.7% of the Nigerian population is considered to be extremely poor far higher than the sub Saharan average ratio of 30 and worse off than Somalia!!    

Certainly, such statements reverberated across the Nigerian society, thus this edition of the Proshare Confidential Report sought to trace the trajectory of extreme poverty as far back as 1985 to present day.  In doing this, a liner interpolation was carried out which showed that in 1985, 60 million Nigerians were considered to be extremely poor, while it declined in subsequent periods. 

The slump in the figure after 1985 was largely felt at the beginning of 2000 when income policies fused with the adequate pre-condition for growth were in place. Some of these pre-conditions for growth include eliminating price discriminatory elements inherent in exchange rate, providing a fiscal rule, liberalizing sectors earlier dominated by government, debt relief and the recapitalization of bank. For the record, the recapitalization of banks addressed the repression experienced in the banking system and further widened the scope of the capital market. This further boosted the private sector and deepened financial intermediation.   Following the decline in poverty in this period, the middle class grew in 2009. 

As at the beginning of the new decade policy summersaults, rising tension in the Niger Delta, rising  population growth and the in ability to follow through with reforms made GDP growth more disconnected with the Human Development Index (HDI), thus earlier gains made in reversing poverty began to unwind and about 53.5 million Nigerians were considered extremely poor. 

Furthermore, the inability to fully go through with reforms in critical sectors such as the Power and Energy sectors affected the nations competitiveness, thus making foreign direct investment experience an under heat. It then became harder to address the nation’s export concentration; and at the wake of 2014 when oil price ran nervy, GDP growth fell below population growth and the naira began to lose its slow biasness. 

Subsequently, per capital income started to slide. By the time the cycle concluded an anti-clock wise movement in 2016, Poverty had taken new heights to about 83.69 million Nigerians been considered extremely poor while the weakness in qualitative indicators became more accentuated than ever.   

In attempt to provide measures on how best to address poverty, the study considered Ethiopia’s broad based approach and gradual transition to a private sector led economy. 

Certainly, the implication of dampening in social well-being have come with dire consequences, as it further weakens the nation’s ability to improve its income drive. More so, the growing dependency ratio, crime and widening inequality put the socio-economic fabric of this country under severe pressure. At the same time, the dynamic forces the fiscal authority in a position to take on social intervention programs, thereby widening the fiscal deficit. 

Thus, there is a need to address factors that hold back private capital formation, improve trade openness and open sectors currently under the government’s full control.  In reality pro-poor policies are palliatives that complement structural reform, since they cannot on their own provide long term solutions. 

More than ever before there is a need to address the growing structural distortions. The drawback from the Lua da Silva reform where pro poor polices took the front row ahead of structural reforms dented Brazil’s potential output. This we must avoid.            

The study also provides a macroeconomic outlook for the Nigerian economy. Based on our model in retrospect, we expect a 1.82% growth for the second quarter of 2018 on the heel of fiscal lags and ongoing shocks in the Agricultural sector, especially in the food belt region of the country.  While we take this into account as a relative risk on to the economy, we are of the opinion that output will experience an under heat moving forward.  

We take a mildly upbeat position moving into the other half of the year; forecasting 1.86% and 1.88% GDP growth for Q3 and Q4 2018 respectively. 

As regards price movements, we see headline inflation dampening to 10.7% in June 2018 and 9.8% in August 2018; thus reaching the Central Bank’s sweet spot which is a dial back of price movement to a single digit. In our Adjusted ARIMA model, money supply is projected to remain mute while the indirect relationship between oil price and inflation is vivid; thus supporting a further decline in inflation till September 2018.  

As inflation dwindles, the real interest rate is bolstered and inflation premium will keep declining. The expected short rate on treasury bills will cave inwards and liquidity premium would remain constant, as the slope remains largely steep, even though the coefficient between tenor and rate stands at 0.93.  On the contrary, OMO bills will still rise steeply as liquidity largely increases with maturity. 

 

Temitope Babalola
Economy Desk, Proshare Research
July 03, 2018
 

Download PDF Here
Proshare Nigeria Pvt. Ltd.
 

Previous Proshare Confidential Report (s)

1.       POCKET Economics: Addressing Income Inequality – May 2018

2.      The Silent Drug Epidemic: A Gathering Storm - Apr 2018 

3.      Judging IMF’s Position on Development Indices – Mar 2018

4.       Money Market: The Folk Road – Feb 2018    

5.      The Headache of Missing Targets – Jan 2018

6.      2018 Outlook on the Nigerian Economy: The Need for an Even Keel – Dec 2017

7.      Nigeria External Economy and the White Noise of Import Dependency – Nov 2017

8.     States and the Rising Weight of Debt – Oct 2017

9.      Money Supply: Reeling from Policy Response – Sep 2017

10.  How Rail and Energy Will Deliver a Robust Economy for Nigeria – Aug 2017

11.   Too Big Government: The Hysteria of Developmental Quagmire – Jul 2017

12.  The Nigerian Debt Conundrum and the Need for Automatic Stabilizers – Jun 2017

13.  Article IV vs. ERGP - The Third Way – May 2017

14.  Lifting The Veil off The Financial Sector – Apr 2017

15.   Towards An Economic Model for Nigeria; Going Beyond Symptomatic Responses - The Panama Model – Mar 2017

16.  FX Utilisation in January 2017-Symptoms of An Opaque Structure – Feb 2017

 

 

Proshare Nigeria Pvt. Ltd.

 

 

Related News

1.       From Russia with Tears and the New Economic Disorder - LBS EBS – July 2018

2.      Nigeria – How to Win – By Bode Agusto via Proshare  Apr 16, 2018

3.      June 2018 Economic Update: Economics Vs Politics

4.      Nigeria PMI- Slightly Brisker Economic Expansion in June

5.      From Protectionism To Prosperity

6.      Risks to Global Growth Rise as Trade Tensions Escalate

7.      Poor Nations v. Rich Nations: Why The Difference? - Proshare Apr 26, 2018

8.     Nigeria Ranks Third Poorest Country in World - Proshare

9.      Breaking the Dynasties of Poverty in Nigeria - Proshare

10.  Paradox of Nigeria's Economic Growth and Poverty Levels - Proshare Mar 22, 2012

11.   Rich-Poor Divide raises inequality to a 30 year high, OECD Says

12.  If Nigeria Is So Rich, Why Are Nigerians So Poor? | Council on Foreign Relations ... Apr 13, 2002

13.  Paradox of Nigeria's Economic Growth and Poverty Levels - Proshare Mar 22, 2012

14.  Where Nigeria got it Wrong  - Olufemi Awoyemi - Proshare Dec 01, 2014

15.   The Quadrilemma of Buharinomics – By Dr. Temitope Oshikoya via Proshare Jun 03, 2015

16.  Echoing the Need for More Hand in Hand Economics

17.   High Base Pay: The Dilemma Between Equality and Equity

18.  2018 Nigerian Workers Day: Discourse on the Proposed New Minimum Wage

19.  7.82m Workers Are Registered Under the Pension Scheme as at Q4 2017 - NBS

20. Wage Growth Key to Continued Success of Abenomics

21.  Gauging the Health of the Household

22. The Future of Nigeria: Three critical levers for improving HDI

23. Global Liquidity Glut : An Opportunity for Nigeria to Attract FDI –Teriba

24. Nigeria and the Failure to Boost Foreign Direct Investment

25.  Determinants of FDI and FPI Volatility: An E-GARCH Approach

26. NEC Approves $650m Seed Funding as FG Establishes Presidential Infrastructure Development Fun

27.  What Has Changed In The Discourse? Poverty - Proshare Apr 15, 2018

28. Reducing Poverty in Nigeria.pdf - Proshare

29. Addressing Nigeria's Poverty Level Through Its Health ... - Proshare Mar 28, 2018

30. Poverty rate increases in Lagos State - Proshare

31.  Rethinking ways to beat poverty - Proshare

32. Breaking the Dynasties of Poverty in Nigeria - Proshare Nov 26, 2012

 

READ MORE:
Related News
SCROLL TO TOP