Victor Ajayi: Growth-Inequality challenge in Nigeria (Y! PolicyHub)

by Victor Ajayi

The recent announcement of the Nigeria’s GDP growth of 6.5 percent in the second quarter of 2014 by the Statistician-General of the federation, Dr Yemi Kale has yet again rekindled and brought into proper context the growing concern about the paradox of rising growth and inequality that has characterised the nation’s economy. This paradox has been a protracted trend for many decades. However, it has gained a considerable public attention and discourse since the nation’s transition to civilian rule in 1999 after which the economy has continued on the path of unencumbered growth.

It’s quite an irony that despite the high incidence of growth in the economy as result of relatively stable macroeconomic fiscal and monetary stances, rising inequality hits harder. Odd are that inclusive pattern of growth that is characterised by shared economic prosperity where all groups could gain and advance has been neglected or rather given a cursory attention. The most obvious reason is that the concept of economic growth in itself is sometimes being overrated and erroneously assumed as a policy measure of societal economic well-being. Rather, it is a means to enhance people’s well-being, not an end. It should be seen as a necessary but not a sufficient condition for human progress.

The extant rebased gross domestic product (GDP) has comfortably positioned Nigeria among the world top economies on the league table occupying 26th position with a more global visibility of being ranked among the MINT countries alongside with Mexico, Indonesia and Turkey – the next economic giants. However, on a per capita standpoint, it abysmally occupies 121th position and if measured by gross national income (GNI) per capita which accounts for more accurate amount of income accruing to the people within the country, this further reveals the poor average well-being of the people. Juxtaposing the share of the national income that accrues to the large poorest percentage of the population with that of the few privileged elites shows a better grasping degree of inequality that stare at us as a nation. Individual income inequality metric given by the Gini index has also consistently risen to 48.8 per cent. It’s has become necessary to look at the widening economic disparity between the rich and the poor to appreciate the breadth and depth of poverty in our country.

Of greater importance than superficial statistical figures is the fact that vast majority of Nigeria population are located in the rural area and engage primarily in subsistence agriculture. Their main concern is survival and unarguably appear less bothered about whatsoever meteoric rate the economy grows. This perhaps explains in large part why the seemingly laudable Agricultural Transformation Agenda has not really added the corresponding expected value to the lives of this peasant population and by extension accounts for its diminishing contribution as a fraction of the gross domestic output. According to the report, agriculture constituted the smallest sector in the second quarter, representing N3.4 billion or 20.89 percent of GDP while the growth was largely driven by activities in the services sector amounting to N8.5 billion or 53.15 per cent in the second quarter of 2014.

What is more, the unprecedented high level of unemployment and underemployment among the teeming youth is alarming and signals a demographic time bomb. More worrisome is the fact despite the uninterrupted economic growth in recent years, the youths have not fully benefited from the rising economic growth and there seems to be no sign of any reversal in the upward trend of unemployment. This portends economic, social and political challenges for the nation.  According to National Bureau of Statistics, the number of employment generated in the first and second quarters is 240,871 and 259,353 respectively. These figures are grossly minuscule and are not enough vis-a vis the massive increase in the supply of labour. Governments should as a matter of priority design policies that will bring about far-reaching structural changes in employment-generating sectors, most especially manufacturing sector, which will enhance the creation of an enormous amount of jobs. This will not only act as a game changer in bridging the economic polarisations but will also help to create equitable long-term wealth.

Before the nation is caught off guard, it is high time a social safety net was designed in the form of ash transfers to the poor and the unemployed who are victims of the underlying economic imbalances as a means of redistributing wealth. This type of program should be collectively designed and undertaken by the three ties of government with more implementation responsibility assigned to the local government. There is no doubt that this also may have a negative effect on social capital as resentment develops of those who receive support by those who do not, however,  the benefit to the economy will eventually outweigh the initial perceived resentment if thoroughly pursed. This type of social initiative has been implemented successfully in Brazil decade ago known as Bolsa Família Program (BF) with the concept of trusting poor families with small cash transfers in return for keeping their children in school and attending preventive health care visits. As a result, President Lula da Silva, leapfrogged more than 20 million people out of acute poverty with Brazil currently ranked as the world’s seventh-largest economy both in nominal term and purchasing power parity (PPP) gross domestic product. This reinforces an economy that simultaneously pursues inclusive growth models and progressive social policies. If this cannot be achieved by political means than resentment, the attendant consequences of inequality could be troublesome.


Op-ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija.


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