The Impact of Growth, Redistribution and Inequality on Poverty in Nigeria
Brasilia, 11 August, 2014 – On Monday, 28 July, Jude Okechukwu Chukwu (Department of Economics, University of Nigeria and Visiting Research Fellow, IPC-IG) introduced his research, presenting its empirical findings during a presentation titled “Growth, Redistribution and Inequality Effects on Poverty Changes in Nigeria”, on the IPC-IG’s Seminar Series. He delved into the patterns of growth and inequality in Nigeria, as well as on the extent of pro-poorness and inclusiveness of growth in the country.
Mr Chukwu began his presentation with a review of Nigeria’s impressive economic growth of the past decade, achieving on average between 6.5% and 7.2% per year. He highlighted that between 2004 and 2010, the rise in GDP growth was 4.1%, which surpassed Africa’s 4% average growth rate. While some theories point to growth being good for the poor, as a trickle-down effect enables them to derive maximum benefits from it, others state that economic growth may lead to an increase in inequality, which would counteract any benefits to the poor. Grounded on these opposing theories, Mr Chukwu set out to investigate the effect this increase in economic growth had on poverty and inequality levels in Nigeria.
He then presented the results of the 2010 Harmonised Nigeria Living Standards Survey (HNLSS). The survey indicated that poverty had increased by 14.6% at the national level (9.9% and 18.6% in rural and urban sectors, respectively) while inequality had risen by 4.1% nationally (2.2% in rural areas and 4.2% in urban areas). Based on these facts, Chukwu used data from the Nigeria Living Standards Survey (NLSS) 2004 and HNLSS 2010 to decompose the effects of growth and redistribution on poverty changes; measure and compare poverty and inequality within and between groups; and evaluate pro-poorness and inclusiveness of growth between the two survey periods.
It is known that while growth effects on poverty are dominant, its effects diminish when there is inequality. Growth effects are also felt less in least developed countries, as opposed to more mature economies. Moreover, growth has a higher impact in rural areas, while distribution has a higher impact in reducing poverty in urban areas.
Empirical results suggest that economic growth in Nigeria does not seem to be accompanied by poverty reduction, as redistribution had an adverse effect on poverty, counteracting the positive impacts of growth. Had inequality not increased, reduction in poverty would have been greater. Moreover, when comparing geopolitical zones, the study finds that the Northern region lags behind the Southern region both in terms of fighting poverty as well as in reducing inequality levels. Overall, growth in the country has been neither pro-poor nor inclusive.
He concluded his presentation by stating that the growth paradox in Nigeria, and its pervasive and highly intractable levels of poverty and inequality, which further lead to vulnerability and social exclusion, is of a great concern to policy makers. He recommended that inequality reducing policies be implemented to complement growth promoting policies, and further alerts that poor targeting of vulnerable groups and lack of quality institutional frameworks may also be hindering the positive impact of growth on poverty.
Jude Chukwu’s presentation can be seen below:
Author: Cecilia Amaral
Interested in Inclusive Growth? Read more on the topic on the following IPC-IG publications:
Working Paper #104 – Inclusive Growth: Building up a Concept
One Pager #188 – After All, What is Inclusive Growth?
One Pager #189 – How Inclusive Has Growth Been in the Last Decade?
Working Paper #105 – Mapping Inclusive Growth
One Pager #205 – What is Inclusive Growth? An Alternative Perspective
One Pager #213 – South-South Cooperation and Inclusive Growth
Poverty in Focus #22 – Can Social Protection Help Promote Inclusive Growth?
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