ANALYSIS OF MULTIDIMENSIONAL POVERTY AND INEQUALITY IN NIGERIA: EVIDENCE FROM THE CORE WELFARE INDICATOR SURVEY DATA

Abstract

This study carried out an analysis of multidimensional poverty and inequality in Nigeria. Five specific  objectives  were  achieved  in  the  study.  The  Core  Welfare  Indicator  Questionnaire (CWIQ) survey data of 2006 by National Bureau of Statistics was used for the study. The sample was made up of 77,400 (seventy-seven thousand, four hundred) housing units drawn from the 36 States and Federal Capital Territory-FCT. The welfare indicators were categorized into ten poverty groups- Housing; Assets; Communication; Education; Means of transportation; Economic/Security;  Energy;  Land  access;  and  Basic  infrastructure.  Principal  Component Analysis (PCA), Poverty mapping, Adapted-Foster Greer and Thorbecke, Gini coefficient, Theil Coefficient, Generalized Lorenz curves, Stochastic Dominance and Binary Logistic Model were used to analyze the data. The PCA was used to derive the non-monetary poverty line. Kaiser- Meyer-Olkin model adequacy value of 0.75 was obtained in each of the poverty groupings. The study found that apart from means of transportation and communication access poverty, poverty incidence is high in the rest of the eight poverty areas with energy and land ownership recoding the highest incidence. The study further revealed that poverty in Nigeria has no geographical or demographic frontier, with all the geo-political zones, states and socio-demographic groupings recording high incidence of multidimensional poverty. Inequality was found to be highest in terms of land access followed by education access while health access recorded the lowest overall inequality. Decomposition of inequality across region, location and gender shows that within-group inequality comprises over 50% of total inequality across education, energy, and land  access.  Household  size,  polygamous  marriage  and  gender  more  significantly  increase poverty while attaining post secondary school, living in an urban area significantly reduced poverty across the composite indicators used. Among the recommendations made were: Government should target specific regions or states based on the poverty attributes they are most deprived; Government should incorporate other poverty attributes in their poverty eradication programmes instead of focusing primarily on moving people out of certain income poverty level; effort should be made to narrow the skewed distribution of non monetary assets, most especially within groups contributions to this disparity.

CHAPTER ONE INTRODUCTION

Poverty and inequality are among the most crucial problems facing developing economies today (Boateng et al 2000) and have attracted a lot of attention among analysts in Nigeria during the past few decades. Poverty and inequality are profoundly endemic in many countries, especially in less developed countries. There have been several reports on poverty trends in Nigeria, that is, on changes in the incidence, depth and severity of poverty over time. For example, poverty rate increased from 46.3 percent in 1985 to 65.6 percent in 1996 (Nigeria Bureau of Statistics (NBS),

1996). Although there was a drop in poverty rate to 54.4% in 2004 (NBS, 2004), the number of people living in poverty is still above 70 million. In fact, Nigeria is among the poorest countries in the World with a Human Development  Index (HDI) of 0.470 ranking 158th  among 177 countries (UNDP, 2007) Thus, poverty reduction is undoubtedly one of the highest ranking issues in the national strategies of Nigeria and the most potent issue in the current international development agenda. This is reflected in Millennium Development Goal (MDG) 1, the vision statement of most bi- and multilateral donor agencies and in poverty reduction policy papers of most  developing  countries,  for instance,  the Nigeria National  Economic Empowerment  and

Development Strategy (NEEDS).

Nigerian governments at all levels have embarked on several programs in order to alleviate poverty incidence and severity. Some of such programs according to Osinubi (2003) include National Directorate of Employment (NDE), the Family Support Program (FSP), the National Agricultural Land Development Agency (NALDA), Directorate for Food, Roads, and Rural Infrastructure (DFRRI), Family Economic Advancement Program (FEAP) and National Poverty Eradication Program (NAPEP). Minimum wage policy and Universal Basic Education (UBE), according to Oyekale et al (2008) are also means of combating poverty. However, given the low response of households to escape from the scourge of poverty, it can be said that many of these programs have not made significant impacts.In order to design policies for poverty reduction, it is important to understand its magnitude and processes that cause and deepen it. Hence, at the heart of poverty reduction policies is the question of what indicators are being considered (the

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issue of measurement). Poverty measurement is the quantitative assessment of the level and depth of poverty of individuals or in aggregate, for a group or region, country or across the world. It can also be seen as an index synthesizing all information available about the poor (Dercon 2005). Given a distribution of one or several indicators of individual’s welfare and poverty  line  (suitably  adjusted,  if  need  be,  for  differences  in  individual  needs,  family composition and prices faced), such a measure yields a single index that summarizes the extent of poverty generated by the distribution. Poverty measurement is very important in poverty alleviation/poverty reduction targeting. For instance, it is not enough to define the concept of poverty theoretically, but to identify the poor and measure the extent of poverty. The measurement of welfare and of poverty plays an essential role in the current debate over the policies for the fight against poverty. This measurement will, among other things, allow for a differentiation between the poor and the non-poor, the introduction of optimal approaches to poverty reduction or estimates of the errors of inclusion or exclusion of individuals from the poor population. In the same vein, poverty measurement makes possible, poverty comparisons in time and space and equally enables us to identify the primary correlates of poverty.

Overtime, different approaches have evolved in the quantification (measurement) of the extent of poverty. These approaches to poverty and inequality measurement involve the traditional or conventional approach to the measurement of poverty and inequality, which is money-metric and uses income and/or expenditure data and a number of alternative approaches that make use of various other socioeconomic indicators to measure poverty and inequality. The income or consumption method uses a specified subsistence income level, referred to as the poverty line. A person is said to be poor if his/her income falls below the poverty line. There are currently two main methods of setting the poverty line in the conventional money-metric procedure, i.e. the Cost of Basic Needs (CBN) and the Food-Energy-Intake (FEI) methods. The CBN approach considers poverty as a lack of command over basic consumption needs, and the poverty line as the  cost  of  those  needs,  while  the  FEI  method  defines  the  poverty  line  by  finding  the consumption expenditures or income level at which a person’s typical food energy intake is just sufficient to meet a predetermined food-energy requirement.

These methods described above are objective measures of poverty (quantitative) from which the absolute and relative poverty lines can be derived. Poverty can also be measured subjectively (qualitatively). This is a self-professed poverty measure based on questions to households about their perceived situation.

Though  the  money-metric  measure  of  poverty  has  achieved  tremendous  progress  over  the decades, the well-being of a population and, hence its poverty, which is a manifestation of insufficient well-being, depends on both monetary and non-monetary variables. The Human Development Report published by the United Nations Development Programme (1997) states that a lack of income only provides part of the picture in terms of the many factors that impact on individuals’ level of welfare ( e.g. longevity, good health, good nutrition, education, etc). This re-echoed the multidimensionality of poverty and gave further impetus to the importance of the multidimensional approach to poverty measurement – integrating both monetary and non- monetary approach in poverty measurement or at best, measuring poverty with the aid of money and non-money metric attributes.

Unlike the conventional income/consumption measures, multidimensional poverty measurement does not only view poverty as insufficient income or consumption but also sees poverty as insufficient outcome with respect to health, nutrition, and literacy etc. Multidimensional measurement of poverty and inequality sees poverty in terms of the functioning and capabilities of individuals as espoused by Sen (1985). Multidimensional measurement of poverty involves a broader measurement of poverty that goes beyond just income measures. In fact, it entails the measurement of poverty using such indicators as health, education, life expectancy, household assets which have been acknowledged as a better measure of poverty since meaningful poverty reduction  is  predicated  on  the  individual’s  ability  to  accumulate  productive  assets.  The importance of multidimensional poverty measure cannot be overemphasized. This is because the broader definitions of poverty do allow a better characterization of poverty and they therefore increase our understanding of poverty and the poor.

1.2       Statement of the Problem

In spite of the importance of multidimensional measure of poverty and inequality in enhancing the knowledge and understanding required to promote a sustainable campaign against poverty at the National and State levels, previous efforts at measuring poverty in Nigeria have always focused on monetary measures of poverty such as income/expenditure as indicator of poverty and income distribution as the basis for inequality analysis. Measurement of poverty and inequality in Nigeria has rarely focused on the level of assets or distribution of assets and other non-income indicators as the objective of policy programme. For example previous efforts in analyzing poverty and inequality in Nigeria namely, Van da Walle (1990); Ogwumike (1987), (1991); Ogwumike and Odubogun (1989); World Bank (1991); Canagarajah et al (1997), Aigbokhan (2000); Ogwumike et al (2006), Okumadewa et al (2006),   and various studies by National Bureau of Statistics all used uni-dimensional measures. Also while the current Nigeria national Gini coefficient value of 0.42 shows an unequal distribution in monetary terms, little is known  about  the  distribution  of  other  welfare  attributes.  These  uni-dimensional  poverty measures, at best, only lead to partial understanding of poverty and often, to unfocused or ineffective poverty reduction programmes. This is because they do not give comprehensive information about the poor especially in terms of other attributes and as such lead to limited knowledge of the problem since the different dimensions of poverty and the correlates are not known. Unfortunately, the Core Welfare Indicator Questionnaire Survey (CWIQ) report only carried out a preliminary descriptive analysis of some indicators without rigorous statistical analysis to decompose these indicators into different poverty and inequality components. Thus, in order to have a multifaceted approach to fighting poverty and inequality, there is the need to carry out a multidimensional analysis of poverty and inequality in Nigeria. This forms the bedrock of this research. The study was carried out using the CWIQ data 2006 from the National Bureau of Statistics.

1.3       Objective of the study

The general objective of the study is to carry out multidimensional analysis of poverty and inequality in Nigeria. Specifically, the study:

  Constructed a relevant multidimensional poverty profile of Nigeria (static) as well carried out a multidimensional poverty mapping of Nigeria

  Carried out poverty sensitivity analysis using composite indicators.

  Carried out a spatial inequality analysis using composite poverty indicators.

  As  a  follow-up,  carried  out  inequality  decomposition  analysis  (within-group  and between-group contributions to overall inequality) using composite indicators.

  Estimate the correlates of poverty using composite poverty indicators. And above all, come up with some recommendations to improve the methodology of identifying who are the poor in Nigeria as a tool for better designed and targeted poverty alleviation policies.

1.4             Hypothesis

Given the nature of the study which concentrates on profiling and mapping of poverty in Nigeria, it does not lend itself to statistical test ( it produced incidences, depth and severity and poverty maps). However, the objective of estimating the correlates of multidimensional poverty can be tested statistically; hence we raised a hypothesis on it.

  Socio-demographic  factors  do  not  significantly  correlate  with  multidimensional poverty in Nigeria.

1.5             Scope of the study

The study undertook a multidimensional analysis of poverty and inequality in Nigeria, using data from the Core Welfare Indicator Questionnaire (CWIQ Survey 2006). The thirty-six states and Abuja form the scope of this study. This is given the fact that the Core Welfare Indicator Survey carried out by the National Bureau of Statistics covered the thirty-six states of the federation including the Federal Capital Territory, Abuja. The survey covers such non- monetary indicators as health, education, employment, household amenities, social project, etc. There was no issue on income and expenditure. This therefore limited our scope of analysis to the above listed human, physical, and social assets.

1.6       Justification of the study

Contemporary discourse in poverty measurement has shifted from uni-dimensional to multidimensional measures of poverty and inequality. Multidimensionality of poverty has important  implications  at  the  policy  level.  The  policy  relevance  of  multidimensionality  of poverty relates to the genuine possibility that a uni-dimensional approach to the measurement of poverty and inequality is likely to underestimate the richness or complexity of the nature of poverty, which needs to be addressed in any policy for poverty eradication (Qizilbash 2003). Furthermore, the use of multidimensional framework might actually alter the particular set of people who are identified as poor.

The fact that increase in people’s income or consumption budget may be able to improve the position of some of their monetary and non-monetary attributes is not in doubt, but the market for some non monetary attributes does not exist, for example with some public goods. On the other hand the market may be highly imperfect, for instance the case of rationing. Therefore, using  income/consumption  expenditure  as  sole  indicator of well  being  is  inappropriate and should be complemented by other attributes or variables e.g. health, education, land access, etc.

In Nigeria   discussion on the measurement of poverty and the related issue of inequality has given little attention to the asset ownership of individuals or households, or the skewed distribution of assets across the population; whether spatially or socially. This   may in part, explain why the objectives of anti-poverty programmes have been articulated in terms of raising people above the income (or expenditure) determined poverty line, or raising command over certain commodities. Since meaningful poverty alleviation is largely predicated on the individual’s ability to accumulate productive assets, and since income inequality will be reduced by addressing the unequal distribution of income generating assets, there is considerable merit in moving the process of poverty measurement away from a solely income (expenditure) based measure toward a more asset-based focus. The implication is that more emphasis will be placed on economic and social factors that contribute to inequality, rather than on anti-poverty measures that are targeted and evaluated based on income (expenditure) levels.

Furthermore,  a  multidimensional  measure  of  poverty  and  inequality  is  more  useful  in  the medium or longer run assessment of individual well being. They address more directly the ends or outcomes of policy (being educated and healthy) rather than the inputs or means (greater income). Also, studies have concentrated more on the incidence of poverty, determinants, causes of poverty, regional disparity, and impact of anti-poverty programmes and policies using the money-metric measure. Even the few works that delved into multidimensional poverty measures in Africa, concentrated largely on other sub-Saharan African countries with Nigeria given little or no attention.

This study will help to ascertain the static multidimensional poverty profile of Nigeria, document a multidimensional poverty map of Nigeria and at the same time serve as flag stop for a dynamic poverty and inequality analysis in the country. In the same vein, the study will add to the contemporary methodological debate that is on-going in the poverty measurement circle. The interregional (spatial) and social poverty analyses using composite indicators of welfare will help to give the spatial and social nature of poverty and inequality in Nigeria, and should also inform the distribution of poverty eradication grants to various regions and social groups.

Finally, the result of this study, will be useful to the National Planning Commission and other development agencies (local and international) especially in designing interventions best adapted to the effectiveness of anti-poverty policies (effective poverty reduction policy targeting) for monitoring and evaluation (to assess the effectiveness of current policies and by so doing track changes in poverty).

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