Poverty Reduction Impossible without Manufacturing Sector Growth

19 Feb 2013

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Olusegun Aganga, Trade Minister

Crusoe Osagie

Recent research conducted by two Associate Fellows of the African Institute for Applied Economics (AIAE) has revealed that without conscious efforts to grow the manufacturing sector of the Nigerian economy, which is capable of creating jobs, all efforts to reduce poverty will remain a mirage.

They said stable macroeconomics cannot automatically translate to growth and poverty reduction with the lingering infrastructural deficit, epileptic power supply and non-existing proper industrial policy.

The assertion was made by the duo of Dr. Chukwuma Agu and Dr. Hyacinth Ichoku at the development policy seminar to disseminate the outputs of their research on ‘Pro-Poor Growth and Poverty Reduction in Nigeria’.
The researchers stated that as commendable as government’s efforts to provide 3.5 million jobs from agriculture, housing construction, solid minerals, aviation and the creative industry are, the inability of government to grow the manufacturing would hamper the vision.

The research, funded by the African Economic Research Consortium (AERC), which showed how public sector has been crowding out the private sector, revealed that the much-talked-about growth in Nigeria is ‘non pro-poor growth’ since the sectors that are growing still leave many unemployed.

Agu, who presented the thrust of the report, averred that using nationally representative data for 1996 and 2004, the researchers evaluated the pro-poor-ness of overall growth in Nigeria, estimating the extent of appropriation of the benefits from economic growth by the richer segment of the population relative to the poor.

“The work also examines the impact of sector of employment and selected demographic indicators at the household level on poverty. Estimates were obtained for both national level data and data from the six geopolitical zones. Determinants of poverty and inequality used in the study included both macro indicators and micro variables.

“And the findings are as interesting. For example, the work found that household size, region of origin and sector of employment are some of the most important determinants of the probability of a household being poor in Nigeria”, Agu noted.

Agu, who is also a lecturer at the Institute of Development Studies (IDS) of the University of Nigeria, Enugu Campus (UNEC), noted that several African countries that have posted high positive growth rates over the last decade have also seen significant rise in poverty. 

He added that, for instance in Nigeria, latest statistics on poverty signals a continued spiral downwards in the welfare indicators. He stressed that, “Between 2004 and 2010 (a period of less than 7 years), the proportion of Nigerians living in absolute poverty jumped from 54 per cent to 70 per cent. This is despite the fact that the country has grown at about 7 per cent consistently for nearly one decade and has also designed a plethora of poverty reduction strategies at all tiers of government.

“Though it has always been known that growth is not always a sufficient condition for poverty reduction and that tackling poverty regularly requires targeted programmes, Nigeria’s experience presents an absolute paradox. Both policymakers and private individuals are concerned about the drivers of growth and poverty. It is difficult to understand that an agriculture-driven growth in a country with nearly 60 per cent of the labour force employed in the sector should produce such adverse growth and poverty dynamics”, Agu lamented.

The report also stated that factors which still impact poverty include household size, agricultural employment, geo-political cultural and religious peculiarities, deepening human capital, and so much talk about corruption without direct impact on poverty reduction.

On income inequality which has contributed largely to poverty, the study revealed that ‘trade income’ is one of the highest sources of income inequality which is part of the growth Nigerian government talked about. It said for instance, the South East has significant number of traders though size and level of engagement in trade vary significantly among households compare to other zones.

On lessons leant from the study, the AIAE Fellows stated that the highest impact of each factor usually falls in the region where it is a source of income to a large proportion of households.

“For some distributed within a particular region, but which are not structured efficiently or in a manner that will elicit wide coverage, inequality arising from that could be quite high for example trade income in the North West and salaries and wages in the North East and subsidies in the North West and North East or also happen to produce income contributes the least to inequality in almost all regions.

“This may not be unassociated with the fact that produce income is low across board, with most of the produce themselves being agricultural. So it does not really make those who do not have access to them to be much better off,” they added.

Tags: Business, Nigeria, Featured, Poverty Reduction, Manufacturing Sector Growth

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