Nigeria sliding deeper into poverty trap despite recovery, experts warn

Nigeria is sliding deeper into a poverty trap despite claims of economic recovery, with unsustainable debts and dissaving now driving inter-generational poverty. 

Experts say 65 million rural dwellers are already in extreme poverty, and the middle class is only one shock away from falling below the line.

Stubbornly high inflation, a weakened naira, low-paying jobs, widespread underemployment and declining access to basic services are recreating the cycle of deprivation. Households are dissaving, liquidating productive assets, rationalising children's education and cutting emergency buffers just to fund immediate sustenance.

Middle class one shock away

Prof. Adeola Adenikinju, an economist at the University of Ibadan, said most of the middle class are left only “one shock away” from falling into poverty. Rising deprivation has grown from a personal vice to a social burden, undermining the country's industrial drive, he said.

Many multinationals have closed operations in Nigeria in recent years because they cannot match huge investment requirements with supportive domestic consumption. Uber was the latest global brand to quit last week, deactivating its Nigerian app as part of a cost-optimisation scheme. A top executive in its sub-Saharan Africa operation said Uber had 7,000 riders in Nigeria as of 2017, three years after launching in Lagos. By contrast, unconfirmed data put South Africa's active riders at about 1.4 million, while Ghana delivered about 180,000 as of 2018.

Weak consumption despite huge population

Nigeria's population is estimated at 236.3 million, but it is weakly correlated with consumption. Last year, industry tracking reports put total units of brand-new cars sold in Nigeria at 23,779, about 56 per cent short of the all-time high of 53,900 units sold in 2014. According to Africa Facts Zone, Nigeria is not among the top five African new-car markets. Tunisia, the fifth-largest market, recorded 93,095 units last year, about four times Nigeria's purchases. South Africa, the continent's top market, recorded 596,818 units, approximately 0.01 per capita compared with Nigeria's 0.0001.

The gap pushes Nigerians into the used automobile market, where maintenance costs reinforce poverty. Haphizibah Iniodu of Cardio Autotech said an average Nigerian car owner spends about $650 (N890,000) on yearly maintenance, about 12 months of minimum-wage salaries. That burden deprives salary earners of resources for other financial needs.

Even entertainment consumption is weak. Netflix has only 162,000 subscribers in Nigeria compared with South Africa's 1.3 million paid viewers. Poor disposable income translates into weak purchasing power and lower consumption, reducing the incentive for new investment and plant expansion. Low investment means lower employment and poor wages, which further depress incomes.

No traction on poverty programmes

Ken Ife, a professor of economics and trade consultant at the Economic Community of West African States (ECOWAS), said there has been “no traction” on poverty reduction, a default policy programme of successive administrations. Chiwuike Uba, another professor of economics, disagreed slightly, saying Nigeria recorded significant progress until 2015. He blamed aggressive sovereign debt accumulation, rising debt-service costs, depletion of national savings and currency instability for triggering inflationary pressures that worsened the “survival crisis”.

In May 2015, when the late President Muhammadu Buhari assumed office, headline inflation stood at nine per cent. A year later, when the administration celebrated its first anniversary, national headline inflation was near 16 per cent.

For Nigerians, the data show that the so-called recovery is not reaching households. Without deliberate policy to support incomes and consumption, the poverty spiral will keep tightening.