OUTSIDE THE BOX
BY ALEX OTTI
“Nigeria
has the unenviable position of being at the bottom of the Commitment to
Reducing Inequality (CRI) Index. Its social spending (on health,
education and social protection) is shamefully low, reflected in very
poor social outcomes for its citizens.
More
than 10 million children in Nigeria do not go to school and 1 in 10
children do not reach their fifth birthday. The Africa Progress Panel
has demonstrated that despite Nigeria’s positive economic growth for
many years, poverty has increased, and the proceeds of growth have gone
almost entirely to the top 10% of the population. The CRI Index shows
that while Nigeria collects significant tax revenues from oil, there is
huge potential for it to raise more tax, for example on personal
incomes, and so it scores very badly on this aspect too. Finally,
Nigeria’s treatment of workers and women in the workplace also puts it
near the bottom of the rankings.”
Above
is the verdict of the Development Finance International and Oxfam in
their research report published just last month, July 2017. In 2015,
some 193 countries, including Nigeria, came together and reached an
agreement to reduce inequality in line with the understanding that
poverty can only be tackled with reduction in inequality as per the
Sustainable Development Goals (SDGs). CRI is the first index designed to
measure the commitment of countries to reduce the gap between the rich
and the poor and was created by Development Finance International and
Oxfam. In measuring the first set of countries numbering 152, the duo of
Development Finance International and Oxfam relied on data that
measures government action on social spending, tax and worker’s rights
amongst other indicators to determine how committed countries are in
reducing inequality. The first report published, which they admit is
subject to adjustments, revealed that while Sweden came first, Nigeria,
came first if you count from the rear in commitment to reduce
inequality. We were actually number 152 out of the 152 countries
measured.
The
same Oxfam in May this year presented a shocking revelation of the
level of inequality in the country. According to the report, 5 Nigerians
that are worth almost $30billion could end extreme poverty in Nigeria.
It claims that 112million Nigerians, representing more than 65% of the
population, live in abject poverty. This report which is part of the
“Even it up” campaign aimed at bridging the gap between the rich and the
poor, also focussed on how the benefits of economic growth in Nigeria
have been exclusively appropriated by the wealthy few at the expense of
the majority of ordinary people. The report also shows that the
wealthiest man in Nigeria earns 8000 times more in one day than
an ordinary Nigerian will spend on basic needs in a year. The report
goes further to highlight that quite unlike most other countries in the
world, Nigeria was one of the exceptional cases where the number of
people living in poverty increased from 69 million in 2004 to
112million, 6 years later. This represents close to 70% growth. On the hand, the number of millionaires increased by 44% over the same period.
Everything
that has been said above points to the fact that inequality is a major
factor in the level of poverty that the country’s population
experiences. According to Index Mundi, a statistical and information
portal for measuring countries, Nigeria has the 6th largest
proportion of its population living below poverty line. This report
goes further to state that Nigeria with 70% of its population living
below poverty line, is only better than Chad, Haiti and Liberia at 80%,
DRC at 71%, and Sierra Leone at 70.2% out of the 152 countries ranked.
As we had stated elsewhere in our intervention, the
World Bank has defined poverty line as that amount of money below which
people are not expected to lead a decent life. The threshold has
recently been reviewed from $1.25 to the current $1.90 per day.
That
figure translates to less than N600 per day at today’s exchange rate or
N18, 000 monthly. The number of people living below this amount
relative to the total population is said to live below poverty line. To
move many more people out of poverty and begin to report better numbers
in the poverty line index, we must drastically attack inequality and
reduce the gap between the haves and the have nots. Inequality is not
good for anyone whether poor or rich. It has been linked with crime and
insecurity, lower economic growth, poor healthcare delivery and hunger.
While the impact on the poor people can be very severe, the rich would
also not be able to sleep well. There is this popular saying that the
poor cannot sleep because they are hungry and the rich cannot sleep
because the poor is awake. How can they when the society is bedeviled by
violent crimes including armed robbery, kidnapping, terrorist
activities and outright brigandage?
Can
something be done about this? The answer is yes. We are aware of the
several humanitarian programs set up by the the wealthy to assuage
poverty and assist the indigent. While this is commendable and should be
encouraged, there is only so much these palliatives can do to solve the
inequality scourge and pull people out of poverty. Given the number of
people who have been counted as living below poverty line, it is obvious
that more concerted efforts need to be put in place to address extreme
poverty and this can only be done by government through policy. It is
interesting that Nigeria is one of the signatories of the 2015 agreement
to reduce inequality. The solution lies not in reducing the wealth
available to the richest few. That kind of thinking is not practicable
and has never worked anywhere.
The
solution that will work is for government to engage in massive social
spending. Government spending on healthcare, education and social
protection is one sure way of reducing inequality. How does it work?
When government spends on healthcare delivery and education, those
facilities are made available to the rest of the society and access
helps in elevating them from a state where those facilities were either
not available or could only be accessed at unaffordable costs. Just
think of what will happen if every community has a well equipped
hospital built by government and probably managed by experts who would
ensure that the service is provided at affordable rates to the people of
the community.
The same thing goes for education about which we had written extensively.
These facilities would not only provide service, but would also
generate jobs for those in the catchment area, thereby reducing
unemployment which is another fallout of inequality. To buttress this
point, the report that we had quoted earlier had pointed out that a
recent study of 13 developing countries that had drastically reduced
their overall inequality level, found that 69% of the reduction of
inequality was because of investment in public services. Social spending
is almost always progressive because it helps reduce existing levels of
inequality. Despite this, in many countries, social spending could be
far more progressive and pro-poor and can play a key role in reducing
the amount of unpaid care work that women do by redistributing child and
elder care, healthcare and other domestic labour.
Beyond
government spending is the issue of progressive taxation. We had
demonstrated in this column in the past that the inability of government
to efficiently collect tax has hampered its ability to deliver service
to the citizens. Nigeria’s tax to GDP ratio is an abysmal 6%, the lowest
in Africa. The real issue is that those who are in a position to pay
tax, (and anyone who earns income should be in a position to pay tax),
do not pay tax. As oil revenue continues to dwindle and as oil’s
imminent collapse approaches, (in view of developed countries’
announcements of phase-out dates of gasoline vehicles), government must
pay attention to improving its tax collection strategies. Why this is
important is that progressive taxation is a sure way to redistribute
income in favour of the poor and reducing inequality. The second point
is that it is also a veritable way to raise funding for social spending.
I know a lot of people would have been worried about where the funding
of the spending we had earlier proposed was going to come from. Of
course taxation is one way of funding government expenditure.
Continuous
upward adjustment of wages is critical to reducing inequality and
eradicating poverty. At a minimum wage of N18, 000.00 monthly, it will
be difficult to reduce poverty as that amount is presently the threshold
for poverty line. It is therefore a good thing that the issue of
minimum wage has recently come to the front burner of discussions. These
discussions should be encouraged if we truly want to bridge the gap
between the rich and the poor. I know all the arguments against increase
in wages which includes the unemployment argument and the fact that
employers are struggling in a challenged economy, but I have always
submitted that if you pay peanuts, you can only attract monkeys. There
is a strong direct correlation between pay and productivity.
The
government needs to pay attention to an inclusive growth model that
will bring minorities and women into the economic equation. To achieve
this, efforts must be made to empower women, pay them appropriately for
their roles, (most of them are not paid for at the moment) and ensure
that they are included in economic activities. This becomes very
important given their numbers. Any serious effort to reduce inequality
without addressing the gender issue is dead on arrival. This is also
true of other excluded segments of the society including the youth.
Government
can also do a lot by spending massively on infrastructure in terms of
power, roads, rail, seaports and airports. This is very useful in
bridging the gap between the rich and the poor in more ways than one. In
the first instance, availability of infrastructure will create jobs and
take a lot of the economically weak out of poverty. It will also reduce
the cost of living, though, for everyone including the rich, but the
poor will feel the impact more.
It
will reduce the cost of doing business and encourage more people to get
into economic activities and reduce tension in the polity. It is,
however, instructive to emphasise here that the ability of government to
engage in social and infrastructural spending is limited not only by
the resources available to it, but that part of the resources earmarked
for capital expenditure in the annual budget. It bears repeating that
beyond the political will and commitment to reduce inequality, the
government has been ambivalent with the budgeting process over the
years. As a result we budget N7 out of every N10 spend on payment of
salaries, servicing of debt and day to day running of the government,
leaving only N3 to spend on capital projects. In many cases, by the time
the year comes to an end, we would have actually spent more than N7 out
of N10 on government overheads.
The
solution, therefore is to force a rejig of the budget numbers so that
we can have enough for social and infrastructural spending. It can be
argued that because this is not being done that we battle with all sorts
of insurrection and crimes. We may choose to allocate more money to
fighting crimes or to address the root cause of the crimes a chunk of
which is inequality. Any choice we make has both short term and long
term consequences. One of the longer term consequences is that our
democracy which we all know is not working may eventually implode and
those that survive it will be forced to learn from the lessons of the
past and do the right thing.
As
highlighted by the CRI research report, many decades ago, a US Supreme
Court Justice Louis Brandeis succinctly said “you can either have
extreme inequality or you can have democracy – you cannot have both”.
Across the world, faced with growing gaps between elites and the rest of
society, politicians are clamping down on democratic rights and closing
the space for civil society. Inclusive policy making processes which
respect the rights and voice of all people are important as an end in
themselves – but also to secure the best policies. Conversely, policy
making processes dominated by elites undermine democracy and have been
shown to result in policies which predominantly benefit those elites.
The result is obvious, extreme poverty, hunger, disease, squalor, which
in turn are not unconnected with violence, crime, terrorism and
instability. We must all act now as tomorrow may be too late.
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