Introduction

The purpose of this report is to explore whether poverty or inequality is a bigger cause of concern in
Nigeria and to suggest steps that the private sector can take to minimize the more pressing problem
between the two challenges. This report is structured in three main sections. The first section will look in
to the different definitions and perspectives of poverty and income inequality. This section will also look
in to the opinions of leading scholars about the two issues in a general/global sense. The second section
will investigate income inequality and poverty issues specifically in Nigeria and will establish a link
between general scholarly opinion. The last section will aim to suggest ideas to the private sector through
which the more pressing issue between poverty and inequality can be tackled.

Definitions: Poverty and Inequality

The first step in approaching the problem is to understand the different definitions of poverty and
inequality as per major global economics institutions and as per leading scholars in these areas. The report
will assess which issue between the two issues is more pressing in a general sense and how the
generalization translates to the case of Nigeria.

Poverty has a variety of definitions. These definitions are proposed by different countries, institutions or
scholars. A few takes on poverty are as follows. As per Amartya Sen poverty does not mean living under
an imaginary poverty line. It means having an income level that does not allow you to meet basic needs
considering the circumstances and social requirements of the environment. According to the world bank
anyone who consumes less than $1.90 worth of goods per day is considered poor.

Inequality is also referred to as relative poverty. It gives us insight into how the income of people in a
country compares. Income inequality is based on the idea that person is getting worse off if another
person is improving. For example, a person who has a net worth of USD 1 million is considered poor when
compared to someone who has a net worth of USD 1 million even though both persons are not poor by
any definition of poverty.

The view of economic discourse on whether poverty or inequality is a pressing issue for a country is heavily
dependent on the context. For a developing country the major concern is poverty. The primary reason for
this is that a large population of people are not able to meet minimum basic needs. In this scenario the
debate on inequality only allows us to differentiate between the poor and the poorer. Therefore, for
developing nations absolute poverty is of prime concern. On the other hand, for developed countries
where a large majority of the populations have access to necessities to survive the concern shifts from
poverty to income inequality. Because not many people are struggling to make ends meet in developed
countries poverty ceases to be a bigger concern. For example, in the developed countries in the EU there
is a huge focus on addressing income inequality. Another interesting point to note is that there are
developing countries that are very wealthy, but all the wealth is concentrated at the top as a result of
which those countries house large populations for very poor populations.

Poverty and Inequality in Nigeria

This section will investigate the current poverty and inequality situation in Nigeria and will investigate the
outlook of both issues. Based on the current severity of the two issues and the future projections of the
two issues an inference will be made which will state the bigger concern between the two.

Nigeria is one of the fastest growing economies in the world it has recently grown at a rate of 7.4%. It is
the 27th largest economy in terms of Nominal GDP and is the largest economy among the African Nations.
The country has a GDP per capita of $ 2049, inflation of 11.4% and unemployment rate of 23.1%. The
economy has boomed in recent times but not much of the growth has translated towards reduction of
poverty and inequality.

Despite the tremendous growth rate, the country faces huge poverty and income inequality challenges.
As per World Bank data the current poverty rate in Nigeria is around 53.5%. This means that around 80
million people in Nigeria consume goods worth less than $1.90 per day. According to DFI and Oxfam data
Nigeria ranks bottom of the list of 157 countries in the commitment to reducing inequality index (CRI). As
per the report Nigeria has shamefully low levels of spending on health education and social protection
and the country has the highest number of out of school children. According the world banks Human
Development Index (HCI) Nigeria ranks 152nd out of 157 countries.

Inequality in Nigeria has reached alarming levels. The country is the fastest growing economy in Africa,
but the growth is not pro poor. The GINI coefficient of the Nigeria is .43 which is a relatively decent
number, however this number is not accurate representation of the true picture in the country. The five
richest Nigerians have a wealth of about $29.9 billion as per Oxfam. The complete picture of income
inequality is bleak at best. The government needs to take necessary steps to address this worsening issue.

The bigger Concern

As can be seen above Nigeria is severely affected by both poverty and inequality. As per general thinking
in economic discourse the first step should be to tackle poverty since Nigeria is a poor country and only
tackle inequality when large population is brought out of poverty. However, the case of Nigeria is
somewhat unique when compared to other developing counties facing poverty and inequality challenges.
Nigeria in terms of growth and GDP is not a poor country but they still have a poverty rate of about 50%.
The problem in Nigeria is that the concentration of wealth with a very small number of families. Nigeria
has the means necessary to bring its poor population out of poverty, but the government has a lack of pro
poor policies. The little policies that they do have in place are not implemented effectively. Therefore,
relative to the unique situation of Nigeria it would be beneficial to address income inequality before
addressing poverty due to enough available resources in the country which can be redistributed to reduce
absolute poverty.

Role of Private Sector

The private sector can take the following steps to help tackle inequality:
• Access to financial capital is a huge area of potential to reduce inequality. Private sector can setup
lending enterprise that give small loans at reasonable rates. The loans can be used by the poor to
setup source of income. The micro finance model used by Grameen bank in Bangladesh can be
replicated in Nigeria to provide access to credit.
• Export based products should be a prime target of the private sector. Private companies can take
advantage of products that have a high demand internationally.
• CSR activities with a focus on skill development can play a huge role to help create employment
opportunities for the poor. These employment opportunities will increase the income of the poor
population and bridge the income inequality gap.
• Education based enterprises can make a huge positive impact in curbing inequality. Educational
enterprises can partner with the government to provide education to the less privileged.
Increasing education can equip people with the knowledge to get better paying jobs.
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