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Cpanel

19September2017

Nigerian economic performance variables should focus on human development indicators


Whenever there is need to compare living standards that cut across borders, the barometer that first comes to mind is per capita income. However, the heterogeneity of the socio-economic structure and income inequality of most economies, especially the developing ones, questions how suitable it is as a benchmark. If we annualise the 2013 third quarter GDP figure released by the National Bureau of Statistics (NBS), the estimated 2013 per capita income for Nigeria is N253,814.77 (US$1,616.65). This implies that an average Nigerian earns, produces or spends about US$1,616.65 per annum and US$4.4 per day which is within the threshold of the living standard of citizens of other emerging economies. However, the huge income disparity that subsists amongst the citizenry suggests the existence of significantly pronounced classes and makes this figure misleading.

 

High poverty incidence and unemployment despite growing per capita income

In its report on the poverty incidence for 2010 and forecast for 2011, the National Bureau of Statistics (NBS) opined that the incidence of poverty in Nigeria worsened between 2004 and 2010. The number of Nigerians living below poverty line grew from 68.7m to 112.5m (increase of 63.7% in poverty incidence) during the period while the population grew from 139.2m to 158.6m (13.9% growth in population) over the same period.Unemployment figures earlier reported by the NBS corroborated this situation as Nigeria’s unemployment rate grew from 12.3% in 2006 to 23.9% in 2011. Conversely, during the same period, Nigeria’s economy grew strongly at an average annual growth rate in excess of 6.6% making the country the 5th fastest growing economy in the world in 2010 with a 7.87% real growth rate.

The above represents the enigma of growth in the face of high poverty incidence. This is not in line with traditional economic and social theories as well as historical trends. It highlights vividly the structural disequilibrium in the Nigerian economy which has sustained the key productive and high employment sectors below potential while supporting consumerism and rent-seeking.

 

Growing per capita income amid widening Gini coefficient

The real per capita income of Nigerians has trended upward, rising from US$559 or N57,073.9 in 2004 (based on 2000 price and exchange rate level) to an estimated US$1,616.65 or N253,814.77 (annualized real GDP figure as at September 2013), representing a CAGR of 18% in Naira term (13% in US$ term) during the period. At this time, the average population growth rate was 2.6%. At purchasing power parity and assuming the wealth of the nation is distributed equally, the real per capital income figures above suggest that an average Nigerian earns US$4.4 per day in 2013, well above the globally acceptable poverty line. This is however not the case as huge income inequality exists amongst the populace. Nigeria’s Gini coefficient, the barometer used to measure income inequality, is estimated by the World Bank in 2010 to be 48.8%. The fact that 60.77% of the population lived on less than US$1 per day despite the implied value of US$4.4 by the per capita income figure, gives more credence to the estimate above.

A number of reasons could be adduced for the paradox above. Population, which is the denominator in the quotient used to measure per capita income, hides the prevalent income class structure in the per capita income calculation. While the income class layers could be more than two, the 60.77% a-dollar-a-day poverty incidence suggests that less than 40% of Nigerian population consumes over 86% of the national income estimated in 2013. The remaining over 60% shares the balance.

 

Human development indicators may provide better information for policy making

Undoubtedly, using the trends in indicators like GDP per capita, hospitals per capita, food intake per capita amongst others are a good gauge for measuring the development of the overall economy especially as they are about the least subjective barometer for international comparison. However, these statistics may hide the real economic situation of countries and could give provide misleading impression about the wellbeing of a nation.

Focusing on other human development indicators (HDIs) such as the poverty level, access to drinkable water, unemployment rate, and health access indicators would help policy makers at targeting reforms. These measures do not only expand the inclusiveness of strong growth, they suggest sustainable capacity to keep growing while closing the gaps within the classes in the society.

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