Saturday, 16 October 2010

Inequality in Nigeria

Inequality in Nigeria is a thoroughly contentious problem. The difference between the ‘haves’ and the ‘have-nots’ can be seen all too clearly, with the lavish lifestyles of a few juxtaposed amongst the squalor of the many. Inequality is closely related to the issue of poverty but the two issues should be looked at separately because ultimately the issue of inequality is not limited by poverty, inequality still exists in countries with low levels of absolute poverty. In fact the world economy as a whole shows high level of inequalities: low income countries account for 62% of the world’s population but only 6% of the world’s income. Inequality in Nigeria has three inter-related but distinct aspects, inequality of wealth, inequality of income and inequality of opportunity. It also takes at least three distinct dimensions: inequalities between urban and rural populations, between rich and poor, and between the genders. The gender issue is a serious and complex problem in itself and is part of a social phenomenon. Because it deserves a discussion in its own right so it will not be discussed here

Scope of Income Inequalities

Inequality is a very difficult concept to measure as it exists in many forms. The inequalities between the groups are further complicated by the inequalities within the groups and trying to treat the groups as homogenous masks the scale.

Data on wealth distribution in Nigeria is difficult to come by. This is partly because wealth and the sources of wealth raise deep political (and perhaps legal) questions. However, the fact that the self-professed richest black person on the planet is from the same nation where 54% of the population are living below the national poverty line, would suggest that there is a severely unequal distribution of wealth.

The Gini coefficient is a statistical measure of inequality which has been applied to national income distributions to measure income inequality in countries. It gives a 0 to a perfectly equal distribution and 1 to a perfectly unequal distribution. According to the CIA, Nigeria gets 43.7 (0.437) in 2003 on this scale, making it more unequal than Ghana, Senegal, Tanzania and Egypt to name but a few. This statistic while offering a snapshot of the situation in regards to income, doesn’t tell the whole story. There is also inequality of opportunity; while this is difficult to measure it exists in all facets of life. There is unequal access to education, to healthcare, to justice, to security, to capital and even to political representation. Some are able to live as full citizens while the majority are offered little by the state and are left to fend for themselves.

The causes of inequality

Inequality in Nigeria has multiple causes, it is undoubtedly possible to trace inequalities to pre-colonial societies: in the forms of social divisions, cast systems and domestic slavery, but the modern phenomenon has its roots in the colonial era. The urban –rural divide really became accentuated in this period as the extractive model of the colonial forces didn’t require them to thoroughly penetrate the hinterland. Commerce was centred round commercial and coastal areas and only the bare minimum of investment was made outside these areas. The system of indirect rule and the utilisation of local middlemen concentrated wealth (and ultimately power) in the hands of a few and thus entrenched the inequalities between rich and poor. The extractive economic model continued into the post-colonial era and was accelerated with the discovery of oil and the propagation of the oil sector. The concentration of amenities in urban areas continues. The structure of the economy is now such that most people (about 70%) are employed in the relatively unproductive agricultural sector, which accounts for only a third of national income.

There has also been a failure thus far on the part of government to institute redistributive policies. Part of the role of government is to ensure a level of equality in society. The most widely used systems of wealth redistribution are taxation, welfare and nationalization. The saga of state owned enterprises in Nigeria is a sad one; corruption and mismanagement have meant that nationalised industries instead of being redistributive have furthered society’s inequalities. The problem in Nigeria’s case has not been nationalization itself, but the way in which it has been done. When it comes to welfare in Nigeria there has been a mish-mash of government initiatives coupled with the work of religious, community and non-government organisations, however there remains no comprehensive welfare policy.

The Nigerian polity has consistently failed to develop a sustainable tax base within the nation. The government is over-reliant on oil revenue, with oil exports accounting for over 80% of Government revenue. Though there is an increasing awareness amongst State Governors of the importance of internally generated revenue (IGR), the failure to tax the average citizen and everyday businesses has countless ramifications both historically and for the future, but it is importance in the context of inequality. Revenue raised from taxation should be spent on providing the public goods and services such as education, healthcare etc that reduce the inequalities of opportunity that plague Nigeria. In addition to this a progressive tax system that tax higher earners more could also aid to balance inequality in all its forms. It is not enough to tax the population; the funds must then be used to improve the lot of the disadvantaged.

There are also more debateable things that may be at the root of the disparity in Nigeria. There is an argument to be made about the link between levels of democracy and levels of inequality, this makes intuitive sense and fits in with the facts as according to Freedom House’s ‘Freedom in the World Report 2010’, Nigeria is rated as ‘Partly Free’. There is also an increasingly popular argument that ethnic heterogeneity is causally related to inequality, again while the argument is contentious it does fit the facts of Nigeria which has over 250 distinct ethnic groups.

Finally, Inequalities of wealth and income perpetuate themselves and deepen inequalities of opportunity. The better off have better access to healthcare and education (both at home and abroad), they enjoy better job opportunities, easier access to financial markets, higher levels of justice and security, and more political access and participation. Through the process of wealth condensation, newly created wealth tends to concentrate in the possession of those who have the means to invest (the already wealthy). So without outside intervention, the market in an unequal society tends to worsen the problem of inequality.

The implications of Inequality

Firstly, inequality is undesirable in itself. Attached to the concept of true democracy is an egalitarian ideal and one of the duties of a democracy is to work towards this ideal. However, there are implications of high levels of inequality that pertain to the economic, political and social aspects of society.

The economic consequences are not entirely clear. There is a body of work that suggests that societal inequalities inspire greater innovation and ingenuity in the economy. On the other hand, the World institute for Development Economic Research argue that highly unequal societies (a Gini coefficient of 0.40 or greater) for a range of reasons s detrimental to economic growth. In a global context inequality amongst nations causes growth in better off countries at the expense of poorer countries.

From a political standpoint, the inequality of access to power is an important one. Politics in Nigeria is a rich man’s game, the system excludes representation of the less advantaged in the institutions of state. Less advantaged people also contribute less to political discourse and have little influence on political policy at all levels of government and even parties. The actual workings of power are the domain of an elite few who have the means to participate, this is at the root of bad governance and the demise of true democracy. The disparity of wealth means that the political class is able to manipulate the political process through legal and illegal means.

The greatest impact of inequality is on the social level. Inequality has its major effect on social cohesion. In unequal societies people are less likely to trust each other. This is a serious problem in a relative young country which has lived through a civil war, it means that economic problems are easily framed as regional, religious or ethnic problems. The term social capital is one often brandished around but is somewhat difficult to define; broadly speaking it is the value of the social networks of society. This value is evident in participation in public and communal organizations, engagement with public officials, adherence to legal and social duties and other forms of social participation. Inequality reduces social capital and as such has negative effects on everything from the effectiveness of education to the development of civil societies.

Inequality is also a cause of crime and this is of particular importance in Nigeria, with the problems of theft, armed robbery, internet scams and the plague of ‘area boys’ amongst others a constant concern amongst the citizenry. Inequality also opens the door for white collar crime. Those with the means are able to take advantage of those without as is evident in the continuing banking sector scandals. The low pay of many relative to a few fuels low level corruption, this manifests itself in a corrupt and inept civil service and security force which in turn results in poor delivery of public services. Such levels of corruption, for which Nigeria is famous worldwide, affect the country the economic performance of the country and the credibility of the political structure.

Inequality is a difficult topic to discuss, let alone to solve. The people in a position to talk about it and act on it are predominantly those that benefit most from the status quo. There therefore has to be a general national consensus that attacking the problem of inequality is fundamental to improving the current condition and the future prospects of Nigeria as a whole.