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Poverty – the role of government and its agencies (5)

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In the course of some weeks I have been examining the issue of poverty and how the gap between the rich and the poor continues to widen with the passing of each day. I traced the start of the current problems to the over dependence on oil revenue and the failure of successive governments to diversify the revenue base of the economy.

I particularly identified the abandonment of agriculture which in the years after independence provided much needed revenue to the regions which existed at that time as a major disaster and advocated a return to agriculture by all the tiers of governments as a means of bringing about economic development. This week in continuation, I intend to highlight how certain government policies continue and will continue to stifle any effort geared towards the reduction of poverty in the land.

In this respect, it is pertinent to note that poverty largely results from lack of opportunities of means or measures which would give to the individual a chance at economic sustenance. Writing on the subject, Rachel Cannon of the Borgen Project stated as follows:

There are many causes of poverty. The countries with extreme poverty have a lack of access to not only the proper foods, but health services and education as well. These countries also show a lack of inclusion, as many of the world’s poorest people do not receive any representation in the economy or in politics. The lack of education and representation creates an issue of mobility. People in developing countries do not possess the necessary means for maintaining life.

One factor that causes poverty is that many people in developing countries are willing to work, but are not given the chance to do so and therefore remain in poverty. The lack of access to education and the jobs that supply little or no wages continue to make rising from poverty very difficult to achieve. This restricts access to an income to support families and creates a barrier from the economy and other typical daily activities.

The lack of education and training for employment inhibits people living in developing nations from obtaining higher paying occupations. The problem is even greater when health education services are not obtainable. This causes high rates of teenage pregnancy and larger families. The larger the families become, the greater the risk of poverty because of the increased amount of resources needed to take care of the household.

The deprivation described above could take the form of lack of employment opportunities or under-employment and / or a lack of adequate wages or non-payment of wages. This is why, as I wrote two weeks back, non-payment of salaries by several states is contributing greatly to the entrenchment of poverty amongst civil servants, some of whom have not been paid for months on end. Poverty also arises from lack of capital or funds to start any business. Among the poor in Nigeria, most actually want to work but lack the capital to start businesses. Economic, monetary and banking policies put in place by successive governments have made it difficult if not outrightly impossible for businesses to thrive.

One of such policies is the government policy on importation of foreign goods. Multi-nationals and some top Nigerians are favoured in the importation of manufacturing equipment. Some obtain waivers for goods imported while the poor or budding entrepreneurs who are in dire need of such concessions to grow their businesses do not enjoy such privileges. The tariff imposed on goods for education and health equipment do not help education and health sector. For instance, PROJECT CURE of USA, and other philanthropists sent health and education equipment free of charge to ABUAD, to aide the take off of its newly built Multi-Systems Hospital. However the custom duties charged on the goods were higher than the value of the said goods donated free by overseas philanthropists. Similarly, some industrialists came from India to install sensitive imported equipments in the same Hospital. The Indians came with some tools to be used in installing the equipment, the customs charged money for the personal equipment after delaying them for hours. Aside from the healthcare benefits of the hospital to the immediate locality and the nation in general, many Nigerians would be employed in its day to day to day operations. This is therefore a classic example of how policies can affect attempts at combating poverty. The custom duties imposed on manufacturing equipments by young entrepreneurs is probative and does not encourage people from starting business.

Another example that comes to mind, is the increase in the duty payable on imported vehicles. Adopted as part of a new automotive policy aimed at stimulating the local production of vehicles, government increased the duties by over 100% in some instances. However without a commensurate provision of necessary infrastructure to back up the policy, the increment has proven to be a source of economic hardship. It has taken the cost of even an imported used vehicle out of the reach of average Nigerians while new one have become no go areas. The effect on the transport sector has been profound. It has also brought about loss of jobs.


CBN policies do not encourage small, medium and large scale businesses. They are killing home grown industries. Importation of foreign goods make it difficult for small and medium scale Industries in Nigeria to survive. In developed countries, interest on loans hardly exceed 5% as it is recognised that low interests on loans helps to grow businesses. The position in Nigeria is however different. With interests rates as high as 27% how will the economy ever grow? This discourages most honest entrepreneurs and on the contrary serves only the interests of unscrupulous ones and their banker friends who will obtain loans and divert them towards the acquisition and sustenance of ostentatious lifestyles. I have often asked why the CBN prescribes such prohibitive interests on loans and the answer I have often received is that there is too much money in circulation and the excess liquidity needs to be mopped up to prevent inflation. However, the reality of the matter is that the so called excess money is in the hands of the few supper rich who constitute less than 1% of the population.

If poverty is to be curtailed, the policies of government and its agencies outlined above have to be addressed. Government, must in the words of Bibek Debroy remove distortions put in place by or aided by its own policies. He stated that:

“…Let me first clarify, people aren’t voluntarily poor. People are poor because they don’t have opportunities. Those opportunities may be in the form of physical infrastructure, may be in the form of social infrastructure, may be in the form of technology or may be in the form of markets. So, the best way of addressing poverty is to remove these distortions.”

Next week we shall consider the impact of the Constitution on poverty in Nigeria.

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