tag:theconversation.com,2011:/institutions/scottish-institute-for-research-in-economics-3696/articlesScottish Institute for Research in Economics2019-10-28T14:57:24Ztag:theconversation.com,2011:article/1253662019-10-28T14:57:24Z2019-10-28T14:57:24ZAfrican countries are behind on progress towards poverty reduction goals<figure><img src="https://images.theconversation.com/files/298096/original/file-20191022-117981-ggwaej.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">African countries have an opportunity to reduce poverty with new policies</span> <span class="attribution"><span class="source">Wikimedia Commons</span></span></figcaption></figure><p>In their annual meeting at the United Nations in 2005, world leaders agreed on a common economic <a href="http://mdgs.un.org/unsd/mdg/Host.aspx?Content=Indicators/OfficialList.htm">agenda</a>. This was to halve – between 1990 and 2015 – the proportion of the world’s population living on less than one dollar a day. It’s been nearly 15 years since this resolution. </p>
<p>The world has certainly seen economic progress but it is not even. And countries in Africa lag behind the global average.</p>
<p><a href="https://www.credit-suisse.com/corporate/en/research/research-institute/global-wealth-report.html">Global wealth</a> has more than doubled from US$170 trillion in 2000 to $360 trillion in 2019. Global wealth per adult is at a record high of $70,850. </p>
<p>Mean wealth per adult in Africa is $6,488. In Mozambique it is as low as $352.</p>
<p>The proportion of the world’s people living on less than two dollars a day (an updated measure of extreme poverty) has more than <a href="https://ourworldindata.org/grapher/poverty-decline-without-china?time=1981..2015">halved</a> from 35.9% in 1990 to 10% in 2015. But in sub-Saharan Africa the figure still stands at 41%, according to the <a href="https://www.worldbank.org/en/news/press-release/2018/09/19/decline-of-global-extreme-poverty-continues-but-has-slowed-world-bank">World Bank</a>. The bank <a href="https://www.worldbank.org/en/publication/poverty-and-shared-prosperity">estimates</a> that 87% of the world’s poorest people will live in the region by 2030 if the trends continue.</p>
<p>Life expectancy has been <a href="https://data.worldbank.org/indicator/SP.DYN.LE00.IN">growing</a> by 16 weeks a year so that those born today are likely to live 20 years longer than a child born in 1960. In Africa, average life expectancy remained at a level that the rest of the world passed in 1974 and is <a href="https://data.worldbank.org/indicator/SP.DYN.LE00.IN?locations=ZG">rising</a> at a snail’s pace. </p>
<p>The continent still <a href="https://www.bbc.com/news/world-africa-48674909">pays</a> up to 30 times more than the rest of the world for generic medicine, despite a world-wide <a href="https://www.marketwatch.com/story/prescription-drug-prices-arent-rising-theyre-falling-for-the-first-time-in-47-years-2019-03-12">decline</a> in drug prices. And energy prices in Africa are more than three times <a href="https://www.cnn.com/2018/10/18/perspectives/africa-affordable-electricity/index.html">higher</a> than in the United States. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/297634/original/file-20191018-56198-1ua5b0m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/297634/original/file-20191018-56198-1ua5b0m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=436&fit=crop&dpr=1 600w, https://images.theconversation.com/files/297634/original/file-20191018-56198-1ua5b0m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=436&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/297634/original/file-20191018-56198-1ua5b0m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=436&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/297634/original/file-20191018-56198-1ua5b0m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=548&fit=crop&dpr=1 754w, https://images.theconversation.com/files/297634/original/file-20191018-56198-1ua5b0m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=548&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/297634/original/file-20191018-56198-1ua5b0m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=548&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Graph global poverty rate, 1981 - 2015.</span>
<span class="attribution"><span class="source">Our World in Data</span></span>
</figcaption>
</figure>
<p>African countries have missed important opportunities in the past two decades that could have ensured these graphs looked different.</p>
<h2>Interlocking problems: debt and aid</h2>
<p>In 2004 UK Prime Minister Tony Blair <a href="http://www.commissionforafrica.info/wp-content/uploads/2005-report/11-03-05_cr_report.pdf">initiated</a> the Commission for Africa, to “carefully study all the evidence available to find out what is working and what is not.” </p>
<p>The Commission’s main findings were:</p>
<blockquote>
<p>The problems… are interlocking. They are vicious circles which reinforce one another. …Africa will never break out of the deadlock with piecemeal solutions and policy incoherence. They must be tackled together. To do that Africa requires a comprehensive ‘big push’ on many fronts at once; which requires a partnership between Africa and the developed world…. Africa is very unlikely to achieve the rapid growth in finance and human development necessary to halt or reverse its relative decline without a strong expansion in aid.</p>
</blockquote>
<p>Blair then called for two simultaneous actions: <a href="https://www.theguardian.com/world/2005/jun/07/hearafrica05.development">forgiving</a> the continent’s debt, and doubling development assistance. This call was partly heeded. </p>
<p><a href="https://www.un.org/africarenewal/magazine/october-2005/industrial-countries-write-africas-debt">Fourteen</a> African countries <a href="https://www.theguardian.com/politics/2005/jun/11/uk.g8">benefited</a> from the 2005 multilateral debt relief initiative. That relief <a href="https://www.theguardian.com/politics/2005/jul/01/uk.g8">saved</a> Nigeria – the region’s largest economy – $31 billion. A host of other countries benefited too, <a href="http://siteresources.worldbank.org/INTDEBTDEPT/Resources/mdri_eng.pdf">ranging</a> from Benin ($690 million) to Ghana ($2.938 billion).</p>
<p>But these countries didn’t make the most of the relief they’d been given. <a href="https://www.cgdev.org/blog/chart-of-the-week-new-african-debt-crisis">Debt</a> in many African countries is on the rise again. What’s more concerning is that debt isn’t being incurred for useful purposes, such as plugging the infrastructure gap. Instead, according to an IMF <a href="https://www.imf.org/en/Publications/Policy-Papers/Issues/2018/03/22/pp021518macroeconomic-developments-and-prospects-in-lidcs">report</a>, the rise is being driven by corruption and mismanagement.</p>
<p>As for aid, since 2005 the flow to Africa has risen by 50%, reaching $49.27 billion in 2017. African countries <a href="https://data.worldbank.org/indicator/DT.ODA.ODAT.CD?locations=ZG">received</a> more than half a trillion dollars ($0.62 trillion) in aid in the decade and a half after Blair’s appeal.</p>
<p>However, the continent now <a href="https://data.worldbank.org/indicator/DT.ODA.ODAT.CD?locations=ZG">gets</a> less donor aid per recipient than most regions in the world: an average of 14 cents per person per day. This is because its rapidly <a href="https://www.prb.org/2018-world-population-data-sheet-with-focus-on-changing-age-structures/">rising</a> population size in recent decades is not being matched by the size of aid inflows.</p>
<p>Added to this is the fact that many African countries have failed to stem the flow of illicit money from the continent. An <a href="https://gfintegrity.org/wp-content/uploads/2014/05/gfi_afdb_iffs_and_the_problem_of_net_resource_transfers_from_africa_1980-2009-highres.pdf">estimated</a> $30.4 billion was transferred from African countries between 2000 to 2009.</p>
<p>Such outflows strip countries of desperately needed financial resources for investment in hospitals, schools and roads.</p>
<p>To stop this trend, Africa needs the help of advanced countries, because some of these countries have been and still serve as havens for illicit funds originating from repressive African regimes and despots. </p>
<p>In “Overcoming the Shadow Economy,” Joseph Stiglitz and Mark Pieth forcefully <a href="https://www8.gsb.columbia.edu/faculty/jstiglitz/sites/jstiglitz/files/Overcoming%20the%20Shadow%20Economy.pdf">argue</a>:</p>
<blockquote>
<p>In a globalised world, if there is any pocket of secrecy, funds will flow through that pocket. That is why the system of transparency has to be global. The US and EU are key in tipping the balance toward transparency, but this will only be the starting point: each country must play its role as a global citizen in order to shut down the shadow economy—and it is especially important that there emerge from the current secrecy havens some leaders to demonstrate that there are alternative models for growth and development.</p>
</blockquote><img src="https://counter.theconversation.com/content/125366/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Zuhumnan Dapel does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>If trends continue, 87% of the world’s poorest people will live in sub-Saharan Africa by 2030.Zuhumnan Dapel, Consultant @ODIdev. Priors: IDRC Fellow at the Center for Global Development; Public Policy Fellow, Woodrow Wilson Center Washington DC. Twitter: @dapelzg, Scottish Institute for Research in EconomicsLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1038642018-10-22T14:26:57Z2018-10-22T14:26:57ZSnap shot pictures of poverty in Nigeria aren’t accurate. Here’s the real deal<figure><img src="https://images.theconversation.com/files/241246/original/file-20181018-67161-q6ladm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Ajegunle City, Lagos State Nigeria in 2018: Busy streets bustling with commercial activity.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Studies that reflect the movement of poverty levels at a particular point-in-time attract a lot of attention. They also inform academic and policy debates across the globe. In Africa, where poverty levels remain high, these snapshots of poverty levels are a big deal.</p>
<p>Grand new narratives emerge from snapshots of poverty levels. For example, the Africa Rising <a href="https://theconversation.com/the-africa-rising-story-was-based-on-faulty-logic-heres-how-to-fix-it-86327">narrative</a> was largely made on the back of numbers that reflected a massive wave of poverty reduction across the continent. Another is that Nigeria recorded remarkable success in its fight against poverty <a href="https://www.bbc.com/news/world-africa-17015873">between 1996 and 2004</a>. This is based on claims that the percentage of those living on less than $1.25 per day declined by 27.63% during this period. This would mean that about 27.13 million Nigerians escaped poverty. </p>
<p>While these snapshots can be useful, they are fundamentally insufficient and can be misleading. Our <a href="https://www.cgdev.org/publication/three-decades-poverty-mobility-nigeria-trapped-freed-and-never-trapped">study</a> of poverty numbers in Nigeria shows how unreliable the numbers are.</p>
<p>We took a different approach, one that’s been gaining traction in recent years – the study of the mobility of poverty, or the movement of people in and out of poverty over time. </p>
<p>It provides a much richer and nuanced understanding of poverty because it challenges the conventional view of “the poor” as a homogeneous and essentially static population. </p>
<p>Applying this approach, our study on poverty mobility in Nigeria found that between 1980 and 2010 there are more people falling into poverty than escaping it. And based on a related <a href="https://www.cgdev.org/publication/will-poor-nigeria-escape-poverty-their-lifetime">study</a>, about 72%-91% of Nigeria’s poor are at risk of spending their entire life below the poverty line. </p>
<p>The study also reveals useful nuances that can’t be realised from conventional approaches. For example, we found that chronic poverty (that is, being trapped in poverty) is less prevalent in Nigeria’s oil producing region and more prevalent in the country’s northeast. And we found that years of schooling has the strongest negative impact on chronic poverty – 74% of those never trapped in poverty have more than a high school level of education.</p>
<p>These critical nuances are important to understand if Nigeria – and other countries – are going to successfully launch an aggressive war on poverty. </p>
<h2>Underestimating the problem</h2>
<p>Our paper explored six sweeps of household surveys of Nigeria (1980–2010). The paper shows that a conventional measure of poverty tends to understate the actual number of people in poverty over a course of time. This is because it is unable to provide information on individual poverty experiences across time.</p>
<p>For instance, the study established that although the poverty rate in 2004 was 58%, around 85% of the population (made up of the trapped, the freed and those that moved into the poverty) had experienced poverty between 1996 and 2004. This means only 15% had never experienced poverty. </p>
<p>The majority of those who have never experienced poverty were schooled, lived in urban areas, and were found in the top 10% of the income distribution.</p>
<p>From this base we found that between 1980 and 1985, about 0.11% to 9.5% of the population escaped poverty, but at the same time, many more – 21.94% to 32.27% – moved into poverty. And the evidence we collected suggests that both transient and chronic poverty were higher between 1996 and 2010 than between 1980 and 1992. But transient poverty rose faster as the share of chronic poverty in total poverty declined to 55% from about 90%.</p>
<p>We also established that chronic poverty is less prevalent in Nigeria’s oil producing region and more prevalent in the country’s northeast and that 81% of those trapped in poverty <a href="https://www.cgdev.org/blog/poverty-nigeria-understanding-and-bridging-divide-between-north-and-south">were from the north</a>. </p>
<p>We found that poverty increased with household size. Having more children by poor families reduces their chances of escaping poverty because bigger households make a dent on their incomes. </p>
<p>We also found that 81% of those trapped in poverty were farmers.</p>
<h2>How to fix the problem</h2>
<p>Chronic poverty is also significantly determined by factors ranging from household size, to age, level of education, location and gender. Transient poverty is less affected by these kinds of household demographics. Rather, it’s linked to the ability to access safety nets such as social insurance or to be able to access funds through borrowing. </p>
<p>It is clear from our numbers that governments need to invest more in better schooling. This can help break the cycle of chronic poverty prevalent in Nigeria’s northern region.</p>
<p>This calls for government to put some effort into providing safety nets that makes households less vulnerable. And that institutions are developed that can cater for low-income households in a way that enables them to protect themselves against economy-wide shocks. One example is recession.</p>
<p>This goes to say governments must tailor policy interventions in the way that speaks to how people actually experience poverty, whether transiently or chronically. </p>
<p>Nigeria recently launched an <a href="https://www.vanguardngr.com/2017/01/presidency-begins-payment-n5000-monthly-stipend-poor-nigerians-9-states/">initiative </a>in its fight against poverty that illustrates perfectly how policies are designed that <em>don’t</em> do this. The government is running a cash transfer programme of 5,000 naira (US$13.76) per month per household. </p>
<p>This won’t deliver relief (or barely scratches the surface) for two reasons: firstly, only less than 1% of poor people are benefiting. And secondly, the amount isn’t enough to boost the welfare of the poor in an economy currently experiencing inflation.</p><img src="https://counter.theconversation.com/content/103864/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Zuhumnan Dapel does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A study of the mobility of poverty, or the movement of people in and out of poverty over time, provides a much more accurate picture.Zuhumnan Dapel, Priors: IDRC Fellow at the Center for Global Development; Public Policy Fellow, Woodrow Wilson Center, Scottish Institute for Research in EconomicsLicensed as Creative Commons – attribution, no derivatives.