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afrol News, 25 July - A new study shows why potentially rich Nigeria missed its chance during the oil boom to wipe out poverty. A large number of "policy distortions" include corruption, military regimes and low investment in health and education, which has ended up in low welfare for the majority of the 130 million Nigerians. A recently published working paper by the International Monetary Fund (IMF), titled 'Poverty in a Wealthy Economy: The Case of Nigeria', seeks the explanation behind the failure of reducing poverty in Nigeria between 1985 and 1992. Editors Saji Thomas and Sudharshan Canagarajah highlight the potential wealth of oil-rich Nigeria and examine how the economic policies of the 1980s and 1990s impacted economic growth and welfare. The headcount measure of poverty in Nigeria declined from 43 to 34 percent between 1985 and 1992, but has since that increased again. Nigeria was "endowed with land, oil and natural resources, but a substantial portion of its population remains very poor because of ins failure to manage its wealth effectively," Thomas and Canagarajah write. The paper concludes that "Nigeria, with its vast physical and human resources," has been "much better placed than many other African nations" to address the problem of fighting poverty. However, "due to various policy distortions which have characterised its economic history, Nigeria has been crippled in its efforts to effectively address poverty." - Nigeria's oil wealth has not been wisely invested to provide a sustainable stream of benefits to the poor, Thomas and Canagarajah write. "Sharp decline in education and health services, coupled with drastic reduction in capital and recurrent expenditures have resulted in a decline in the quality of services. This has had a negative impact on human development and welfare." Thomas and Canagarajah remind that an earlier World Bank study had concluded that, in order to significantly reduce poverty in Nigeria, an annual per capita growth of 5 percent would be required. They hold that, to achieve this, Nigeria needs to implement a so-called poverty reduction strategy, which is among the standard IMF recipes of macro-economic reform. Such a recommended poverty reduction strategy includes "a combination of policies that support macro-economic stability, removal of price distortions, a more open trade regime, more efficient investments and improved private sector access to resources, services and markets." Secondly, the "distributional patterns" had to be improves, "increasing the poor's access to quality services, particularly health and education," Thomas and Canagarajah conclude. These macro-economic reforms aimed at poverty reduction were however rejected by Nigeria earlier this year, when the government terminated its cooperation with the IMF. The Nigerian held that the standard IMF recipes were not sufficiently adapted to local circumstances and put too much emphasis on macro-economic reform. Nigeria instead opted to promote home industry by creating new trade barriers and promoting investments. Sources: Based on IMF and afrol archives
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