volume 18 no 1 2020... · 2020. 11. 2. · twin crisis of health shocks and pandemic-induced...

ADVANCINGNIGERIA’SINCLUSIVEGROWTHEDITION

Volume18No1

ListofArticles MacroeconomicOutlookUpdatefor2020:COVID–19,GlobalOilPriceandtheNigerianEconomyNESGResearch04Industrialization:ARoadmaptoInclusiveGrowthinNigeriaJosephO.AfolabiandJoshuaA.Ogunjimi20 InclusiveSectoralFinancingforSustainableEconomicGrowthIbukunoluwaAwotunde29 AchievingSustainableDevelopmentGoal8-DecentWorkandInclusiveEconomicGrowth:APreliminaryAnalysisofNigeria'sPerformanceJustineT.NwanakwereandFidelisO.Ogwumike40EconomicGrowth,UnemploymentandPovertyinNigeriaRisikatOladoyinS.Dauda,Ph.D.49 GrowthandPovertyDynamicsinNigeria:EvidencefromPanelSurveyChinasaIkeluandOnyukwuE.Onyukwu57

TowardsanInclusiveGrowthFramework:CriticalIssuesandNigeria'sContextMartinsIyoboyi,Ph.D.70IndustrialClustersinNigeria:Wakingthe'SleepingGiant'forGrowthandJobCreationNESGPolicyBrief76

2ECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020

Introduction-ReviewoftheGlobalEconomy

MacroeconomicOutlookUpdatefor2020:COVID–19,GlobalOilPriceandtheNigerianEconomyNESGRESEARCHAbstractTheglobaleconomystartedtheyear2020withhopesofgraduallyreducingtradetensionsreflectedbyapartialtradedealreachedbytheUnitedStatesandChina.TheIMFearlierprojectedthatglobalGDPwouldexpandby3.3%initsWorldEconomicOutlookfor2020releasedinJanuary.Meanwhile,theworldwascaughtunawaresbythesuddenoutbreakofCOVID-19inWuhanCityofChinaanditsrapidspreadtotherestoftheworld.Againstthehuge economic damage brought about by the viral infection, the IMF's revised growthforecastsshowedthattheglobaleconomywouldcontractsharplyby-4.4%in2020.TheFundalsodowngradeditsgrowthprojectionsformajoradvancedeconomiesandemergingmarketstonegativeterritory.Consequently,theNigerianeconomywashardlyhitbythetwin crisis of health shocks andpandemic-induceddecline in crudeoil prices. The IMFexpectstheeconomytocontractby-4.3%in2020.Inthisarticle,wepresentareviewoftheglobal economy as well as the Nigerian economy in the wake of COVID-19 pandemic.Specifically,werevisedourgrowthprojectionsfortheNigerianeconomyin2020.Inourworstscenario,weestimatedthattheeconomywillcontractby-7.3%in2020.The outbreak of COVID–19 in Chinadampeneditseconomicoutlookfortheyear2020. Efforts to contain the spreadof thevirus has led to widespread movementrestrictions and shutdown of industrialactivities. The effect is evident in China'sManufacturingPurchasingManagers'Index(PMI),whichslippedintonegativeterritoryat35.7pointsinFebruary2020.Thisimpliesthe growth figure that will emanate fromChina will significantly contract andtherefore affect the global economy. Theregimentedmovement of humans due tofearofcontagionandtheinabilitytosecurevaccine continue to dampen economicactivities.Forthefirsttimesince1992,theeconomy of China recorded negativegrowthinQ1'2020at-6.8%downfrom6.4%

inthecorrespondingperiodof2019and6%the previous quarter (Q4'2019). However,China is no longer the main concernregardingCOVID-19.Inthelastfewmonths,theUnitedStates(US)andsomecountriesinEuropehaverecordedahighernumberofconfirmedcasesanddeaths.Mostofthesecountries have implemented movementrestrictions, lockdowns, among othermeasures,tocontainthespreadofthevirus.Thesemeasureswillhurtglobaleconomicgrowthin2020.AdvancedeconomiesledbytheUnitedStateswillbelargelyresponsiblefor the significant decline in global GrossDomesticProduct(GDP)in2020asaresulto f t h e COV I D - 1 9 p a n d em i c . T h eInternat ional Monetary Fund ( IMF)projected global GDP to decline by 4.9%,4ECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020

with countries such as the United States,Germany, United Kingdom and Italyrecordingsignificantoutputdeclineof8%,7.8%,10.2%and12.8%,respectivelyin2020.In Q1'2020, the US has posted a GDPcontractionof-4.8percentrelativeto3.1%in the same period last year and 2.1% inQ4'2019.Likewise,theEuropeanUnion(EU)hasreportedslightlylowercontractionof-2.7%,comparedwitheconomicexpansionsat1.7%and1.3%inQ1'2019andQ4'2019respectively.Meanwhile,emergingmarketscontinuetofeel theheat of the global pandemic. Theeconomies of emerging markets anddevelopingcountriesexpandedby3.7%in2019,muchhigherthantheglobalgrowthof2.9%.Growthwas largely driven by Chinaand India, which recorded significantexpansionsat6.1%and4.2%,respectively,in 2019. With the outbreak of the virus,economic activities in emerging anddeveloping countries have been subdueddue to lockdowns,movement restrictions,lower foreign investment inflows anddecliningcommodityprices,forthosethatrelyoncommoditiesexports.Subsequently,the IMF downgraded growth outlook foremerginganddevelopingcountriesto-3%in2020, fromanearlierprojectionof -2%.Countries such as Nigeria, South Africa,Brazil,MexicoandRussiaareprojected torecord negative growth rates in the year2020.Themanifestationoftheimpactofthepandemic is evident in the commoditymarket.Beingthesecondlargesteconomyand consumer in theworld, an economicslowdown in China means a significant

NigerianEconomyinChallengingTimesTheeconomyisexpectedtocontractin2020

decline in the demand for commodities.Particularly,theoilmarkethasbeenbadlyhit.WTIandBrentoilpricesplummetedby35.8%and37%toUS$40.8andUS$41.2perbarrel,respectivelyonJune30,2020,fromtheirlevelsinthebeginningoftheyear.Theoutbreakofthecoronaviruspandemicwith itsattendant restrictiononeconomicactivities and severe impact on the oilmarketissettoreverseNigeria'sgrowthof2.3%achieved in2019.Already inthefirstquarterof2020,theeffectofthepandemicandtheslumpincrudeoilpriceisevidentonNigeria'sPurchasingManagers'Index(PMI),which tracks the performance of thebusiness aspect of the economy. TheManufacturing PMI fell further to 41.1points in June2020,afterslippingintothenegativeregioninthepreviousmonthfromanexpansionof51.1pointsinMarch2020.Ontheotherhand,thenon-manufacturingsector contracted as its PMI slid to 35.7points in June 2020 from 49.2 pointsrecorded in March 2020. This suggests aweaker growth in the second quarter of2020. As expected, the Nigeria economycontracted sharply by 6.1% in the secondquarter of 2020 relative to the reportedeconomic expansion of 1.9% in the firstquarter of 2020. The lockdown of severalstatesandtheFederalCapitalTerritory(FCT)inthesecondquarteroftheyearwillhavean immense negative impact on GDPgrowth in the year. The threemajor GDPcomponents - household consumption,governmentspending,privateinvestment-

MacroeconomicOutlookUpdatefor2020:COVID–19,GlobalOilPriceandtheNigerianEconomy


TheoutcomeshowedthatGDPwilldeclineby 1.9%; Inflation wi l l r ise to 15%;Government revenue will decline by 25%;

The underlying assumptions includemovementsincrudeoilprice,governmentcapital spending and oil productionvolumes.Ourworst-casescenarioassumedan average crude oil price at US$44 perbarrelin2020;averagecrudeoilproductionof 1.5 million barrels per day and capitalspendingofN1trillioninthe2020budget.

were constrained during the lockdowninducedby thespreadofcoronavirusandare expected to perform poorly in 2020relativetothepreviousyear.Thisisbasedon the high level of uncertainty over thepandemic, as well as, the fragility of theeconomy exempl ified by the poorperformance of major macroeconomicindicators. In the NESG macroeconomicoutlook report released in January 2020,three scenarios were projected for theNigerianeconomyinthefullyear2020.

MacroeconomicOutlookUpdatefor2020:COVID–19,GlobalOilPriceandtheNigerianEconomyExchange ratewill reachN400/US$1whilet h e u n e m p l o y m e n t r a t e a n dunderemploymentratewillincreaseto52%in 2020.With the COVID-19 outbreak andrestrictions of movement and economicactivities across certain sectors, theNigerianeconomywillbeseverelyaffectedin2020.Thismeansthatournewworst-casescenario will capture more pessimisticexpectationsaboutthemovementsincrudeoilpriceandoutputmostespecially.Severalindustry estimates have shown thatNigeria'sGDPwouldcontractsignificantlyin2020(SeeTable1).MajoreconomicsectorswillfeeltheimpactofCOVID-19From a sectoral perspective and prior toCOVID-19 outbreak, the economy showedsignsoffragilityas10outofthe46activitysectorscontractedin2019whileabout16ofthe46sectorsrecordedgrowthoflessthan2%intheyear.Lookingatthethreebroadsectors, Services remained the largestsector accounting for 52.6% of GDP.



The sector was a major contributor tooveralleconomicgrowthandhousedthreeofthetopfivefastestgrowingsectorsintheyear (See Figure 2). Growth in Agricultureintensifies–thesectorgrewby2.4%in2019,animprovementfrom2.1%inthepreviousyear with growth led by aquaculturefollowed by crop production. Adequaterainfall, which improved vegetation andcontinued support of the government tofarmers improved agricultural output in2019.Nigeria's hugemarket, improved oils e c t o r p e r f o rman c e , a s w e l l a s ,government's interventions were notenoughtotriggersignificantgrowthoftheindustrialsectorduringtheyear.Industrialactivities expanded by 2.3% with CoalMining; Water Supply, Sewage, WasteManagementandRemediation,andCrudePetroleumandNatural Gas playingmajorroles in the sector'sgrowthnarrative. Themanufacturing sector grew marginally by0.8% in FY'2019and continued to grapplew i t h t he pe renn i a l cha l l enges o finconsistentpolicies, infrastructuredeficit,poor electricity supply and lack of policydirection.ConsideringtheimpactofCOVID-19on global crudeoil price anddemand,Nigeria'soilsectorwillbethefirstandmainculpritasitisexpectedtodisplaynegativegrowth in the year. Lower oil prices andstaggering production are likely to persist

coupledwiththedirectimpactoflockdownand restrictions of economic activities insome sec to r s , w i l l re su l t i n poorperformanceofthenon-oilsectorin2020.

withnegative implicationsongovernmentfinances, other economic sectors andoverall economic growth. Drawing frompreviousexperiences,contractionintheoilsectoroftendragsoveralleconomicgrowth.Inseveralinstances,thecontractionintheoil sector had resulted in an overalleconomic recession in the early 1980s,1990sandin2016.However,therearealsoafewcaseswherecontractionintheoilsectordid not lead to a recession, and this waslargelyaresultoftheresilienceofthenon-oil sector and the adequacy of externalreserves. For instance, the oil sectorcontracted between 2006 and 2008, butgrowthinthenon-oilsectoraveraged11%and sustained the economy. Similarly,external reserves stood at US$50 billionduring the period. Unfortunately, non-oilsector growth in 2018and2019averaged2%showingweak resilience,withexternalreservescurrentlyat$36bn.Thesefactors,

FitchIMFMcKinsey(worst-casescenario)Dalberg(worst-casescenario)-1%-5.4%-8.8%-27%

Table1:GrowthProjectionsforNigeriain2020



Trade Balance declined in 2019 and wasnegativeinthelastquarteroftheyearIn our Macroeconomic Outlook ReportreleasedinJanuary2020,wehadnotedthedeclining trend of Nigeria's trade balancewhichstoodatN2.8trillionasatSeptember2019fromN5.4trillioninthepreviousyear.Withthereleaseoftradedataforthefourthquarterof2019,theoveralltradedeficitforfull-year 2019 fell further to N2.2 trillion.

Thiscontractionwaslargelyduetoadeclinein the value of crude oil exports and thenegative impact of Nigeria's land borderclosureonnon-oilexportswhichplungedby43.9%inthefourthquarterof2019.Also,inthequarter,Nigeria'stradebalanceslippedintoadeficitofN579billion($1.6billion)forthefirsttimesincethethirdquarterof2016.With theoutbreakof the coronavirus andlowercrudeoildemand,theexportofcrude


MacroeconomicOutlookUpdatefor2020:COVID–19,GlobalOilPriceandtheNigerianEconomyis expected to fall further in 2020. Asexperienced in 2016, the trade balance isexpectedtoplungeintoadeficitinFY'2020,with huge implications on governmentrevenue, export earnings and externalreserves.Foreign Investment inflow in 2019ou tpe r f o rmed 2018 bu t de c l i nedconsistentlyfromQ2'2019AtUS$24billion,foreigninvestmentinflowin 2019 was the highest Nigeria hasrecordedinover10years.Aswithpreviousyears,growthininvestmentinflowswasledbyForeignPortfolio Investments (FPI) and'Other Investments', which accounted for

68 .2% and 27 .9% of to ta l inflows ,respectively.Despitethesignificantincreasein investment inflows relative to previousyears, high level of uncertainty in theaftermath of the elections, delay inministerial appointments and weakinvestors'sentimentsresultedindeclinesin overall inflows from US$8.5 billion inQ1'2019 to US$5.8 billion in Q2'2019,US$5.4billioninQ3'2019andUS$3.8billioninQ4'2019.ForeigninvestmentinflowsforQ1'2020fellsharplyby31.2%to$5.9billionfrom $8.5 billion in the correspondingquarterof2019(Q1'2019).Theyear-on-yeardecline in investment inflows is the firstsince the last recession in 2016. Foreign


…andexternalreservestofacepressuresin2020Despitearelativelystableoilpricein2019,externalreservesfor2019stoodatUS$42.8billiondown fromUS$44.5billion in2018.The continued intervention of the CentralBankofNigeria(CBN)intheFXmarket,highdollardemandforimportsofservicesandgoods as well as external debt servicingobligationswerelargelyresponsibleforthefallingreservesduringtheyear.Cominginto2020, the outbreak of COVID-19 furtheramplifies the sliding trend in the reservespositionthroughtheoilpricetransmissionchannel.Giventhebleakoutlookforcrudeoilpriceandforeigninvestmentinflows,aswell as, an anticipated widening of tradedeficit, external reserves are expected tocomeunderintensepressurein2020goingforward. While we do not rule out thepossibility of a temporary rise in reservesdue to external borrowing, this increasewould,however,beoffsetbyweakoilandexportearningsin2020.


February2020.Theheadlineinflationstoodata25-monthhighof12.4%inJune2020,the inflation rate pointed at 12.3%.InflationratecontinuestoamplifyastheeffectofCOVID-19comestoplaySince the implementation of the borderclosure policy, the inflation rate has risensharplyfrom11%inAugust2019to12%in

investment inflows into Nigeria wouldexperience a significant decline in 2020given the fall in crude oil price, externalreserves and uncertainty caused by thesudden outbreak and rapid spread ofCOVID-19acrossworldeconomies.Foreign Direct Investment (FDI) Inflowcontinuedtoperformpoorly…Nigeria'srecenthistoryonFDIhasnotbeenimpressive and the year 2019 was nodifferent.FDIin2019andQ1'2020stoodatUS$934 million and US$214 million,respectively, representingonly4%of totalinvestmentinflowsintothecountryduringboth periods. Nigeria's FDI inflows haveconsistentlyremainedaroundUS$1billionin the last four years, a meagre amountwhen compared with that of similardeveloping countries. FDI inflows, mostespecially cross-border investments, areexpectedtofallsignificantlyin2020duetohuge disruptions to global supply chainarisingfromCOVID-19crisis.



Nigeria'sfiscalpositionisbeingchallengedasoilandnon-oilrevenueprojectionsinthe2020 Budget are likely not to be met.Consequently, the 2020 Budget is beingreviseddownwardswithanapprovedcrudeoilpricebenchmarkofUS$25perbarrelandanestimatedcrudeoiloutputof1.7millionbarrels per day (mbpd). In a revised 2020Budget proposal sent to the NationalAssembly, the federal government budgethasbeenreviseddownwardfromNGN10.6trillion to NGN10.3 trillion, representing a2.8%decline.Thistranslatestoareductionin expenditure components: capital

Theoutbreakofcoronavirusandoilpriceslumpaggravatetheshrinkageoffiscalspace expenditurewasslashedfromN2.8trillionto N2.6 tri l l ion, non-debt recurrentexpenditurewasloweredby0.7%toNGN4.5billion. Going deep into the year 2020,effortsmustbegearedtowardsprioritizingcapitalexpendituresduetoitssignificancei n s t i m u l a t i n g g r ow t h t h r o u g hinfrastructure delivery. Similarly, therevenue projection for 2020 was reviseddownwards from N8.4 trillion to N5.1trillion.Projectedoilrevenuewitnessedthebiggestcutby90%toN254.3billionwhiletheexpectednon-oilrevenuewasreducedfrom N1.8 t r i l l ion to N1.5 t r i l l ion.Consequently, the overall budget deficitwidenedby57.6%fromN2.2trilliontoN5.2trillion.

heightened inflationary pressures on theeconomy. Value chain d isrupt ions ,exchange rate depreciation along withstructural issues such as poor electricitysupply, infrastructure deficit will trigger arisinginflationrateinsubsequentmonths.Foodinflationwasamajordriverofoverallinflation,risingto15%inMarchfrom14.7%in December 2019 . A longs ide theinflationary impact of the border closure,the outbreak of COVID-19 has further


With declining revenue, Nigeria's debtpos i t i on w i l l be worsened as thegovernment is set to embark onmassiveborrowing of over N4.43 trillion. Nigeria'stotal public debt, which stood at N28.6


trillion as at March 2020 is expected tocontinue its upward trend in 2020 goingforward. Ultimately, debt servicing as ashare of revenue is expected to increasesignificantly.


MacroeconomicOutlookUpdatefor2020:COVID–19,GlobalOilPriceandtheNigerianEconomyCOVID-19:QuantifyingtheSufficiencyofGovernmentResponseGovernments around the world haveadopted various measures to curtail thespread of the virus and address theassociated negative socio-economicimpacts.Althoughidenticalapproachesandcontainment measures (non-economic)havebeendeployed,rangingfrommobilityrestrictions,socialdistancingamongothers,the economic responses with regards tofiscal,monetary,exchangerateandmacro-financialpoliciesandtheirmagnitudesvarysignificantly. While Japan has announcedstimuluspackagesworth20%ofitsGDP,thevalue of other selected countries policystimulusamountsto5%ofnationalGDP,onaverage(SeeFigure11).Announced interventions in Nigeria isestimatedatN4.5trillion(3.1%ofGDP)In N iger ia , the monetary va lue ofannounced interventions to contain thespreadofthevirusandcushionitseffectson

key sectors and households has totalledN4.5trillion (US$11.2billion), representing3.1% of the overall GDP. This consists ofintervent ions f rom the CBN, fisca lauthoritiesanddonations.Nevertheless,NigeriarequiresN10.1trillion(7% of GDP) worth of interventions toameliorate the devastating impact ofcoronavirus on the economy. For a low-middleincomecountry likeNigeria,withaslowandfragileeconomicgrowth,over100million individuals living in poverty, and ahigh unemployment/underemploymentrateat43.3%,weestimate that combinedgovernment interventions should amountto 7%ofGDP. This represents a financinggap of N5.6 trillion (US$14 billion). Theimportance of closing this funding gapcannotbeoveremphasized,consideringthelevelofdecayinthecountry'shealthsector,coupled with the dominance of informalmicro,smallandmediumscalebusinessesin the economy, that are in dire need ofsupport.


Intheinitial2020Budget,fiscaldeficitstooda t N 2 . 1 t r i l l i o n r e p r e s e n t i n g1.4%ofGDP,wellbelowthestipulated3%inthe Fiscal Responsibility Act. However,following the downward revision of thebudgetwhichsawthereductionofcrudeoilbenchmark,weanticipateawideningofthebudget deficit. Meeting the additionalfinancingneedforCOVID-19responsewillrequireadjustingthefiscaldeficit,asashareofGDP,fromthestipulated3percentintheFiscalResponsibilityActto5%.Fundingthegap:whatoption?Asearlier indicated,Nigerianeedsat leastN10.1 trillion worth of interventions. OurcurrentinterventioncapacitystandsatN4.5trillion.ToamelioratetheimpactofCOVID-19 and oil price decline on the economy,Nigeria needs to close the gap. So, thequestion is how do we fund the gap?Unfortunately,Nigeriaisfacedwiththedualproblem of declining revenue and theabsenceofadequatesavingseither in theformofexternalreservesorfiscalbufferstofinance such a huge gap. This leavespolicymakers with the option to borrowdomesticallyor frommultilateral agenciesandembarkonquantitativeeasing.Tofundthegap,thereareseveraloptionsavailableto the Nigerian government, each withpotentialbenefitsanddrawbacks:

compared with those of developedcountries.Externalborrowing:Nigeriacansecure loans frommultilateralinstitutions such as the World Bank, IMF,InternationalFinanceCorporation(IFC)andAfricanDevelopmentBank(AfDB).Already,the IMF has approved the government'srequestforaUS$3.4billioncreditfacilityasemergency fund ing . The N iger i angovernment is also looking to borrowUS$2.5 billion from the World Bank andUS$1billion from theAfDB.More fundingfrom multilateral institutions can beexplored in this respect to fill the existingfundinggap.Thedownsidetothischannelisobvious.NigeriamayhavetofollowtheIMFand other mult i lateral inst i tut ions'conditionalities and reforms with theirunpalatable implications on the socio-economicstability,especiallyatthisperiod.

Domesticborrowing:The Federal Government can issuedomesticmedium- to long-term bonds toraisecapital.Onapositivenote,atatimeofuncertainty, fixed income securities willappeal to investors who are seeking safehavensfortheirfunds.Ontheflipside,thesignificantriseindomesticdebtoftenleadsto higher domestic interest payments,which isdetrimental to theprivatesector.ThisismoresoindevelopingcountrieslikeNigeriawherenationalsavingsarequitelow



QuantitativeEasing(QE):Inthischallengingtime,theCentralBankofNigeria(CBN)couldconsiderthepurchaseof government securities to increase themoneysupplyandencourage lendingandinvestments. While this approach isconsidered the second best to the moreconventional monetary policy approach,quantitative easing can also deteriorateexchange rate stability and can putmorepressure on inflation. Also, social welfaretends to be lower under optimalQE thanunderoptimalconventionalpolicy.Inall,thesacrificeratioremindsusthatifwechoosealow level of unemployment, we mustreconcile ourselves to a high rate ofinflation. Nigeriamaythenhavetogoforthe lower unemployment rate at theexpenseofhigherinflation,whichwillmakeinflation targeting a secondarymonetarypolicyoption.

Despite the challenges of borrowing,expansionary fiscal policy remains theoptimal approach to revamping theeconomy. For example, an increase ingovernmentspendingtendstoincreasedemandforgoodsandservices,whichalsoincreases output and employment. Thequestionis,ifweraisethisdifferential,howwill the economy be impacted? Table 3shows new projections of GDP based ongovernment spendingatdifferent sizesoffiscalstimulus.Theresultsareinstructiveasthetabledepictsamoreoptimisticoutlookforeconomicoutputfrom2020to2023asaresult of the increased interventions. Theresults are instructive as the table showscapacity(atN4.5trillion).



Rationale&OutcomesScenario1Rationale: In our best-case scenario, weassumeglobal oil price experiences somelevelofstabilityaveragingUS$35perbarrel in2020fromUS$25perbarrelasattheendofApril2020.Thisisabovetherevised2020budgetbenchmark.


17

Macroeconomic Projection for 2020 inlightofCoronavirusPandemicOur projection was done based on theregional-wide Dynamic CGE model of theNigerian Economic Summit Group (NESG-DynCGE-Model), which was revised toaccommodate the uniqueness andpecu l i a r i t i e s o f t he i s sues underconsideration, being COVID-19 and theimpactofweakoilpriceontheeconomy.Themodel involves dynamic optimizationbehaviouralassumptionwhileweextractedprojectionsfor2020.

ECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020

This ison thebackof containmentof thespread of the virus; major economiesresume production tension between andSaudiArabiaandRussiapull throughwiththecutagreement.Intermsofproduction,thisscenarioassumes an improvement in crude oilproductiontosettleat1.3mbpdfollowingreneweddemandinthemarket,therelativepeaceintheNiger-DeltaregionandrecentcommitmentsbytheleadersoftheNationalAssembly to begin work on the differentaspects of the Petroleum Industry Bill.Outcomes:GDPwilldeclineby4.1%in2020,driven by a contraction in Agriculture,Manufacturing,Oil&GasandTradesectors.Theinvestmentwilldeclineby39.4%in2020asmuchinvestmentwouldhavegoneintosocialsecurityandpalliatives.Governmentrevenuewillplungeby40%in2020asoilandnon-oilrevenuesareconstrained.Inflationaverages15%in2020sequeltotheglobalsupplychainanddevaluationofnairafromN306/US$toN360/US$.Scenario2Rationale: In the business-as-usualscenario, we project a less optimisticoverviewofoilpricecomparedwiththefirstscenario.Here,weseeadeeperdownturnintheglobaloilmarket reflecting inoilpriceaveraging US$20 per barrel in 2020. Thismanifestsasthecoronavirusspreadcurveis

Scenario3Rationale: In the worst-case scenario, weassumecrudeoilpriceaveragesUS$15perbarreldrivenbyapersistentescalationofthe virus and restriction of economicactivities. Nigeria's crude oil productionaverages1.3mbpd.Outcomes:TheoutcomeofScenario3forrealGDPisadeeperrecession;realGDPwilldeclineby7.3%in2020.Investmentlevelaswell as government revenue will declinesignificantlyby65%and63%respectivelyin2020. Inflationary pressure intensifies asinflationrateaverages18.4%in2020.

flattened while the chase for a vaccinecontinues and some parts of the worldremainonlockdown.Theassumptiononoilproduction remains at 1.3 million barrelsperday(mbpd).Outcomes:TheoutcomeforScenario2isadeeper cut in economic activity. Theeconomyisexpectedtoslip intoadeeperrecessionastherealGDPcontractsby5.3%.This will be as a result of a deepercontraction inmajorgrowthdrivers in theeconomy.Investmentisexpectedtodeclineby50%asgovernmentrevenuedipsby51%in 2020. Meanwhile, inflation will average17.5%in2020.

Industrialization:ARoadmaptoInclusiveGrowthinNigeria


REFERENCE

NationalBureauofStatistics(2020).NigeriaGrossDomesticReportfor2019.Retrievedfromhttps://nigerianstat.gov.ng/elibraryNationalBureauofStatistics(2019).NigeriaGrossDomesticReport(Expenditure&IncomeApproach) for Q3, Q4'2018 and Q1'2019. Retrieved from https:// nigerianstat.gov.ng/elibraryNationalBureauofStatistics (2020).ConsumerPriceIndexforFebruary2020.Retrievedfromhttps://nigerianstat.gov.ng/elibraryStatista(2020).ValueofCOVID-19fiscalstimuluspackagesinG20countriesasofApril2020ashare of GDP. https://www.statista.com/statistics/1107572/covid-19value-g20-stimulus-packages-share-gdp/

Central Bank of Nigeria (2020). Purchasing Managers' Index (PMI) Survey Reporthttps://www.cbn.gov.ng/Out/2020/STD/MAR%202020%20PMI%20Report.pdfDebt Management Office (2020). Nigeria's Public Debt Stock as at December, 2019.Retrievedfromhttps://www.dmo.gov.ng/debt-profile/total-public-debtInternational Monetary Fund (2020). World Economic Outlook: The Great Lockdown.Retrievedfromwww.imf.orgNationalBureauofStatistics(2020).NigeriaCapitalImportationReportfor2019.Retrievedfromhttps://nigerianstat.gov.ng/elibrary

CentralBankofNigeria (2020).Crudeoilprices, crudeoilproductionandexportsdata.Retrievedfromhttps://www.cbn.gov.ng/rates/crudeoil.aspCentral Bank of Nigeria (2020). Gross external reserves data. Retrieved from https://www.cbn.gov.ng/IntOps/Reserve.asp?MoveDate=1/20/2020%2010:39:17%20AMCentral Bank of Nigeria (2019). CBN Economic Report for Q3'2019. Retrieved fromhttps://www.cbn.gov.ng/Documents/quarterlyecoreports.asp


Introduction

Industrialization:ARoadmaptoInclusiveGrowthinNigeriaJosephO.AfolabiandJoshuaA.OgunjimiNigerianInstituteofSocialandEconomicResearch(NISER),Ibadan,NigeriaAbstractThedesireforinclusivegrowthinNigeriaisattheforefrontofmostpublicdiscourseowingtothe rising level of inequality, poverty, and unemployment in the country. Given themonoculturalnatureoftheNigerianeconomyandtheinstabilityinthecrudeoilmarket,thisstudyarguesforindustrializationasaroadmaptoinclusivegrowthinNigeria.Itwasfoundthatperiodsoflowindustrialoutputcorrespondwithperiodsofhighunemploymentandlow-incomeperheadinNigeria.EmpiricalfindingsrevealedthatGDPpercapitaislikelytoincreaseby0.38%,whiletheunemploymentratewilllikelyreduceby0.03%forevery1%increaseinindustrialoutput.Therefore,thegovernmentshouldembarkonpro-industrialpolicies such as revitalizing the industrial sector through massive investment intechnological progress and industrial infrastructures, promoting inter-sectoral linkages,facilitatingprivate-publicpartnerships,andoperatingarelativelyclosedeconomy.TheneedforinclusivegrowthinNigeriaismorecogentthanevergiventherisinglevelsofinequality,poverty,andunemploymentinthecountry.Thishasinformedpoliciesandplans, putt ing social and economicinclusiveness at the forefront of macro-economic object ives in Niger ia , asdocumented in theEconomicGrowthandRecovery Plan (ERGP); taking social andeconomicinclusionasoneofthemedium-term targets, and the eighth goal of theSustainable Development Goal (SDG) —promotion of sustained, inclusive, andsustainableeconomicgrowth.Fortunately,Nigeriaisnottheonlycountrytohavefounditselfininequalityandpovertyconundrum,countries like Korea, Taiwan, Hong-Kong,China and Malaysia had at one timeexperiencedthesame.Lessonsfromthesecountr ies show the importance of

industrialization in fostering inclusivegrowth and sustainable development.Simandan (2009) alluded that industrial-ization is a generic name for a set ofeconomicand socialprocessesassociatedwith discovering more efficient ways forvaluecreation.Anyanwuetal.(1997)viewedit as theprocessofbuildingupanation'scapacitytoconvertrawmaterialsandotherinputs to finished goods, including themanufacture of capital and consumergoods. Industrialization is about valueaddition, with a sturdy manufacturingsector at its centre. Industrialization iscentral to achieving a vibrant economybecause of its forward and backwardlinkages as its inputs and output aresourcedfromandusedbyothersectorsoftheeconomy,respectively.Hence,industrial20ECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020

Emp i r i c a l ev i dence i n suppor t o findustrialization as a potent tool forinclusive growth abound. Chenery et al(1986)proved,bothonthetheoreticalandempirical ground, that industrializationcontr ibutes posit ively to economicperformance. Shi and Cao (2019) foundrural industrialization a catalyst for thegrowth of the Beijing metropolitan whileYang and Shao (2017) found employmentquality to be significantly associated withthe industrialization process in China.

growth could propel the growth of theprimary sector and the tertiary sector aswe l l a s c rea te more emp loymen topportunitiessoastoincreasemorelabourforceparticipation.

D e s p i t e t h e h u g e p o t e n t i a l s i nindustrialization, Alege and Ogun (2004)alludedthatNigeriaisyettofullyexploititwhileAmakom(2008)referredtoNigeria'sexperiencewithindustrializationasaclassiccase of misfortune. This misfortune hasbeen traced to combined forces ofinstitutional inadequacies and pervasivecorruption in the Nigerian system.S ta t i s t i ca l da ta revea led tha t theperformance of the Nigerian industrialsector has been so poor over time,especially with the exclusion of thecontributionoftheoilandgasindustry(seeFigure3).Theshrinkingcontributionoftheindustrial sector to GDP, together withNigeria'sburgeoningpopulationisamajorcause of rising poverty, inequality, andu n em p l o ym e n t i n t h e c o u n t r y .Nevertheless, industrial sector deve-

StylizedFactsThe structure of the Nigerian economy ismult i faceted with different sectorscontributingtoaggregateoutput(seeFigure1).Inthe1980s,1990s,andearly2000s,theindus t r i a l sec to r had the h ighes tcontribution to GDP but its performancehas dwindled due to the multifariousbottlenecksinthesector,includingoilpricevolatility, financial constraints, dilapidatedinfrastructures,lowinnovativecapacity,andpolitical instability.Theformerlydominantindustrialsectorhasnowbeentoppledbythe services and agricultural sector.However,themanufacturingsectorseemsto be gradually evolving albeit with arelativelylowcontributiontoGDP,butithasthe potential to foster inclusive growth inNigeria given its labour-intensive nature.

lopment, with particular reference to themanufacturingsector,couldputNigeriaontheinclusivegrowthtrajectory.Most studies on industrialization focusedonitsimpactoneconomicgrowthandnotinclusive growth. To this end, this studycontributes to the literatureby examiningtheimpactofindustrializationoninclusiveg rowth i n N i ge r i a . Fo l l ow ing th i sintroductory section, stylized facts ared i s cus sed i n t he se cond se c t i on ,methodologyandempiricalanalysisarethemain thrustof the thirdsection,while thefourth section concludes and providespolicyimplicationsfromthefindingsofthisstudy.

The dominant subsectors under the



Nigerian industrial sector are manu-facturing and oil and gas. The manu-facturingsector'sgrowthrateandGDPpercapita growth follow similar trend almostthroughout the period under review (seeFigure 2) such that a positive turn inmanufacturing sector performance isassociatedwithapositiveturninGDPpercapitaandviceversa;althoughthegrowthof the manufacturing sector is morepronounced than that of GDP per capita.ThissuggeststhatthemanufacturingsectorHoweve r , t o ana l y se t he re l a t i v econtribution of the industrial sector tonational output, we differentiated totalindustrial output from industrial outputdevoidoftheoilandgassector.Industrialoutput (% of GDP) averaged about 40%

isadeterminantofwelfareintheNigerianeconomysuchthatifconcertedeffortscanbe made to prioritise the sector, it willaccelerateindustrializationandimprovethewelfareofNigerians.

Figure1:SectoralContributiontoAggregateOutput

Source:CBNStatisticalBulletin(2018)

Figure2:ManufacturingGrowthandGDPPerCapitaGrowth




between 1981 and 1998 but contributedlessthan10%toGDPwiththeexclusionoftheoilandgassector(seeFigure3).From2000 to 2018, industrial output fell to anaverage of 25% of GDP while with theexclusion of the oil and gas sector, itcontributedonlyanaveragevalueof7.65%.Thisshowsthedomineeringroleofoilandgas in the overall industrial sector.Unfortunately, the oil and gas sector onlyaccommodatesan insignificantproportionofthelabourforceasitisprimarilycapital-intensive, a situation which has madeNigeria'sgrowthtobenon-inclusivetherebyengendering high levels of incomeinequalityandpovertyincidence.The capital- intensive nature of thedominant oi l and gas subsector , acomponentoftheindustrialsector,impliesthat less labour forcewould be absorbedinto the sector and consequently limitingthepoweroftheindustrialsectortofosterinclusive growth (reduce unemploymentOntheotherhand,thereisaninverseco-movement between unemployment andindustr ia l output as the dec l in ingcontribution of industrial output to GDPcorrespondswith rising unemployment inNigeriawhichbecameprominentbetween2013and2018(seeFigure4).Thisindicates

and poverty while promoting growth). Insum, the contribution of the industrialsectortoGDPisdrivenmostlybytheoilandgas sector and the contribution of themanufacturingsectorisstillatlowebb.Thekey challenges impeding theperformanceoftheindustrialsectorcanbeattributedtothe endemic problems of pathologicalpoliticsandthepervasivecorruptioninthee c onomy , wh i c h h a s r e s u l t e d i ninfrastructuraldecayandpolicysomersault,amongothereconomicmaladies(Stiglitzetal,2017).It,therefore,becomesimperativeforpolicy-makersandvariousstakeholdersto put measures in place to revamp themoribundmanufacturingsectorinNigeria.

Figure3:IndustrialContributiontoAggregateOutput




thattheneglectoftheindustrialsectorhascompounded unemployment woes andworsenedpovertyincidence.Putdifferently,thehighpremiumgiventoothersectorsatthe expense of the industrial sector hasfacilitated non-inclusiveness of growth inNigeria. Nonetheless, industrializationremains a panacea to unemploymentproblemsinNigeriaasrevampingthesectorwouldnotonlyimproveitsperformancebutreduce unemployment, poverty, andincomeinequalityinNigeria.MethodologyT h i s s t u d y e x a m i n e s w h e t h e rindustrialization is capable of drivinginclusivegrowthinNigeriabyexaminingtheimpact of the key sectors (agriculture,industry, and service) of the Nigerianeconomyoninclusivegrowth(measuredbyGDP per capita) and unemployment rate.Data from 1991-2018 were sourced fromthe World Development Indicators (2019)andthemodelsarespecifiedasfollows:Where:

SER=Servicesvalueadded(%growth)AGR=Agriculturevalueadded(%growth)UNEM = Unemployment (% of total labourforce)GDPPC=GDPpercapitagrowth(%);arestochasticerrorterm;t=timeperiodTheOrdinaryLeastSquare(OLS)methodisused to estimate themodels since all thevariablesarestationary.ThechoiceofOLStechniqueliesinitsabilitytominimizethesum of the squared error to produceunbiased estimates. The results arereportedintheAppendix.EmpiricalAnalysisIndustrialsectoroutputexertsasignificantpositive impact on GDP per capita but as i g n i fi c a n t n e g a t i v e i m p a c t o nunemployment such that when industrialoutputgrowsby1%,GDPpercapitawillriseon average by 0.4% while unemploymentwillfallonaverageby0.02%(seeAppendix).Th i s sugges t s tha t improv ing theperformance of the industrial sectorenhancesthewelfareofresidentsofNigeriafirstbyincreasingtheirincomeandsecond,

IND=Industryvalueadded(%growth)

(1)(2)24ECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020


byreducingunemployment.ThiswillleadtoareductioninpovertyinNigeria,andensurethat Nigeria's growth is inclusive and notdevoid of improvement in the welfare ofNigerian citizens. Nonetheless, the recentgradual decline in the contribution of theindustrial sector to GDP, increasingunemployment, and the fall in economicgrowthdepictsthattheindustrialsectorhasthe potential to drive not just economicgrowth, but inclusive growth in Nigeria.Furthermore, the result reveals that anincreaseinindustrialoutputinthepreviousyearwillboostemploymentinthefollowingyear,therebyunveilingindustrializationasaroadmap to Nigeria's quest for inclusivegrowth.Moreover, the share of the agriculturalsector in GDP has a positive impact oneconomic growth without a decliningunemploymentrate.Specifically,theresultshowsthatanincreaseintheshareoftheagricultural sector in GDP by 1% willincreaseGDPpercapitaandunemploymentby approximately 0.2% and 0.001%respectively. However, whereas thecoefficient of agricultural output iss t a t i s t i c a l l y s i g n i fi c a n t , t h a t o funemployment is not. This further givescredence to the earlier assertion that theagriculturalsectoriscapableofstimulatingeconomicgrowth,butnotprovidingqualityjobs.Hence, the growth generated by theagricultural sector is not inclusive. Thiscould be attributed to the fact that themajorityofNigerianyouthsprefertoseek

white-collarjobsastheyseeagricultureasadirty job, primarily because agriculture inNigeria has not been fully mechanized.More so, other problems such as lack ofstorage facilities, bad road networks, andlimited improved seedling, among others,rema in p reva len t i n the N ige r i anagriculturalsector.Similarly, Nigeria's services sector has asignificant positive relationship witheconomic growth, but an insignificantinverserelationshipwithunemployment.Aswasthecasewiththeagriculturalsector,thecontribution of the service sector drivesgrowth,butnotinclusivegrowth.Intuitively,it suggests that the performance of theservice sector has little or no impact onreducingthepovertylevelsinNigeria,thus,limitingitsabilitytodriveinclusivegrowthinNigeria.Thisresultisnotsurprisingastheservice sector is largely capital-intensive.Even though the service sectornow takesthelionshareregardingitscontributiontototal GDP, it does not translate to moreemploymentopportunitiesfortheteemingNigerian citizens. Nonetheless, it isnoteworthythattheservicesectorhasthehighest impact on economic growth inNigeria,whichconfirmstheearlieranalysisontheincreasingimportanceoftheservicesectorinNigeria,andtheneedtovigorouslypursue indus t r ia l i za t ion to tack leunemployment and poverty conundrumsbedevi l l ing the Niger ian economy.Therefore,industry-ledgrowthoutperformsagriculture-ledandservices-ledgrowth.25ECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020


2. Tax holidays, capital al lowances,subsidies, and duty drawback, amongother incentives, should be offered toprivate industrialists to attract privatesector participation into the sector aswell as facilitate the public-privatepartnership.3. Atransferofresourcestotheindustrialsectorwillimprovenationaloutputandattract structural change bonus.Specifically, finance for industrialenterprises should be affordable andeasily accessible by issuing special

1. Government should revitalize theindustrial sector through massiveinvestment in technological progressandindustrialinfrastructurestoincreasetheproductivityandcompetitivenessofthe sector. The power and transportsectorscouldfirstbetargeted.

Thisstudyhasshownthatindustrializationisaroadmaptoinclusivegrowth.Hence,thefollowingpoliciesarerecommended:PolicyRecommendations directives to financial institutions topriorit ize this sector and ensuree n f o r c emen t o f t h e d i r e c t i v e .Complexitiesinassessingloans(suchascollateral requirements, filling complexforms,andhighinterestrate)shouldberelaxed while foreign exchange shouldbe made readily available to theindustrialists especially those whoimportrawmaterials.4.Nigeriashouldoperatearelativelycloseeconomy through the facilitation ofintersectoral linkages which createeconomies of scale andhave spill-overeffectsonothersectorsoftheeconomy5. Government should design, implementandmonitor the progress of industrialpolicies through regulardiscoursewiththeprivatesector to identifyproblems,proffer evidence-based solutions,developkeyperformanceindicatorsandlearnmodernbestpracticestoimprovepe r f o rmance and p romo te t hecompetitivenessoftheindustrialsector.



REFERENCEAlege, P.O. and Ogun, T.P. (2004). Exploring Globalization-Industrialization Nexus forEconomic Development: A Case of Nigeria. Selected papers for the 2004 annual NESconferenceAmakom,U.(2008).Post-IndependenceNigeriaandIndustrializationStrategy:FourandHalfErraticDecade.1-18.Retrievedfrom:http://ssrn.com/abstract=1266633.

Stiglitz,J.,Lin,J.Y.,Kere,E.(2017).IndustrializeAfrica:Strategies,Policies,Institutions,andFinancing.AfricanDevelopmentBankGroup.Availableathttps://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-Documents/industrialize_africa_report-strategies_policies_institutions_and_financing.PDFYang, Y. and Shao, X. (2018). Understanding Industrialization and Employment QualityChangesinChina:DevelopmentofaQualitativeMeasurement.ChinaEconomicReview,47:274-281.DOI:10.1016/j.chieco.2017.08.009

Chenery,H.B.,Robinson,S.andSyrquin,M.(1986).IndustrializationandGrowth:AComparativeStudy.Retrievedfromhttp://documents.worldbank.org/curated/en/714961468135943204/Industrialization-and-growth-a-comparative-studyShi, Q. and Cao, G. (2019). Urban Spillover or Rural Industrialization:WhichDrives theGrowthofBeijingMetropolitanArea,Cities.https://doi.org/10.1016/j.cities.2019.05.023Simandan, D. (2009). Industrialization, In R Kitchin & N Thrift, (Eds.), InternationalEncyclopediaofHumanGeography,Oxford:Elsevier,5:419-425.

Anyanwu, J.C., Oyefusi, A., Oaihenan, H. andDimowo, F.A. (1997). The Structure of theNigerianEconomy.Onisha:JoaneeEducationalPublisherLtd.



APPENDIXTable1:EstimationResultsVariables GDPPerCapitalModel UnemploymentModelINDAGRSERCAR(1)Adj.R-Squared

0.38*0.18*0.41*-2.47*0.968-0.029***0.001-0.0210.998*0.841Source:Authors'ComputationfromEviews9



Introduction

InclusiveSectoralFinancingforSustainableEconomicGrowthIbukunoluwaAwotunde,DepartmentofEconomics,UniversityofIbadan,NigeriaAbstractThedominanceoftheoilsectoringovernmentrevenueandexporthasconstrainedtheimplementationoffiscalandmonetarypoliciesinNigeria.Decliningoilrevenuelimitstheabilityofthegovernmenttofunditsbudget,whilethedominanceofoilasthemajorforeignexchangeearningsectorcomplicatestheimplementationofmonetarypolicyinNigeria.TheCentralBankofNigeria(CBN)hasimplementedseveralpoliciestoinfluencethelendingpatternofcommercialbankstocertainsectorsinabidtoenhancegovernmentrevenueandeconomicgrowth.However,availablestatisticssuggestthatthesectorallendingpatternofcommercialbanksisnotreflectedinthesectoralcompositionofthegrossdomesticproduct(GDP)andexport.ItturnsoutthattheagriculturalsectorwhichaccountedforthehighestshareofGDP(21%)receivedabout4%ofbanks'loans.Whilethedownstreamoilandgassectorwhichreceivedthelargestchunkofbankloans(21%)contributedlessthan9%toGDP.TheUpstreamoilandgassectorwhichreceived9%ofbanks'loansaccountedforover90%ofcommercialbanks'loans.Acontinuationoftheobservedtrendinbanklendingcouldlimitthegrowthofthekeycontributors(sectors)toGDPandthusthreatenthesustainabilityofGDP growth. Three recommendations are proposed in this paper toward ensuring thesustainability of the growth of the key contributors to GDP and export. Firstly, CBNinterventionsinbanks' lendingactivitiesshouldenhancethegrowthofkeycontributors(sectors)toGDP,export,andgovernmentrevenue.Secondly,thefederalgovernmentshouldlead in thefinancingof large-scalemanufacturing (textile, steel, andpetrochemicals) inpartnershipwiththeprivatesector.Thirdly,thefundsintheexcesscrudeoilaccountshouldbededicatedtotheinfrastructuraldevelopmentoftheindustrialsector.ThequestfordiversificationoftheNigerianeconomy is one that requires purposeful,coherent, and consistent strategies toachieve. To start with, it is imperative todefineeconomicdiversificationexplicitlytoavoidgenericusage.Inthispapereconomicdiversification is conceived regardingspreadinthesectoralcompositionofgrossdomesticproduct (GDP)andexportof theNigerian economy. Thus, economicdiversificationisdefinedfromanintensiveperspective.GDPandexportdiversificationaid sustainable economic growth and

development by reducing the impact ofnegative sectoral shockson theeconomy.TheCOVID-19pandemic isa recent shockthat led to the lockdownof countriesandreduced global economic activities. WhiletheimpactoftheshockisevidentacrossallsectorsoftheNigerianeconomy,itsimpactsontheoilmarkethaveamultipliereffectonthe Nigerian economy. The federalgovernment's2020revenueprojectionwasrevised downward by 40%, due to thedecline in projected oil price and oilproduction by 47% and 22% respectively29ECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020

Thechallengewiththedecliningandvolatileoil revenue implies non-oil revenue mustgrowandreplacethedecliningoilrevenue,to sustain the growth of the economy'saggregate demand. The ability of thegovernmenttogeneratenon-oilrevenueisafunctionoftheproductionlevelofthenon-oilsectors.Theproductionlevelofthenon-o i l sec tors i s dependent on the i raccessibility toproduction inputs.Physicalcapital (for example plant, machines, andbuilding)isoneoftheproductioninputsthatfirms often require external financing toacquire, given thehuge cost requirement.Theaccesstofundingisskewedtowardstheoil sector as it accounted for the highestshareofcommercialbanks'loansinrecentyears.Thehighcostofbankloans(16%—30%)andtheshortloantenor(fiveyearsorlower)oftenlimitstheaccessoffirmsinthenon-oil sectors to banks loans (Al-Kawaz,2008).Banksoften favouroilfirmsdue totheir high rate of return and shortinvestmentpaybackrelativetofirmsinthenon-oilsectors.

(Iroanusi, 2020). The problem of lowrevenue has persisted for a while. Forinstance,betweentheyears2016and2019,the federal government realized revenueconsistently fell below budgeted revenue.Thislowrevenueresultedinincreasingfiscaldeficitsandrisingdebtlevels.Thegravityofthe revenue challenge is evident in itsemergenceatthetopprioritytargetinthe2020-2022 medium-term expenditureframework.Thissectionanalysesthestructureofbankloans, GDP, and export using availablestatistics.Itisevidentfromstatisticsthatthemainrecipientsofcommercialbanks'loansare not the major contributors to grossdomestic product and export of theNigerian economy. According to Figure 1,four sectors accounted for 51 % ofcommercialbankloansbetweenMay2015andMay2020.Thesefoursubsectorsare:the downstream, natural gas and cruderefining; manufacturing; government; andgeneral service which accounted for anaverage of 21%, 14%, 8.3%, and 8.1% ofbanksloan.

Thispaperexaminestheimplicationoftheconcentration of commercial banks' loanstowardstheoilsectorforthesustainabilityofeconomicgrowthanddevelopmentoftheNigerianeconomy.Theremainingsectionsof this paper focus on stylized facts oneconomic diversification and sectoralfinancing,theroleofcapitalaccumulationine conomi c g rowth , and the po l i c yrecommendationinsectionstwo,three,andfourrespectively.Stylized Facts: Sectoral Financing andEconomicDiversification

Analysing the composition of GDP usingFigure 2 shows that the top four sectorsaccountedfor60%ofGDPbetweenquarter1of2015andquarter3of2019.Thetopfoursectors are: crop production; trade;informationandcommunication;andcrudepetroleumandnaturalgaswhichaccountedfor22%,17%,12%,and9%respectively.Itis

InclusiveSectoralFinancingforSustainableEconomicGrowth


InclusiveSectoralFinancingforSustainableEconomicGrowthFigure1:SectoralcompositionofCommercialBanks'loans(May2015-May2020)

Figure2:StructureofNigeria'sRealGDP(Q12015-Q32019)Source:CBNStatisticalDatabase

Source:CBNStatisticalDatabase 31ECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020

InclusiveSectoralFinancingforSustainableEconomicGrowthinteresting to note that while cropproduction (a subsector of agriculture)accountedfor22%ofGDP, theagriculturesector received only 4 % of commercialbanks' loans.Whiletheleadingreceiverofbank loans, the oil and gas sector onlycontributed9%toGDP.Regardingexportcomposition;accordingto

Figure 3, crude oil and its by-productsaccounted for an average of 91% of totalexport.Theexportofcrudeisattributabletofirmsintheupstreamoilandgassector,andthissectoraccountedfor8%ofcommercialbanks'loans.Manufacturingandagriculturewhichreceived14%and4%oftotalbanks'loans,contributedonly6%and2%toexportrespectively.Figure3:StructureofNigeria'sexports(Q12017-Q12020)

Source:NationalBureauofStatisticsIn terms of revenue composition, oilrevenuehasbeentheleadingcontributortogovernment revenue between 1981 and2019,whenitaccountedforanaverageof73%oftotalgovernmentrevenue.However,lookingatFigure4,inrecenttimes,between2015and2019,thecontributionofnon-oilrevenuehasincreasedsignificantly,whenitaccountedforanaverageof46%.

Havingexaminedthesectoralcompositionsofbanks' loans,GDP,export revenue,andgovernment revenue using the availablestatistics,itisobservedthatthepatternofsectoralcompositionsofcommercialbanks'loans is not replicated in the sectoralcomposition of GDP and export. If thestatistics presented in this section areanythingtogoby,theysuggestthattheloan32ECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020


behaviourof commercialbanks inNigeriadoesnotsupportsectorsthathelpsustaineconomicgrowthinNigeria.Investment and Economic Growth inDevelopingEconomiesOnecriticalfeaturethathasbeenobservedfor countries that achieved sustainableeconomic growth and development iscapita l accumulat ion; even thoughNeoclassicalgrowththeories (Solow,1956;Cass,1965)suggestthatthere isa limittoeconomicgrowththatcanbegeneratedforstimulatingcapital.However,studiesontheemergence of the Asian Tiger havesuggestedthatcapitalaccumulationplayeda cruc ia l ro le in the i r growth anddevelopment (OECD, 2013). The questiontheniswhatcapitalaccumulationstrategiesadevelopingcountrylikeNigeriacanutilizetocatch-upwiththedevelopedeconomies.Developmenteconomicsliteratureprovidestwo alternative approaches to how

Hirschman (1958)however challenged thebig push model on the premise thatdevelopingcountriescannotaffordtoinvestinmultiplesectorsduetotheirlow-incomeand investment levels. Thus, to create asustainable growth path, developingcountriesshoulddevoteinvestmenttowardsectors with high forward and backwardinter-sectorallinkages.

developingcountriescanbuildtheircapitalstock to achieve sustainable economicgrowth.Theyarethebalanced/bigpushandunbalanced growth model. The balancedgrowth model assumes that developingcountriesarecharacterizedbylow-income,andasmalldemandmarket(theiraccesstothe International market is low). Thus, todevelopand sustain growth, theyneed toinvest in multiple sectors simultaneously,which will help create markets for theoutput of various sectors (Resenstein-Rodan,1943;RangerNurkse,1952).

Figure4:StructureofGovernmentRevenue(1981-2019)



1. CBN interventions in banks' lendingactivitiesshouldenhancethegrowthof key contributors (sectors) toGDP,export,andgovernmentrevenue.TheCBNinrecenttimeshasrequestedbanksto extend loans to certain sectors. Forexample, deposit money banks are tomaintain a minimum of 65% loan todepositratiowithprioritybeingassignedtoSMEs,retail,mortgage,andconsumerlending. While the growth of thesesectors is crucial for economic growth,the sectors that account for significantsharesofGDP,exportandgovernmentrevenue,shouldalsobegivenpriorityin

An example is an investment in vehicleengine production. This wil l have abackwardlinktosteelproducers,whichisacrucialinputandhaveaforwardlinktothecar production factories. Thus, directinvestmentinoneproductionchainhelpsinbuildingtheentirevaluechainforaproduct.However, in the case of Nigeria, thepopulation size of the economy and thesignedAfricanContinentalFreeTradeArea(AfCFTA)suggestthatahugemarketexistsfor the country to explore. The relevantquestionishowthecountryshouldplanitsi n ves tmen t pa t t e rn t o reduce i t sdependenceontheoilsectorandenhancetheoutputofothersectorsintheeconomy.Potentialstrategiesareproposedinthenextsection.PolicyRecommendation

2. Government-led industrializationfinancing. Sectors that can generatesubstantial revenue, employment, andforeignexchangeearningsarerequiredto put the Nigerian economy on asustainablepath.Theindustrialsectorisasectorwiththepotentialstomeetthesethreetargets.ThegrowthofindustriesinChina, and the Asian Tiger economieswere largely influencedby governmentintervention in providing adequatefinancing and a business enablinge n v i r o nmen t , t o e n s u re r a p i dindustrialization is achieved. Leavingfinancialmarketstodetermineresourceallocationwillnotachieveanysignificantindustrialization. The high lending rateandtheshort-termnatureof the loansofferedbycommercialbanksrestraintheability of firms within the industrialsectortoaccessfunds.Thegovernment,therefore, needs to provide financialsupportandactivemonitoringforfirmstoengage in largescalemanufacturingwithaspecificfocusontextile,steel,andpetrochemical.

commercial bank lending, to avoid theriskofstuntedgrowthinthesesectors.For example, crop production whichcontributed 22% of GDP received lessthan 4% of banks' loans and theupstreamoil sectorwhichaccounts forthemajorityofgovernmentrevenueandforeignexchangeearningreceivedonly8%ofbankloans.



Theaccesstorawmaterialandexistingsteel production facilities puts thesemanufacturingactivitiesintheforefront.The government has successfullyestablished joint ventures with theprivatesectorintheoilandgassector,itcanequallyapplyasimilarapproachintheindustrialsector.

3.Ut i l i ze the excess o i l fund forIndustrialization.Theexcesscrudeoilaccountisanexample.Thisfundcanbeused to provide cheap and long-termfunding support to firms in themanufacturing sector, rather thanuti l iz ing the fund to supplementgovernmentrevenueshortfalls.Withthecurrent African Continental tradeagreement,Nigeriahasalottoharnessin producing and exporting industrialgoods,asmostAfricancountriesengageintheexportofprimarygoodssuchasagricultural produce and naturalresources.




36

Al-Kawaz, A. (2008). Economic diversification: the case of Kuwait with reference to oilproducingcountries.JournalofEconomicCooperation.29(3):23-48Cass,D.(1965).OptimumGrowthinAggregativeModelofCapitalAccumulation.ReviewofEconomicStudies32(3):233-240

Hirschman, A. (1958). The Strategy of Economic Development. New Haven, CT, YaleUniversityIroanusi,E.(2020,April9).Nigeriareduces2020budget,slashesrevenueprojectionby40%.The Premium Times.https://www.premiumtimesng.com/news/headlines/386844-nigeria-reduces-2020-budget-slashes-revenue-projection-by-40.htmlNational Bureau of Statistics (2020). Foreign Trade Statistics. Retrieved fromhttps://www.nigerianstat.gov.ng/elibrary?page=2&offset=10

Cen t ra l B ank o f N i g e r i a ( 2 019 ) . S t a t i s t i c a l Bu l l e t i n . R e t r i ev ed f romhttps://www.cbn.gov.ng/documents/Statbulletin.aspCent ra l Bank o f N ige r i a ( 2019 ) . S t a t i s t i ca l Da tabase . Re t r i eved f romhttp://statistics.cbn.gov.ng/cbn-onlinestats/Hammouda,H.Ben,Karingi,S.N.,Njuguna,A.E.,&Jallab,M.S.(2009).DeterminantsofDiversificationinAfrica:AContinentalAnalysis.TheJournalofWorldInvestment&Trade,397–425.Herrendorf,B.,Rogerson,R.,&Valentinyi,A.(2013a).GrowthandStructuralTransformation.HandbookofEconomicGrowth

NigeriaEconomicSummitGroup(2020).NigeriainaNewDecade:PriorityforAcceleratedG r o w t h , J o b C r e a t i o n a n d P o v e r t y R e d u c t i o n . R e t r i e v e d f r o mhttps://www.nesgroup.org/research#documentsNurkse,R.(1953).ProblemsofCapitalFormationinUndevelopedCountries,Oxford:OxfordUniversityPress.

REFERENCE



37

Solow,R.J.(1956).AContributiontothetheoryofEconomicGrowth.QuarterlyJournalofEconomics,32(1):65-94Rosentein-Rodan,P.(1943).ProblemsofIndustrializationofEasternandSouthernEurope.EconomicJournal,53:202-211OECD(2013).InnovationinSouthEastAsia.OECDReviewsofInnovationPolicy.Retrievedfromhttp://dx.doi.org/10.1787/9789264128712-en

REFERENCE


AchievingSustainableDevelopmentGoal8-DecentWorkandInclusiveEconomicGrowth:APreliminaryAnalysisofNigeria'sPerformance1 2JustineTochukwuNwanakwere andFidelisObiomaOgwumike1NigeriaInstituteofSocialandEconomicResearch(NISER),Ibadan2DepartmentofEconomics,UniversityofIbadan,IbadanAbstractOneoftheSustainableDevelopmentGoals(SDGs)istoachieveinclusiveandsustainableeconomicgrowth,productiveemploymentanddecentworkforall–SDG8.However, inNigeria, unemployment and underemployment rate remain high, especially among theyouthandwomen,withrapidlyexpandinginformalsector.Over20percentoftheyouthsarenotineducation,training,andemployment.These,amongothers,raisedtheconcernontheprogressofthecountryinachievingSDG8by2030;hence,theneedforapreliminaryassessmentof thecountry’sperformance.WeadaptedthemethodologyofSustainableDevelopmentSolutionsNetwork (SDSN)and theBertelsmannStiftung,usingdata from2010to2017/2018foreightSDG8indicators.Theresultsreveal,amongothers,thatontheaggregate,thecountryscored44.9percentinSDG8performancelevelwhichcanberankedaslowperformanceaccordingtotheSDGsrankings.Therefore,werecommendtheneedforconsciousinvestmentintechnologyandresearchanddevelopment(R&D)formoreefficientand innovative production processes and techniques. Also, employment and skillacquisition programmes should be more of regional and state specific than centrallydesignedas“one-cap-fits-all”.Thiswillhavefarreachingeffectintargetingandreducingunemploymentinthecountry.Additionally,technicalcollegesandcraftcentresshouldbeestablishedandreinforcedtoabsorbyouthsnotinemployment,educationortraining.


The 17 Sustainable Development Goals(SDGs)adoptedin2015weredesignedwiththe ultimate objective of improving theentire living condition and welfare ofhumans across the globe for better andproductive life, both for the current andfuture generations. SDG 8 is crucial toachieving the objective because decentworkandinclusivegrowthensureimprovedlivelihoodsandbetterlivingconditions(Raietal.,2018).TheILOreportin2019,revealedtha t ove r 170 m i l l i on peop le a reunemployedglobally,duetotheincreasingrate of unemployment in Sub-SaharanAfricaandAsia(ILO,2019).Also,about140millionpeopleareunderemployed(61%arewomen)in2018,inadditiontohighlevelofinformalemployment;anindicationoflackofeconomicsecurityanddecentwork.In Nigeria, the number of unemployedpersons increases with decreasingemployment generation (Ajakaiye et al.,2015).From2010to2018,thetotalnumberofemployedpersonsincreasedonlyby12.4percent(NBS,2018).Youthunemploymentratewas36.9percentin2018,withfemaleconstitutingoverhalfthisrate.In2016,over20percentofyouthswerenotineducation,training,andemployment(NBS,2018).Theinformal sector is rapidly expanding andstoodat41.4percentofGDPin2015(NBS,2016). These negative indices define thelivingconditionsofthepeople.Effortshavebeenmadebysuccessiveadministrationsinthe count ry th rough po l i c i e s andprogrammes to arrest these negative On the other hand, inclusive growthconnotes equitable participation ineconomicopportunitiesandhumancapital

ILO defines decent work as access to“employment opportunities; adequateearnings and productive work; decentworking time;combiningwork, familyandpersonallife;workthatshouldbeabolished;stability and security of work; equalopportunityandtreatmentinemployment;safeworkenvironment;socialsecurity;andsocial dialogue, employers' and workers'representation” (ILO, 2013). UNESCOconceivesdecentworkasemploymentthat“respects the fundamental rights of thehuman person as well as the rights ofworkers in terms of conditions of worksafetyandremuneration,[and]respectforthe physical and mental integrity of theworker in the exerc i se o f h i s /heremployment”(UnitedNations,2018).

ConceptualClarificationTTheUnitedNationsbroadlyconceivedSDG8 as a goal to “Promote inclusive andsustainableeconomicgrowth,employmentanddecentworkforall”.TheGoalisoftenreferred to as “decent work and inclusiveeconomicgrowth”(Raietal.,2018),hence,aconceptualclarificationofthetwoconcepts(decent work and inclusive growth) isessential(Masdonatietal.,2019).

indicators;however,thereseemstobenosignificantimprovement.Hence,thisstudyassessestheperformanceofthecountryinachievingSDG8by2030.AchievingSustainableDevelopmentGoal8DecentWorkandInclusiveEconomicGrowth:APreliminaryAnalysisofNigeria'sPerformanceIntroduction


development; environmental and socialprotection;andfoodandpropertysecurityfor every individual in society (Rai et al.,2018).TheIMFopinedthatinclusivegrowthembraces sustainedextensivedistributionof the benefits and the proceeds fromeconomic growth across sectors in percapita terms (IMF, 2017). The inclusivegrowthcycleinFigure1givesmoreinsightintotheconcept.

The National Directorate of Employment(NDE)This was statutorily established as ane m p l o y m e n t a g e n c y t o t a c k l eunemployment issues in the countryt h r o u g h d i ff e r e n t i n t e r v e n t i o np r o g r amme s . N D E i n t e r v e n t i o nprogrammesarelargely:(i)VocationalSkillsDevelopment (VSD); ( i i ) Small ScaleEnterprises (SSE); (iii) Rural Employment

Policy Efforts by Government: PastAdministrations Promotion (REP); and (iv) Special PublicWorks(SPW)(NDE,2010,2016).Despiteitsimpressiveprogramme,theperformanceofNDE in fulfilling its mandate remainsquestionable as unemployment ratecontinuestoriseinthecountry.Therehasbeen a dec l i ne i n the number o fbeneficiaries, and most programmes aregenderbias(see,Figure1and2).

AchievingSustainableDevelopmentGoal8DecentWorkandInclusiveEconomicGrowth:APreliminaryAnalysisofNigeria'sPerformance

Figure1:InclusiveGrowthCycle

Source:AdaptedfromMasterCardCentreforInclusiveGrowth


National Financial Inclusion Strategy(NFIS)TheNFISwasestablishedin2012withthetargettoincreasefinancialinclusionratetoabout80percentby2020(NFIS,2019).Also,it has the target of increasing access topayment services by Nigerian adults; thenumber of people with access to savingsandcredit;thenumberoffinancialserviceschannelsandproviders;andthenumberofAutomated Teller Machines (ATMs) (NFIS,2019). However, a report by EnhancingFinancial Innovation and Access (EFInA)revealed that 60 percent of the adult

population do not have mobile moneywalletorbankaccountin2018.Also,morefemales than males are being financiallyexcluded, and exclusion is more in ruralareas (78.5%) than inurbanareas (21.5%)(EFInA, 2018). These cast doubts on therealization of the NFIS targets. Otherinterventionsbypast administrations thatintersectwiththetargetsofSDG8aretheNa t iona l En te rp r i se Deve lopmentProgramme (NEDP), Nigeria IndustrialRevolutionPlan,amongothers.


Figure2:NDEInterventionProgramme(in'000)

Figure3:NDEInterventionProgrammeBeneficiariesbySex,2016

Source:Authors'AnalysisusingdatafromNDEAnnualReport(2010and2016)

Source:Authors'AnalysisusingdatafromNDEAnnualReport(2010and2016)


Theprincipleof“leavingnoonebehind”isanotherpolicytargetthatisincongruencewith the SDGs. This principle is directedtowards increasing social inclusion andsafetynetofvulnerablegroupsandthepoorin thecountry. Someof theprogrammesinitiatedinclude:ConditionalCashTransferProgramme, Home-Grown School FeedingProgramme, N -Power Programme,GovernmentEnterpriseandEmpowermentProgramme(GEEP)/MarketWomenMoney(ibid).MethodologyThestudyadaptedthemethodologyoftheSustainable Development SolutionsNetwork (SDSN) and the BertelsmannStiftung,formonitoringtheperformanceofcountrieson theSDGs (Sachsetal., 2019;SDSN, 2019). Due to paucity of data, wefocusedoneightofthetwelvetargetsoftheGoal,witheightindicatorsasthevariables,

PolicyEfforts:ThePresentAdministrationThe present administration appointed aSeniorSpecialAssistantonSDGs,withthemandate of coordinating SDGs-relatedinterventions, and tracking and reportingprogressandperformance(FederalRepublicofNigeria,2017).Theseinterventionstargeteducation,health,women,youthandsocialdevelopment, job creation and youthempowerment,etc. Over15milliondirectjobs are expected to be created between2017and2020(FederalMinistryofBudget&NationalPlanning,2017).

ResultsandDiscussionTable1showstheresultoftheperformancescore. Indicators are either “decreasing”,“stagnating”, or “moderately improving”basedonscoresbelow,equal,orabove50percent,respectively.Indicatorswithscoreabove75percentareconsidered“ontrack”(achieving)(Sachsetal.,2019).

usingdatafrom2010to2017/18.Valuesforeach indicatorwere normalized using theMin-Maxmethod(Sachsetal.,2019).Thisisrepresentedas:N, i, t, X, Min(X), and Max(X) are thenormalized value, indicator, period, theoriginal value, minimum and maximumvalues, respectively. Normalizing theindicators provides a commonmeasuringmetric through which performanceevaluat ions becomes possible. Thepercentage of the normalized scores arefurtherdetermined,whichshowthelevelofachievementoftheGoalbythecountryontheaggregate(Sachsetal.,2019).Thresholdvalues provided in the SustainableDevelopment Report 2019 and the AfricaSDGIndexandDashboardReport2019(seeTable 4) are used for compar ison.Comparing an indicator's threshold valuewithitsactualvalueshowstheperformanceof the indicator. Data for this study weresourcedfromWorldDevelopmentIndicator,World Bank; United Nations database,InternationalLabourOrganization,andtheCentralBankofNigeriabulletin.



AnnualgrowthrateofrealGDPpercapitascores thehighest (55.1%)whiledomesticmaterialconsumptionpercapitascoresthelowest (32.9%). All the indicators forunemployment are “decreasing”. At thenational level on the aggregate, theperformancescoreis44.9percent,showingthat the country is less than half way toachievingGoal8. Thisresultvalidatestheglobal and continental rankings of thecountry in the 2019 SDG index reports;159th (of 162nd) with 46.4 per cent, and43rd (of 52nd), respectively (Sachs et al.,2019;SDSN,2019).

Table1:NormalizedScoresofIndicators

Note:DecreasingStagnatingModeratelyImprovingOnTrackorAchievingSDGSource:Authors'Analysis

Table2:ThresholdforIndicators

Note:ValuesinparenthesisarefortheactualindicatorsSource:Authors'Analysis



Also,theperformanceoftheindicatorswasevaluated using their threshold values.Fromtheresult,alltheindicatorsarehavingchallengesinmeetingthegoal(seeTable2).Unemployment, youths not in education,training and employment, and proportionof adultswith an account at a bank havemajor challenges in achieving SDG8. ThisresultshowsthatthecountryisnotmakingsufficientprogressinachievingtheSDG8.Inconclusion,resultsfromthestudyrevealthatthecountry'sperformanceinachievingSDG8islow. Boththeperformancescoresof the individual indicators and theaggregatescoreshowlowperformance.Thethreshold results also reveal similaroutcome. This implies that the variouspo l i c i e s a nd p ro g rammes o f t h egovernment, directed towards achievingSDG8,areeitherinefficientorinsufficient.Basedonthefindings,weofferthefollowingpolicyrecommendations:1.Governmentshouldconsciouslyinvestinhumancapital,technology,andresearchanddevelopment(R&D)todiversifytheeconomy by providing necessaryi n f r a s t r u c t u re t o e nhan c e t h eperformanceofnon-oilsectors.Thiswillhelp improve labour productivity, andmoreefficientandinnovativeproductionprocesses and techniques. Hence, willculminateincreaseineconomicgrowth.

ConclusionandPolicyRecommendation3. Technical colleges and craft centresshouldbeestablishedandreinforcedtoabsorbidleyouths–notinemployment,education, or training. This will enablethem acquire the necessary skills andknowledgetocreatevaluefortheirlivesandsocietyatlarge.4. Stringent requirements to financialinclusionshouldberelaxedbyfinancialinstitutionssoastoincreasethenumberofadultswithaccesstofinancialservices.

2. Employment and skill acquisitionprogrammesshouldbemoreofregionalandstatespecificthancentrallydesignedas “one-cap-fits-all”. This will havet a r g e t e d e ff e c t i n r e d u c i n gunemploymentinareaswithhigherratesofunemploymentinthecountry.



REFERENCEFederalMinistryofBudget&NationalPlanning.(2017).EconomicRecoveryandGrowthPlan2017. InFederalRepublicofNigeria&GrowthPlan.http://yourbudgit.com/wp-content/uploads/2017/03/Economic-Recovery-Growth-Plan-2017-2020.pdfFederal Republic of Nigeria. (2017). Implementation of the SDGs: A National VoluntaryReview.1–100. https://sustainabledevelopment.un.org/content/documents/16029Nigeria.pdfILO.(2013).GlobalEmploymentTrends2013.Recoveringfromasecondjobsdip.InGlobalEmploymentTrends.InternationalMonetaryFund(2017).InclusiveGrowthInternational LaborOrganization. (2019).World employment social employment social:trends2019.http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_615594.pdfMasdonati,J.,Schreiber,M.,Marcionetti,J.,&Rossier,J.(2019).DecentworkinSwitzerland:Context, conceptualization, and assessment. Journal of Vocational Behavior,110(June2018),12–27.https://doi.org/10.1016/j.jvb.2018.11.004NationalBureauofStatistics.(2016).FormalandInformalSectorSplitofGrossDomesticProduct.June.

Ajakaiye, O., Jerome, T. A., Nabena, D., & Alabi A. Olufunke. (2015). Understanding therelationship between growth and employment in Nigeria. May, 1–32.https://www.wider.unu.edu/sites/default/files/wp2015-124.pdfEnhancingFinancialInclusionandAccess(EFInA)(2018).EFInAAccesstoFinancialServicesinNigeria2018Survey



REFERENCENational Bureau of Statistics. (2018). Labor Force Statistics: Unemployment andUnderemployment Report. Labor Force Statistics Unemployment andU n d e r e m p l o y m e n t R e p o r t , 1 ( D e c e m b e r ) , 1 – 8 8 .https://www.proshareng.com/news/Nigeria Economy/Unemployment-Rate-Rises-to-18.8Percent-i/37757NationalDirectorateofEmployment.(2010).AnnualReport.NationalDirectorateofEmployment.(2016).AnnualReport.NationalFinancialInclusionStrategy(Revised)(2018).FinancialInclusioninNigeriaRai,S.M.,Brown,B.D.,Ruwanpura,&N.,K. (2018).SDG8:DecentWorkandEconomicGrowth.WorldDevelopment.Sachs,J.,Schmidt-Traub,G.,Kroll,C.,Lafortune,G.,Fuller,G.(2019).Sustainable Development Report 2019. In Bertelsmann Stiftung and SustainableD e v e l o p m e n t S o l u t i o n s N e t w o r k ( S D S N ) .https://doi.org/10.1192/bjp.111.479.1009-aSDGCenterforAfricaandSustainableDevelopmentSolutionsNetwork.(2019).2019AfricaSDGIndexandDashboardsReport.



Introduction

EconomicGrowth,UnemploymentandPovertyinNigeriaRisikatOladoyinS.Dauda,Ph.D.ProfessorofEconomics,FacultyofSocialSciences,UniversityofLagos,NigeriaAbstractInanattempttoaffirmthetheoreticallinkagebetweeneconomicgrowth,unemployment,andpovertysurgeinNigeria,thisstudyreliesonPearsoncorrelation,Grangercausalitytest,andtheimpulseresponsefunction(IRF).Theresultofthetrendandcorrelationanalysissupportsaweaknegativerelationshipbetweeneconomicgrowthandpoverty(-0.21)andtheneconomicgrowthandunemployment(-0.36).Amoderatenegativerelationshipexistsbetween poverty and unemployment rate. Surprisingly, the Granger causality test andimpulse response function conducted support the findings above since it reveals thatgrowthispro-poor;whilethelatterrevealsthatunemploymentandpovertydonotrespondtoshockineconomicgrowth.Inlinewiththeforegoing,thestudyconcludesthatoutputgrowthisexclusiveofthepoor.Thus,thereisaneedforstablemacroeconomicpoliciesthatwouldensureequaldistributionofincome,whichattractsthepoorandunemployedintothemainstream,thuspromotesinclusivegrowth.Nigeria l ike many other developingeconomiesintheworldisinthepursuitofsustainable development with focus onattainingahigh levelofeconomicgrowth,providing a conducive macroeconomicenvironmentforbothdomesticandforeigninvestments,creationof jobs,andpovertyreduction. This has led to the aggressiveadoption of poverty alleviation andunemployment reduction policies by theNigeriangovernment.Someofthepoliciesadopted by the government include theNational Home-Grown School FeedingProgramforchildrenwiththeaimoffeedingover 24 million school children. This hasencouraged poor parents to send theirchildrentoschooljusttoenjoyfreemealsinschool. Also, policies like N-Power hashelped in poverty and unemploymentreduction by creating jobs for the youths.

OtherpoliciesincludetheConditionalCashTransfer Program and Trader Moniinitiatives. These policies have beenbeneficialandhavehelpedinliftingsomeofthecitizensoutofthepovertyline,yet,muchneedstobedoneastheeconomystillshowssignsofsluggishnessinitsgrowthtrajectorysince the2016 recession.Nigeria'sgrowthratein2019standsat2.3%whichisbelowthe projection of 4.5% by the EconomicRecoveryandGrowthPlan(ERGP).AccordingtotheWorldBankreport,Nigeriawasranked thehighestcountrywithpoorpopulationin2018andhasbeenprojectedtoincreasebymorethan30millionby2030whichwouldaccountforabout25%oftheworld's extremely poor population.Similarly,theunemploymentrateisontheriseand isestimatedat23.1%asof2018.49ECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020

Severalotherfactorssuchaslowinflowofforeign investment, declining foreignreserve, rising inflationary pressure, fiscalindiscipline, and rising debt levels haveplagued the economy and have beenidentifiedtobeequallyresponsiblefortheslowrecoverygrowthpathof thecountry.The current position of the Nigerianeconomyishighlyfragileanditisvulnerabletobothdomesticandexternalshockssuchas oil price fluctuations and tardiness ingrowthresponse.Thisclearlysuggeststhatpolicymakersandthegovernmentneedtoadopt a different approach from theconvent iona l and ex is t ing povertyalleviation and unemployment reductionpolicies to adequately tackle the socialmenace. With the poor growth path,financing poverty reduction strategiesbecomes almost impossible and thisrendersmostofthemassesunemployed.The study thus seeks to examine therelationship between unemployment,poverty, and economic growth in Nigeria.Thestudyseeks toanswer thequestion ifNigeria's economic growth can efficientlyreduce poverty and unemploymentmenace?Empirical literature documents divergentv iews on the relat ionship betweenunemployment and economic growth inNigeria. While some studies opined apositive relationship (Ademola & Badiru2016; Akeju & Olanipeun 2014; Arewa &Nwakanma, 2012); others observed anegative relationship (Njoku & Ihugba,

2011) and others, found mixed evidence(Sodipe, 2008). Similarly, the relationshipbetween poverty and unemployment inNigeriaremainsinconclusive(Hassan,2015;EPAR,2016;Aigbokhan,2008; Ijaiya, Ijaiya,Bello, & Ajayi, 2011; Oyegoke & Wasiu,2018). This study provides new empiricalevidenceontheactualrelationshipbetweenthesevariablesconsideringtherecentslowpaceingrowth.Thestudyfurthersuggestspoliciesthatcanensurethatthegainsfromgrowth translate into unemployment andpoverty reduction. The study uses dataavailablefortheperiod1991till2019.Theremaining section of this paper reviewsrelevantliterature;thereafter,themethodsemployedaredescribed,thisisfollowedbyfindings, policy recommendations, andconclusion.ReviewofRelevantLiteratureIt is very crucial to state that we do notintend to provide an exhaustive reviewofliterature, but rather,we present selectedstudies considered crucial to our study.Akeju and Olanipeun (2014) tested thevalidity of Okun's law in Nigeria byexamining the relationship betweenunemploymentrateandeconomicgrowth,using Error Correction Model (ECM) andJohansen cointegration. Their findingsshowed a positive relationship betweenunemployment and economic growth inNigeria.Theyalsofoundashortandlong-run relationship between unemploymentrate and output growth in Nigeria. They,therefore,advocatedforincreasingforeigndirect investment (FDI) attraction that has

EconomicGrowth,UnemploymentandPovertyinNigeria


thepossibilityofreducingthehighrateofunemploymentinthecountry.Conversely,Airi,Ounakpo,andAnebi-Atede,( 2 0 1 6 ) e x p l o r e d t h e i m p a c t o funemployment on the Nigerian economyfrom1980to2010usingtheordinaryleastsquaresmethod(OLS)andtheyfoundthatunemployment has a negative effect onGDP of the economy. In the same vein,Imoisi, Amba, andOkon (2017), examinedtheimpactofunemploymentoneconomicgrowth inNigeriausing theordinary leastsquare(OLS)multipleregressionfrom1980– 2016. They found that unemployment,population, and labour force significantlyimpact Nigeria's economic growth, whileminimumwagehas no significant impact.They recommended that job creationshould be a primary objective of thegovernment,subsidyshouldbegiventotheprivate sector, and the labour marketshouldbederegulated.Lastly,Onwachuwu(2015) employed the OLS approach toexamine the impact of unemployment oneconomicgrowthinNigeriaspanningfrom1 9 8 5 t o 2 0 1 0 . T h e y f o u n d t h a tunemploymenthasnosignificantimpactonNigeria'seconomicgrowth.Hassan(2015)examinedtheimpactofgrossdomestic product (GDP) growth rate onpoverty reduction in Nigeria from 1986-2012. They employed the OLS regressionandfoundapositiverelationshipbetweenunemployment rate (whichwasusedasaproxyforpoverty)andGDP.They,therefore,recommended that key sectors l ike

agriculture and industries should beprioritizedingeneratingmoreemploymentandabsorbmore labour,andthusreducepovertyinthecountry.Morerecently,Dauda(2016)examinedtheparadox of rising poverty amid higheconomicgrowthinNigeria.Theyfoundthatjoblessgrowth,anon-propoorgrowth,andfailureofpovertyalleviation initiativesarethe reasons for thisabsurdity. Theauthorrecommended that priority should beplacedonstructural transformationwhichnecessitates good governance, anti-corruptionpractices,andprovisionofsocialprotectionforthepoorandvulnerable.ResearchMethodsThissectionexplainstheempiricalstrategyemployed in establishing the relationshipthat exists between economic growth,unemployment, and poverty in Nigeria;threeapproachesareemployedinachievingthis. The first method employed is byconducting a correlation statistic amongeconomic growth, unemployment, andpoverty.ThePearsoncorrelationcoefficientrangesbetween-1and1with-1interpretedasaperfectnegativerelationshipbetweenthebivariatevariables;1isinterpretedasaperfectpositiverelationship;with0implyingno relationship exists between them. Thesecondapproach is by conductinga long-runcausalitytestasdevelopedbyGranger(1969), and the short-run causality testbetween the bivariate variables. Thecausality test seeks to establish whethereconomic growth causes a change in



unemployment or the reverse is thescenario; this causal ity test is alsoconducted between other variables(economic growth, unemployment, andpoverty). The third approach employed isthe estimation of the impulse responsefunction (IRF) together with a variancedecomposition(VDC)asdevelopedbySims'(1980) Vector Autoregression model. TheIRFandVDCwillhelptoshowhowpovertyand unemployment respond to shocks orsuddenchangesineconomicgrowth.Economicgrowthismeasuredbyestimatingthechangeinrealgrossdomesticproductf o r t h e N i g e r i a n e c onomy wh i l e

unemploymentrateismeasuredusingthetotalunemployedasapercentageof totallabourforceusingtheInternationalLabourOrganisation's (ILO's) model. Poverty ismeasured using the poverty headcountratioat$1.90aday.Allthedataaresourcedfrom the World Development Indicator(2019).AnalysisandFindingsThis section evaluates the data retrieved,and presents the result of the analysescarriedout.Thepurposeofpresentingthisanalysis is to help in formulating policiesthatwillaidthepovertycumunemploymentreduction.


Figure1:EconomicGrowth,UnemploymentandPovertyHeadcountRatio

Source:WorldDevelopmentIndicators(2019)Figure 1 shows the trend of economicgrowth rate between the periods. It isevident thatbetweentheperiods1981 till1990,theeconomicgrowthratecontractedby0.2%withinthedecadeandasatthen,about53.1%ofthecitizenswerelivingbelow$1.90 per day while no information wasavailable for unemployment rate. Theeconomy experienced positive growthbetween the period 1991 and 2000 byexpandingwith1.6%whilethisreducedthenumberofpeoplelivingbelow$1.90perday


bymeagre0.4%.Asattheperiodbetween2011and2019,thegrowthdeclinedto3.3%from8%recordedbetween2001and2010;thepovertyratiowas51.5%;while11.3%ofthelabourforcewereunemployed.Furthertestdoneisthecorrelationbetweenthe measures, and the result shows thatthere is a weak negative relationshipbetween economic growth and poverty (-0.2);economicgrowthandunemploymentrate (-0.36); while there is a moderatenegativerelationshipbetweenpovertyandunemploymentrate.Theimplicationofthissuggests that economic growth is a weakrepellant of unemployment menace andpoverty incidence. The Granger causalitytest conducted reveals that economicgrowth does not cause a change inunemployment rate or poverty reduction,neitherdoesanyofthemcauseachangeineconomic growth. This decision wasreached as the probability value of the F-statisticswereabove5%,therebyfailingtorejectthehypothesisofnorelationship.Thisresult further strengthens the weakrelationship found between growth andunemploymentcumpoverty.

The result from Figure 2 reveals thatunemployment responds negatively whenthereisashockineconomicgrowthandthisis feltmostly after the 4th periodwhile itreveals that poverty does not respond toshock in economic growth for the entireperiod.Theimplicationofthesefindingsisthat poverty headcount ratio does notrespond to shocks in economic growthexcept unemployment rate. Conclusively,theeconomicgrowthinNigeriaexperiencedthus far cannot cause changes in povertyreduction.ConclusionResults support the presupposition thateconomicgrowthinNigeriaispro-poor.Thisis because, the aforementioned resultsshow that unemployment surge andpoverty head count respond weakly toincreasingoutputgrowth.However,itisonlyemployment that moderately influencespoverty. Similarly, the impulse responsefunctionupholds that unemployment andpoverty do not respond to shocks ineconomic growth. Therefore, the studyconcluded that within these periods ofexamination,growthisyettobeinclusiveofthepoorandunemployedgroups.Drawingfrom this intellectual exposition, it ispertinent for government and otherstakeholders to fashion out workableframework, timelines and trajectorythrough which the poor and unemployedcanbedrivenintothemainstreamsectors;hence,transformingeconomicgrowthintoone that is inclusive via the underliningpathways.



PolicyRecommendationBasedonthefindingsfromthisstudy,thef o l l ow i n g r e c ommend a t i o n s a r ehighlighted:1.Thesurgeofunemploymentandpovertycan be ameliorated if the Federalgovernment supports value creation inmainstream sectors of the Nigerianeconomy which employs large labourforces, such as the agriculture andindustrysectors,inordertomakegrowthpro-poor.2. The monetary and fiscal authoritiesshould ensure a good blend of bothsound fiscal and monetary policiesa imed a t c rea t i ng a conduc i veenvironment for private and publicinvestmentstothrive;hence,promotinginclusiveandtransformativegrowth.

4. Furthermore, to reap the benefits of apositiveexternalshock,thereisaneedtoimproveonthelevelofcompetitivenessand productive capacity within thecountry.5. It cannot be overemphasized thatinvestment inbasic infrastructure suchaspowerandroadsespeciallyintheruralsettlementswouldbeatacticalstrategyat promoting inclusive and sustainablegrowthinNigeria.

3. Also,thereisaneedforpolicystabilityandcontinuityespeciallyonethatwouldensureequitabledistributionofincomeandopportunitiesbetweentherichandpoor.

EconomicGrowth,UnemploymentandPovertyinNigeriaFigure2:Impulse-ResponseFunctionofPoverty,UnemploymentandGrowth

Note:Thefirstgraphshowstheresponseofunemploymenttogrowthshocks,whilethesecondgraphshowstheresponseofpovertytogrowthshocks.Source:Author'sEstimation


Ademola,S.,&Badiru,A.(2016).TheimpactofunemploymentandinflationoneconomicgrowthinNigeria(1981–2014).InternationalJournalofBusinessandEconomicSciencesAppliedResearch,1(1),47–55.

Akeju,K.F.,&Olanipekun,D.B.(2014).UnemploymentandeconomicgrowthinNigeria.JournalofEconomicsandSustainableDevelopment,5(4),138–144.Arewa, A., & Nwakanma, P. (2012). Potential-real GDP and growth process of Nigerianeconomy,anempiricalre-evaluationofOkun'sLaw.EuropeanScientificJournal,8(9),25–33.Dauda,R.S.(2016).PovertyandeconomicgrowthinNigeria:Issuesandpolicies.JournalofPoverty,21(1),61–79.doi:10.1080/10875549.2016.1141383EvansSchoolPolicyAnalysisandResearchEPAR#327.(2016).EconomicGrowthandPovertyinNigeria.

Aigbokhan,B.E.(2008).Growth,inequalityandpovertyinNigeria.EconomicCommissionforAfricaACGS/MPAMSDiscussionPaperNo.3.Airi,S.E.,Ounakpo,R.I.,&Anebi-Atede,H.A.(2016).ImpactofgraduateunemploymentontheeconomicgrowthoftheNigerianeconomy.InternationalJournalofadvancedAcademicResearch,2(3),1–16.

FDC Bi-Monthly Update (2019). A Financial Derivatives Company Publication, 9(21),December30,2019Granger,C.W.J.(1969).Investigatingcausalrelationsbyeconometricmodelsandcross-spectralmethods,Econometrica,37(3),424–438.Hassan,O.M.(2015).Theimpactofthegrowthrateofthegrossdomesticproduct(GDP)onpovertyreductioninNigeria.InternationalJournalofBusinessAdministration,6(5),90–100doi:10.5430/ijba.v6n5p90Ijaiya,G.T., Ijaiya,M.A.,Bello,R.A.,&Ajayi,M.A.(2011).EconomicgrowthandpovertyreductioninNigeria.InternationalJournalofBusinessandSocialScience,2(15),147–154.

REFERENCE



REFERENCEImoisi,A.I.,Amba,E.A.,&Okon,I.M.(2017).UnemploymentrateandeconomicgrowthinNigeria: An empirical analysis, 1980–2016, International Journal of Development andSustainability,6(7),369–384.Njoku,A.,&Ihugba,O.(2011).UnemploymentandNigerianeconomicgrowth(1985-2009).Proceedingsofthe20011internationalconferencesonteaching,learningandcharge.Onwachuwu,C.I.(2015).DoesunemploymentsignificantlyimpactoneconomicgrowthinNigeria?GlobalJournalofHuman-SocialScienceEconomics,15(8),23–26.

World Development Indicators, (2019). World development indicators. Retrieved fromhttps://databank.worldbank.org/source/world-development-indicators#

Oyegoke,O.E.,&Wasiu,A.Y. (2018).Effectsofeconomicgrowthonpovertyreduction inNigeria.JournalofEconomicsandFinance,9(5),25–29.Sims,C.A.(1980).Macroeconomicsandreality,Econometrica,48(1),1–48.Sodipe,O.A.(2008).EmploymentandeconomicgrowthinNigeria.AnunpublishedM.Sc.Researchpresentedtothecollegeofbusinessandsocialscience,Covenantuniversity,Ota,OgunState.



https://databank.worldbank.org/source/world-development-indicators

Introduction

GrowthandPovertyDynamicsinNigeria:EvidencefromPanelSurveyChinasaIkeluandOnyukwuE.OnyukwuAbstractWeexaminedtherelationshipbetweenhousehold-levelpovertydynamicsandpatternsofgrowthusingapaneldatasetcomprisingtwowaves.Analysisrevealsthathouseholdsthatcultivated theirown landrelatively livemore in theurbanareas.Sincehouseholds thatcultivatedtheirlandsandresideinurbanareasareassociatedwithreducedlikelihoodofbeingchronicallypoor,thegrouppatternofgrowthwillbeforhouseholdstomigratetourban areas to partake in the opportunities created by theAgricultural transformationprogrammes. In addition tomobility, since households that reside in urban areaswithsecondaryeducationareassociatedwithreducedlikelihoodofbeingchronicallypoorandimpoverished,thegrowthpatternisforruraldwellerstobeeducateduptothesecondarylevelandthenmigratesoastofullyparticipateinthetransformationsintheurbansector.Also,thereisevidencethatgrowthisconstrainedbythepresenceofchronicpovertythroughnon-farmemployment, the growthpattern forhouseholds in the rural areaswill be toimprovetheactivitiesthatdonotconstituteprimaryagriculturalproductionsotheycanbenefitfromopportunitiesintheruralnon-farmeconomy.Buttobenefitfromthisruralnon-farmeconomy,thepoormustovercomemanypolicyandresourceconstraints.Theseincludelimitedaccesstoconnectivity,educationandrelevantskillstraining,financeandlegalrightstoland.Otherconstraintsareassociatedwithexclusionbasedongender,ageoridentity(WorldBank,2017).Theruralnon-farmsectorcan,andoftendoes,contributetoeconomic growth, rural employment, poverty reduction, and amore spatially balancedpopulation distribution (Lanjouw, 2001). Rural non-farm activities account for 35 to 50percentofruralincomeindevelopingcountries,andforthelandlessandtheverypoor,sustainable income gains at the household level are associated with additional wagesearnedfromnon-farmactivities(WorldBank,2017).Nigeria like other countries in Africa hasexperienced real growth in the past fewyearsbutnotenoughpovertyreductionhasbeenrecorded.However,countriesthatdowell onpoverty reduction takeagricultureand the l ivelihoods of smallholdersespecially Africa's millions of womenfarmersseriously–throughmorerelevantagricultural research, smallholder friendly

infrastructure and improved marketing.(Arndt,Demery,Mckay,&Tarp,2015) intheir studyof growth andpoverty in Sub-SaharanAfricaclassifiedcountriesintofourgroups, depending on their response togrowth and extent of poverty reduction.Nigeria falls under the second group ofrelatively rapid economic growth butseeminglylimitedpovertyreduction.57

1


5.Whatpolicycanberecommendedtothegovernmentbasedontheanalysis?4.Whatarethemajorpolicyandnon-policyfactorswhichliebehindthepatternsofgrowthincidenceandpovertydynamicsobserved?3. Whatistheimpactongrowthofchronicpoverty?

2. What relationships exist betweenpatterns of poverty dynamics asmeasured by panel data, and growthincidence amongst the poorest, asmeasured through national growthincidencecurves?

1. What does the analysis of householdpanel data tell us about the nature,dynamics and magnitude of growthamongst the chronically poor, thoseescaping poverty and those becomingimpoverished?

Thispaperseekstoclearthedoubtsraisedabove by the authors by answering thefollowingquestions:

TheyarguedthatNigeriafailedtoimprovenon-monetary indicators despite massiveoil revenues formuchof theperiod.Theyalso stated that the unfocused state ofNigeria's statistics in relation tomonetarypovertyprevented solid conclusions tobemade as regards the nexus.Wewere notimmediately able to comment on theirclaims until we are able to establish arelationship between patterns of povertydynamics and growth incidence amongstthepoorest.

In answering the above questions, wee m p l o y e d t h e L i v i n g S t a n d a r dMeasurement Survey (LSMS) data, anationally representative panel datacovering 5,000 households in waves oneandtwo.Generally,weseektoexaminethetypesofpovertydynamics/trajectoriesandgrowththatisexperiencedinNigeria;whathavethesedynamicsandtrajectoriesbeenattributed to; why do some householdsbecomepoorerorwhydosomehouseholdswho were non-poor in a period slip intopoverty in another period; why are somehouseholds able to escape poverty andremainoutof itoveramedium-term;andwhydosomeremaininpovertyatallpointsintime?Specifically,weaimtostudyhowdifferentfactorsexplainthetrajectoriesofpovertyinNiger ia . Our findings showed thatHouseholdwithcultivablelandnotutilisedhaveagreaterriskofbeingchronicallypoorassomehouseholdownlandthatwerenotcultivated. Further analysis shows thathouseholds living in well-connected areasliketheurbanareasareallassociatedwithcultivating theirown land. Inessence,ouradviceforhouseholdswithlandthatarenotcultivated—thatliveintheurbanareas—isthattheyshould,byallmeans,increasethenumberofpersonsintheirhometomakegood use of the advantage of largehouseholdsizeforagriculturalpurposes.

GrowthandPovertyDynamicsinNigeria:EvidencefromPanelSurvey


Regarding household attributes, anincreaseinhouseholdsizeisassociatedwitha higher risk of chronic poverty andimpoverishmentrelativetoanescapefrompover t y. I nc rease in the share o fdependents is also associated with anincreasedriskofbeingchronicallypooranddescendingintopoverty.Headwithprimaryeducationhaveagreaterriskoffallingintopoverty in rural areas. In the area ofactivities, head in non-farm employmenthaveanincreasedlikelihoodofdescendinginto poverty and a reduced likelihood ofbeing chronically poor. Households thathavetakenloanhaveareducedlikelihoodofbeingchronicallypooranddescendingintopoverty. Households that participate in a

Inseekingtoanswerthequestionsaboveonthe factors that lead to household'simpoverishment and chronic povertyrelativetoescape,weanalysedthedataandfoundthatanincreaseinlogofassetvaluemakes household less l ike ly to bechronicallypooranddescendintopovertyrelativetoescapingpoverty.Anincreaseinrooms per person is associated with areducedriskof chronicpoverty relative topoverty escapes. An increase in improvedsanitarytoiletisassociatedwithareducedlikelihood of being chronically poor anddescending into poverty relative toescapees.Also,anincreaseinpotablewaterforhouseholdsisassociatedwithareducedlikelihood of descending into poverty.However,householdswithlimitedaccesstoelectricity have an increased chance ofdescendingintopoverty.

As regards context, households in allregions except the south-west have thelikelihood of being chronically poor andimpoverishedusingthewholesampleandrural subset. For the urban subset,households in the north-west and south-east have an increased likelihood ofdescending intopoverty. In looking at theimpact of negative poverty dynamics, likechronic poverty and impoverishment, ongrowth, the study re-assessed the non-oilsector sources of growth associated withthese negative poverty trajectories. Wefoundthatforthegainsinchronicpovertytobe achieved and reduced drastically,adequate investments in the educationsector, non-farm activities should beprioritized. This is because an increase ininvestmentineducationisassociatedwithareducedlikelihoodofbeingchronicallypoorandanincreaseineducationisassociatedwithreducedlikelihoodofdescendingintopoverty. Further, an increase in non-farmactivitiesbringsaboutareducedlikelihoodof being chronically poor. Also, we foundthatifthosedescendingintopovertymustbe drastically reduced, transportationsector must be a priority because anincrease in transportat ion costs isassociatedwith an increase in chances ofdescendingintopoverty.

savingsgrouphaveareducedlikelihoodofbeing chronically poor in the whole andruralsamples.GrowthandPovertyDynamicsinNigeria:EvidencefromPanelSurvey


DescriptiveStudy 2Macro level: Growth Incidence Curve(GICs)We conducted sensitivity tests using theuniformdistributionforthedatageneratingpart of the graphs.We then createdGICsusing the data since panel data yearsoverlap with the GIC years. In addition,consumption data are in disaggregatedformleavingustobaseourdecisiononthisdata.Theresultsfromtheanalysisaregiveningraphicalformbelowas:

Figure1:PovertyDynamicsinNigeria(2010-2013)

Source:AuthorsChronicpoor Descents Escapes NeverpoorNationalRuralUrbanNorthCentralNorthEastNorthWestSouthEastSouthSouthWest

11.87%18.14%2.70%15.50%13.80%25.22%9.63%9.13%2.52%

8.72%12.41%3.33%6.02%13.97%18.54%8.37%5.97%2.78%

6.27%8.57%2.91%10.69%5.70%8.33%3.14%6.50%4.37%

73.14%60.88%91.06%67.80%66.53%47.91%78.86%78.40%90.34%

Table1:PovertyTrajectoriesinNigeria

Source:Authors



Figure2:PovertyTrajectoriesinNigeria(2010-2013)

Source:AuthorsMacro level: Growth Incidence Curve(GICs)We conducted sensitivity tests using theuniformdistributionforthedatageneratingpart of the graphs.We then createdGICsusing the data since panel data yearsoverlap with the GIC years. In addition,consumption data are in disaggregatedformleavingustobaseourdecisiononthisdata.Theresultsfromtheanalysisaregiveningraphicalformbelowas:Figure3: Figure4:



Figure5: Figure6:

Figure7: Figure8:

Figure9:



Furthermore, Nigeria should not only3industrialise but also focus on all key4sectors (Education and Transportation) thatwillnotonlyhelpreducethenatureofchronic poverty and short-lived povertyescapes experienced by households, butalso inequality, thereby spreading the5benefitsofgrowth acrossthecountry.Thisleads us to the discussion of structural6transformation that allows inclusivegrowth. Such structural transformation

ConclusionIn the whole sample, approximately 12percent of the households are chronicallypoor,sixpercentareescapees,ninepercentdescended into poverty, while 73 percentwereneverpoor.Byregion,approximately16percentofthehouseholdsinthenorthcentral are chronically poor, 11 percentescaped, six percent descended, while 67percent were never poor. Further, threepercentofthehouseholdsinthesouthwestwere chronically poor, four percentescaped,threepercentdescended,while90percent were never poor. In addition,factors thathelphouseholdsmoveoutofthe chronic nature of poverty includehousehold size, shareofdependants, andregionofresidence.Factorscontributingtolow impoverishment include electricity,education, household size, share ofdependents, non-farm employment andregionofresidence(north-east,north-west,south-eastandsouth-south).

must not be rapid to avoid growthacceleration episodes thereby hinderinggrowthmaintenance–whichisparamount(Sen, 2014). The process of structuraltransformationtakesplaceatmanylevels.At one end, it is the result of decision-making of individual households or evenhousehold members. At the other end,governmentpoliciescanaffectthedirectionandspeedof transformation (Beck,2015).No doubt, Covid-19 related shocks wouldcausesomeeconomicfluctuationsthatmayslow down economic growth in the shortterm.However,preliminaryin-depthstudyby(Farayibi&Asongu,2020)ontheimpact7ofthepandemicshowinsignificant declineonmacroeconomicvariables like inflation,employment, exchange rate, GDP growth,among others. Besides, deliberate policyactionsbytheNigeriangovernmentliketherecently launched Economic SustainabilityPlan(ESP)arelikelytoensureearlyandfullrecoveryoftheeconomicgrowthtrend.8Policyrecommendations 1.Encouragehouseholdsintheruralareastoownmoreassetstofacilitateescapesfrompovertyandpreventdescentsintopoverty.However, theircounterparts intheurbanareasareencouragedtoownless assets since findings show thaturbandwellersthatownlesservalueofassetshaveareducedlikelihoodofbeingchronicallypoorandimpoverished.



4. Educationpolicymakersneedtoreflectontheassociationbetweencompletingprimaryeducationandimpoverishment.11Deliberate investment inhigher levels

2.Innovatearoundthepowersectorsothattheprotractedproblemintheelectricitysector can be resolved in a timelymanner.Thisinnovationcanbethroughpromotionofpoliciesandinterventionsi n t he a rea o f a c c e s s t o ba s i cinfrastructure services for the poor. Inthis regard, while the current federalg o v e r n m e n t i n v e s t m e n t s o nstrengthening and extending electricityt r a n sm i s s i on i n f r a s t r u c t u re i scommendable,similareffortsshouldbemade in deploying renewable energysourcestotheruralcommunitiesacrossthe regions. This wi l l encouragecommunication firms to upgrade and9extendinternetconnectivityfacilities tothe rural communities as well. This ispart icular ly important g iven theemerging new ways of doing thingsoccasioned by the current Covid-19pandemic.Theruralcommunitiesmustnotbeleftbehindintheemergingnewnormal where acquisition and use ofmoredigitalskillswouldberequired.3.Householdsizeiscriticaltobothreducingchronic poverty, and descents intopovertyinthewholeandruralsample.Tothis end, we recommend womenempowerment and education sincestudieshaveshownthathighlyeducated10womentendtohavelesschildren .

6 . Pa rad i gm sh i f t o f f o cus i ng on13households in all regions except thesouth-westshouldbeprioritysothatthereduction of chronic poverty andimpoverishmentcanbeachievedinthelongrun.7. Massive investments in non-farmactivities that are critical sources ofadditional incomefor thepoor,so thatchronicpovertycanbereduced.Withinthe rural population, households thatdon't have some form of non-farmincometendtobepoorer(WorldBank,2017).

of education is critical to ensuringhuman cap i ta l deve lopment ; ashouseholdswhereheadhascompletedprimaryeducationalonearemorelikelytodescend intopoverty. In lightof theunfolding new normal occasioned byCovid-19, there should be greater12embeddingofdigital skills andmulti-mediatechnologiesacrossthedifferenttiersofeducationinthecountry.5 . Encourage more households toparticipateinsavingsgroupsandtakealoansothatthegainsinescapingpovertyandpreventingdescendingintopovertycanbemaintainedinthelong-term.



Mariotti,C.,&Shepherd,A.(2016).Gettingthelong-termmacrodevelopmentperspectiveright:Diversificationoftheeconomywithstrategic investmentandincreasedprotectionfromrisks.Retrievedfromwww.chronicpovertynetwork.org

Arndt,C.,Demery,L.,Mckay,A.,&Tarp,F.(2015).WIDERWorkingPaper2015/051-GrowthandpovertyreductioninTanzania.WorldBank (2017).GrowingtheRuralNonfarmEconomytoAlleviatePoverty.RetrievedfromWorldBank,Washington,DCwebsite:www.worldbank.orgBeck,U.(2015).WIDERWorkingPaper2015/065-LocaltransformationinruralVietnam:Acommunelevelanalysis.Bhorat, H., Cassim, A., & Hirsch, A. (2014). WIDER Working Paper 2014/155 Policy co-ordinationandgrowthtrapsinamiddle-incomecountrysetting:ThecaseofSouthAfrica.Farayibi, A. O., & Asongu, S. A. (2020). The Economic Consequences of the Covid-19PandemicinNigeria.Gallagher,K.P.,Moreno-Brid, J. C.,&Porzecanski,R. (2008). TheDynamismofMexicanExports: Lost in (Chinese) Translation? World Development, 36(8), 1365-1380.https://doi.org/10.1016/j.worlddev.2007.08.004Gebreeyesus,M.(2014).WIDERWorkingPaper2014/163Anaturalexperimentofindustrialpolicy:FloricultureandthemetalandengineeringindustriesinEthiopia.Kimenyi,E.,Otieno,J.,&Kaye,T.(2020).BuildingeffectiveCOVID-19EducationResponsePlans:InsightsfromAfricaandAsia.https://doi.org/10.5281/ZENODO.3884302Lanjouw, P. (2001). Nonfarm employment and poverty in rural El Salvador. WorldDevelopment,29(3),529-547.https://doi.org/10.1016/S0305-750X(00)00105-4

REFERENCE



REFERENCEMashindano,O.,&Maro,F.(2011).GrowthwithoutpovertyreductioninTanzania:Reasonsfor themismatch. CPRCWorking Paper 207. Retrieved from https://agris.fao.org/agris-search/search.do?recordID=GB2012109809Osili,U.O.,&Long,B.T. (2007).DoesFemaleSchoolingReduceFertility?EvidencefromNigeria.https://doi.org/10.3386/w13070Sen, K. (2014). Inclusive growth: When may we expect it? when may we not? AsianDevelopmentReview,31(1),136-162.https://doi.org/10.1162/ADEV_a_00022Shepherd,A.(2016).Householdeconomicdiversification:Policiestosupportsmallholderagriculture, the rural nonfarm economy and casual wage labour. Retrieved fromwww.chronicpovertynetwork.orgStiglitz, J. E. (2015). WIDER Working Paper 2015/149 Industrial policy, learning, anddevelopment.



ENDNOTE

5Nigeria can become amajor exporter of ore andmetal like South Africa that reliesrelativelymorethanMalaysia,PhilippinesandChinaonexportsoforesandmetals,insuranceandfinancialservicesbutfallsshortininnovativeorvalue-addedexports(Bhorat,Cassim,&Hirsch,2014). Sinceabasketofexportedgoodsare critical togrowth,developmentandinternationalcompetitiveness(Gallagher,Moreno-Brid,&Porzecanski,2008). 6Emergingresearchsuggests thatgreaterattention isneeded to thepolicycontext incountries undergoing rapid structural transformation which may be in some casesexacerbatinginequalityforthelandlessandtheverypoor.Forexample,inRwanda,arapidlymodernizing agriculture sectormay be leading to increased inequality in the farm andnonfarmeconomies(WorldBank,2017).

2PovertytrajectoriesexaminedincludeNeverPoor,Descend(Impoverishment),Chronicand Transitory Escapes. Never Poor refers to households that stayed out of poverty.Impoverishmentreferstotheprocesswherebyapoorpersonorhouseholdbecomespoorer,orwheresomeonewhoisnon-poorslipsintopoverty.Chronicpovertyreferstopeopleorhouseholdswhoremainlivinginpoverty.Transitorypovertyescapersarethosehouseholdsthatusedtoliveinpovertyandsucceededinescapingpoverty.3Exchangeratepolicythathastraditionallybeenthoughtofasamacroeconomicpolicyisalso an industrial policy and it is true too of other aspects of macroeconomic policy.Economiesthatrelyonmonetarypolicyformacroeconomicstabilizationare,simultaneously,affectingtheeconomies'sectoralallocations,forexample,relativetowhattheywouldbeifthegovernmentreliedmoreonfiscalpolicy(Stiglitz,2015).4Forinstance,intheTransportationsector,theuncertaintythatbringsaboutincreaseindescendingintopovertywheninvestmentinthissectorisincreasedshouldbeclarifiedbytransparentlyreformingthesectorandworkingtowardsatransportsystemthatworksforall-this can be based on improved technology for this sector. After extensive reformprogrammestotransformthefloriculture industryofEthiopia, theeconomybecamethesecond-largestfloricultureproductsexporterfromAfricawithanexportvalueofnearlyaquarterbillionUSDin2012(Gebreeyesus,2014).

1InstitutdeMathematiquesetdeSciencesPhysiques(IMSP),PortoNovoandInstituteforDevelopmentStudies(IDS),UniversityofNigeriaEnuguCampus.



ENDNOTE7Meaningonlystatisticallysignificantvariablescanbesaidtohaveacorrelationamongstthemselves-whichcanthenleadtothestudyoftheircauseandeffect.8Foranextendedversionofthispaperwhichcapturesthemultinomiallogisticregression;furtherregressionanalysis;andsummarystatisticsofchronicallypoor,impoverishedandescapedhouseholds,pleasewritetheauthorsontheire-mail.9The recent reduction of Right of Way (RoW) charges for telecommunicationinfrastructures by the state governments of Ekiti, Imo and Anambra is a welcomedevelopment as this will help integrate the necessary infrastructure needed for thisinnovation,improvebroadbandinfrastructureandeasedoingbusiness.10(Osili&Long,2007).11Evidenceon 'What', 'How' and 'Why' is found in StuartCameron'swork: ScalingupSchoolImprovementinNigeria:FindingsfromaNewSurvey(www.esspin.org)12Technologyshouldbepartoftheeducationsystemasthiswillleadtoinnovationandfurther competition. This innovation strategies should include strategies for reachinglearners(pupils),teachersandparentsalike(Kimenyi,Otieno,&Kaye,2020)13Particularlythenorth-west,south-eastandsouth-southregionssincetheyhappentobearecurringdriverofbeingchronicallypooranddescendingintopovertyforthewholeandruralsamples.Tailoringinterventionstothesespecificlocalcontextsarekeyformaximizingdevelopmenteffectiveness.Themoreweknowaboutthechronicpooranddescendersintheseenvironments,themorelikelyweareabletoimplementpoliciesandinterventionsthataddresstheneedsoftheseregions(WorldBank,2017).14Sincestudyshowsthattheruraleconomyisakeypartofthesolutiontoendingpoverty,(WorldBank,2017)recommendsthatpolicymakersshouldinpartnershipwithdonorsandclient countries like Nigeria collect information on both formal and informal ruralenterprises,theirconstraintsandperformancetohelpbetterinformtheSystematicCountryDiagnostic.



Introduction

TowardsanInclusiveGrowthFramework:CriticalIssuesandNigeria'sContextMartinsIyoboyi,Ph.D.,DepartmentofEconomics&DevelopmentStudies,FederalUniversityDutsinMa,KatsinaState,Nigeria.AbstractThis paper explicates an inclusive growth framework with an emphasis on Nigeria.Deployinganon-quantitativeapproach,itshowsthatinclusivegrowthfocusesoneconomicgrowthwhichisnecessaryandcrucialforpovertyreduction,dealswithboththepaceandpattern of growth, adopts a long-term perspective, broad-based across sectors(necessitatingstructuraltransformation)andaboveall,theimperativeofgovernmentalroleintheinclusivegrowthtrajectory.ThepaperunravelsthepeculiarfactorsmilitatingagainsttherealizationofinclusivegrowthinNigeriaandrecommendsthemechanismtodealwiththem,inorderforthecountrytoaddressthepandemiclevelofpovertyandunemployment,andthusenjoythebenefitsaccruabletoinclusivegrowth.Nigeriaisaneconomictragedyofsomesort,andachievinginclusivegrowthhasbeenaHerculeantask.Inclusivegrowthisusedtorefertothepaceaswellasthepatternofgrowth, both of which are regarded asintertwined,and thereforemustbe jointlyaddressed.Inclusivenessinitselfisagenericconcept which encompasses equality ofopportunity, equity, and protection inmarkets (Commission on Growth andDevelopment, 2008). Inclusive growth,therefore,connectsbothmacroandmicrodeterminants of growth, with the formerembracing structural re-alignment foreconomic diversification, innovation, andcompetition.Theimperativesofinclusivegrowthcannotbe gainsaid, dovetailing into rapid andsus ta ined pover t y m i t i ga t ion andemployment creation. Consequently,inclusivegrowthleveragespeople'sabilityto

both contribute to, and benefit fromeconomicgrowth.Thishowever isnot thesame thing as pro-poor growth, whichessentiallyaimsatthewelfareofthepoor,as i ts concern is with engenderingopportunities for the greater part of thelabourforceincludingthepoorandmiddle-class. Although the definition of inclusivegrowth is consistent with the absolutedefinition of pro-poor growth, it differs intwofundamentalways.First,absolutepro-poorgrowth canbeengenderedbydirectincomeredistribution,whereasproductivityg row th and imp rovemen t i n newopportunitiesforemploymentaregermaneforgrowthtobeinclusive.Second,focushastraditionallybeen, in the caseofpro-poorgrowth,ongrowthandpovertymeasures,asagainstinclusivegrowthwhichisfocusedontheex-anteanalysisoftheimpedimentstosustainedgrowth,aswellasthesourcesofhighgrowthandpovertyreduction.70ECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020

A critical issue in the inclusive growthframework is that focus is on productiveemploymentrather thanondirect incomeredistr ibution, as a mechanism forimprovingtheincomesofexcludedgroups.Although income distribution or transferschemescouldbeemployedintheshortrunto mitigate the adverse impact of publicpoliciesaimedatgrowth,theyarenotsuitedtothelong-runhorizon,especiallyforpoorcountrieswhichfacethedoublejeopardyof

According to Ravallion and Chen (2003),growth is considered pro-poor in theabsoluteifpoorpeoplebenefitinabsoluteterms, as indicated by some establishedpoverty indicators,whereas in the relativedefinition,itis“pro-poor”ifandonlyifthereisadeclineininequality,i.e.ifthegrowthintheincomesofthepoorisfasterthanthatoftheentirepopulation.While rapidpaceofgrowth is a sine qua non for significantpoverty reduction, its sustainabil ityregarding long-run horizon necessitatesthatitshouldnotonlybebroad-based(i.e.encompassing or cutting across sectors),but inclusiveofaconsiderablechunkofacountry'slabourforce.From the foregoing, this paper dealswiththe issues in inclusive growth framework,andthesalientissuesinNigeria'scontext.Itis divided into four sections. The criticalissuesininclusivegrowtharepresentedinsection2. Insection3,Nigeria'scontext isc o v e r e d . S e c t i o n 4 i s o n p o l i c yrecommendationsandconclusion.CriticalIssuesinInclusiveGrowth

overstretchedbudgetsanddismalaverageincomelevelsbelow700USdollarsperday.It isreasonedthatevenforthedevelopedworldandforsomepartsofthepopulation,redistr ibut ion schemes need to becombinedwithothermeasurestoaddressrisingpovertyrates(OECD,2008).

Newjobscouldemanatefromtheformalori n f o rma l s e c t o r s , i n c l ud i n g s e l f -employment.Importantly,thereshouldbeproductivitygrowthirrespectiveofthetypeof employment as a means of improvingwagesacrosssectors,whileaddressingtheissueofunderemployment,whichisamajorprobleminmanycountries,especiallylow-incomeeconomies.Inaddition,policiesarenot targeted mainly in favour of labor-intensity in industries,althoughthismighttendtobeadvantageousforthepoorwithlittleeducationandtechnicalcompetencies.

Alliedtothis isthattherealizationofhighgrowth rates and poverty reduction isunderpinnedonthepreponderanceofthelabour force taking an increasing share inthegrowthprocess.Consequently,growthhastobeinsuchamannerthatbringsaboutprogressivechangesinincomedistribution.Thissortofefficiencyinthegrowthprocessiscapableof inducingagreaterimpactonpovertyreductionthanoneinwhichincomedistribution remains unchanged aftergrowth, as demonstrated in White andAnderson (2001). Thus, for growth to beboth inclusiveandsustainable,productiveemployment is assumed to be the maininstrument.

TowardsanInclusiveGrowthFramework:CriticalIssuesandNigeria'sContext


Thus a successful inclusive growthframework should take cognizance ofproductive resources and capacity of theindividualonbothlabordemandandsupplysides.Second,soundpoliciesareaviablestrategyfor sustainable and inclusive growth.However , such po l i c ies shou ld beencompassingoreclecticandshouldtakealonger-term perspective. With long termperspective comes the need to recognizethatbetweenreformsandoutcomes,therearetimelags.Overall,emphasisshouldbeplacedonimplementingpoliciesintheshortrun, but if inclusive growth must besustainable, it has to contend with thefuturehorizon.Furthermore, when high growth ratesextendoveraperiodoftime,theirbenefitsare felt in terms of poverty reduction(Bourguignon, 2003). Findings by Kraay(2004)indicatethatasmuchas70percentofthe var iat ion in poverty reduct ion(measured by the headcount ratio) wasfound in theshort run tobeexplainedbygrowthinaverageincomes,andasmuchas97 percent in the long run. Thus, anyinclusive growth architecture aims atpovertyreductionacrosssectors.Additionally, the need for the completepicture of growth and the contexts arecriticalinanyinclusivegrowthframework.Itisimportanttonotethatverylittleguidanceis offered in the literature on growth andpro-poor growth to policymakers. In thiscontext, it is important to emphasize thatprior to the2000s, themajor focus in the

Itisalsoimportanttonotethatforbroad-basedgrowthtobesustainable,economictransformation is key. According to ImbsandWacziarg (2003),nocountryhasbeenable to accomplish significant growth inincome and poverty reduction at theexpense of structural transformation andeconomicdiversification.Thisisparticularlyimportant for developing countries,especially thosesuffering fromthe “Dutchdisease”, small markets and difficulties inaccessing internationalmarkets. Lastly,anissue that calls for attention in Nigeria'squestforinclusivegrowthistheCOVID-19.WiththedeclarationasapandemicbytheWorldHealthOrganization inMarch2020,COVID-19hasbecomeaglobalemergency

pro-poor growth ana ly t i cs was onmeasuring the extent to which growthengenderedpoverty reductionsabsolutelyorrelatively,inadditiontotheprevalenceofstatistics on aggregated income andpoverty.Thisfocushashowevershiftedtospecificcontextsandex-ante investigationof impediments to future economicdevelopment.Inthiswise,issuesrelatingtosources of growth, poverty and growthdecompositions have become criticaltowards proving remedies in country-specificcontextsduetothediversitiesthatexist not only between and amongcountries,butalsowithinthesamecountryoveraperiodoftime.This isbecause it isknownthatgrowthdeterminantsarelargelya function of initial conditions, and aplethoraofotherfactorsincludingpolicies,governance, politics, geography, anddemography.



Theexogenouseffectsincludeadeclineintrade between Nigeria and affectedpartners, the decline in remittances fromNigerians in the Diaspora, a decrease inforeign direct investment and OfficialDevelopment Assistance, and fallingrevenues from crude petroleum. On theotherhand,theendogenouseffectsincludethe rapid spread of the virus (with itsdebilitating effects on morbidity andmortality),disruptionineconomicactivities,decreaseintaxrevenue,andriseinpublicspendingtocushiontheadverseeffectsofthe pandemic and support economicactivities.Theimplicationisthatmeetinganinclusivegrowth inNigeriabecomesmorechallenging,althoughCOVID-19canbeusedto address growth that targets a largesegment of the Nigerian population viausingsuitablepublicpolicy.Country Idiosyncrasies: Nigeria'sContextAchievinginclusivegrowthinNigeriawouldlargely depend on a variety of factorsincludingdealingwithcorruptionandweakinstitutional environment, insecurity,pove r t y, a t t ra c t i ng fo re i gn d i re c tinvestment, economic diversification, andsound economic policies. Due to spaceconstraints, the first one is explored. Forquite a long time, Nigeria is widely

andglobalgrowthispredictedtofallby0.5for the year 2020. As of 3 April 2020, thevirus had spread to 50 African UnionMemberStates.Thus,NigeriaisnotimmunetotheendogenousandexogenouseffectsofCOVID-19.considered and perceived as one of themost corrupt countriesonearth,with theeffectthatitsstunteddevelopmentdespitethe encouraging growth indices is tiedinevitably to the many shades of corrupttendencieswhichtakeplaceinit.

A major effect of corruption is theexacerbation of poverty and this isparticularly harmful to lower-incomegroups because it pulls resources thatshouldhavebeenemployedinbridgingthegapbetweentherichandoccupantsofthelowestrungofsociety.Oneofthedisturbingparadoxesof theNigerianeconomy is theincreasingamountofrevenuesearnedandthelikewiseincreaseinthelevelofpovertyofthepeople.Thus,itisimplausibletolinkthe high level of poverty in Nigeria todwindling fortunes. Over the years, the

Inclusivegrowthandcorruptioncanbesaidto be antithetical. Due to the inert justicesystem, thesubservientappendageof thelegislature to the executive arm ofgovernment, political opportunism andpatronage, weak civil societymechanismsforholdingcorrupt individuals toaccount,andlargelyowingtotheheavyreliancebymajority of Nigerians on governmentservices, corruption is a major driver ofpovertyinNigeria.Althoughcorruptionanditsassociatedstealingofpublicfundsareasold as mankind and cut across religious,racial, and ideological divide (Lipset andLenz, 2000; Dike, 2005), that of Nigeriapresentsusefuldimensions,withhigh-levelpolit ical graft exerting monumentalfinancialcostontheeconomy.



evidence points to a h igh posi t ivecorrelationbetweenrevenuesandpoverty,a paradox explainable by the political-economic architecture, in which politicalpowermodulatestheflowanddirectionofresources,andinwhichquasi-federalism(aunitaryforminthegarboffederatingunits)creates a productive base that is mono-cultural without optimally harnessing thehuge endowments of states in thefederation. A cursory dissection of thefactors usually adduced as causes ofpovertyinNigeriadovetailstothepoliticalandeconomicundertonesofthepandemic.Iyoboyi (2012)maintained that corruptionespecially of the public sector variety islargely the result of the political andeconomicstructureofthecountry.BecauseNigeria isbasicallyagovernment-orientedeconomy (as most people are reliant ongovernmentservicestomeetmostoftheirbasicneeds),doingsoinanenvironmentofcorruption has meant the payment ofvarious forms of regressive taxes. Thepoliticalinstabilitywitnessedovertheyearscan be traced directly to corruption andstealingofpublicfunds,sometimeposingahuge challenge to democracy and thesurvival of the country. The high level ofgraft in the political space has castconsiderabledoubtinthemindsofordinarycitizensabouttherelevanceofthebrandofdemocracybeingpracticed in thecountry.Sycophancy and bootlicking which areprevalentinthepoliticalarenaarebelievedbymanytobeaninstantleewaytowealthandaffluence.Thereareseveralreasonstothinkthatpoliticalofficeholderscannotbe

Followinganon-quantitativeapproach,thispaperdepictsthetenetsofinclusivegrowthframework and the critical issues in theNigeriancase.Itwasfoundthatthecriticalissues hinge on productive employment,public policies, and poverty reduction, inaddition to a holistic view and countrycontexts.InthecontextofNigeria,emphasiswas placed on corruption and weakinstitutional environment, which areinjurious to the prospects of inclusivegrowth in the country. Based on thenarrative,Nigerianeedstoengagepoliciesthat put premium on growth that cutsacross sectors ; takes into accountproductive resources and capacity of theindividualonboththedemandandsupplysidesoflabour;andaboveall,empowerthepoorthroughproductiveemployment.Thisway, themiseries associatedwith povertyand unemployment can bemitigated andinclusive growth can thus have expectedpalliativeeffectsontheeconomy.

ConclusionandPolicyRecommendation

responsibleandaccountabletothepeopleduetothemanipulationofinstrumentsofjustice by powerful groups and elementswithinsociety.Thepoliticalspaceislitteredwith the mosaic of electoral corpses.Elections are generally a do or die affair,while the country has had to pay heavyp ena l t y i n t h e n ame o f p o l i t i c a lassassinations, electoral violence, and thegeneraldestructionoflivesandpropertiesofseveralpersonsbefore,during,andafterelectoralcontests.Inanutshell,corruptionsuffocatesinclusivegrowth.



TowardsanInclusiveGrowthFramework:CriticalIssuesandNigeria'sContextBourguignon, F. (2003). The Growth Elasticity of Poverty Reduction; ExplainingHeterogeneity acrossCountries and TimePeriods. In Eicher, T. and Turnovsky, S. (eds),InequalityandGrowth:TheoryandPolicyImplications.Cambridge,MA:MITPress.CommissiononGrowthandDevelopment(2008).GrowthReport:StrategiesforSustainedGrowthandInclusiveDevelopment,theWorldBank.Dike, V.E (2005). Corruption in Nigeria: A New Paradigm for Effective Control. AfricaEconomic Analysis. Retrieved on 1st August 2007 from http://www.isdafrica.com/Jsda/Summerl999/articlespdf7ARC%20%20A%20Psvchological%20Analvsis%20of%20Corruption%20in%20Nigeria.pdfImbs,J.andWacziarg,R.(2003).StagesofDiversification.AmericanEconomicReview,93(1),63-86.Iyoboyi,M. (2012). The Political Economyof Poverty inNigeria. International Journal ofResearchinCommerce,Economics&Management,2(8),45-48.Kraay,A.(2004).WhenIsGrowthPro-Poor?Cross-CountryEvidence.IMFWorkingPaper4-47,InternationalMonetaryFund,Washington,DC.Lipset,S.M.andLenz,G.S.(2000).Corruption,Culture,andMarkets.InHarrison,L.E.andSamuelP.Huntingdon,S.P.(eds),CultureMatters.NewYork:BasicBooks,p.l12.OECD(2008).GrowingUnequal?IncomeDistributionandPovertyinOECDCountries.Ravallion,M.andS.Chen(2003).Measuringpro-poorgrowth.EconomicsLetters,78,93-99.WhiteandAnderson(2001).Growthvs.Redistribution:DoesthePatternofGrowthMatter?DevelopmentPolicyReview,19(3),167-289.

REFERENCE


Introduction

IndustrialClustersinNigeria:Wakingthe'SleepingGiant'forGrowthandJobCreationNESGPolicyBriefAbstractMakingNigeriaan industrialisednationhasbeenakeyprogrammeofmanysuccessivegovernments towards achieving economic prosperity. Evidence from recent studies onindustrialclustersinNigeriahassuggestedthatemploymentcreationandcontributiontoeconomic growth are significantly low. This contradicts results from other emergingcountrieslikeChina,India,Turkey,etc.ThisstudyprovideskeypolicysuggestionstowardsrevivingandleveragingtheindustrialclustersforeconomicprosperityandinclusivegrowthinNigeria.Achieving a significant level of prosperity(economic growth, job creation, andeconomic development) in a countrytypicallycomeswithsystemicchangesinthegeographicandsectoralcompositionoftheeconomy.Asthecountrydevelops,thereisashift tohighervalue-addedwithinexistingindustries for operational efficiency andother business reasons. As a result,i n d u s t r i e s o ff e r i n g s i m i l a r a n dcomplementary products and servicesconverge at a location (Haussmann et al.,2013;Christian,2017).This isbecause thelocation gap between industries, inputssource,andmarketnegativelyimpactstheoverall prosperity growth in an economy(OECD,2019).This mode of inter-sectoral collaborationamong firms from diverse industriesengendersinnovation,knowledgetransfer,newproductandvaluechaindevelopment(Malacarne, 2013). Therefore, helping tostimulatemoreinvestments(bothlocalandforeign) and diversification of sources of

economicsecurity,stability,andprosperityin a country. According to Porter (1998;2000),industrialclustersaretheengineforeconomic growth . Many advancedeconomies used it as a foundation toachieve inter-sectoral spil l -overs oftechnical knowledge and economy-widediversification. Notwithstanding, thepotentialsofindustrialclusterstogenerateeconomic growth, Nigeria has failed tobenefit from the presence of industrialclustersacrossthecountry.Theadoptionofnational cluster policy in 2007 could notsignificantly revive existing industrialclustersfromtheircurrentcomatosestateduetocripplingchallenges—bothcyclicalandstructuralissues.Meanwhile,industrialclustersinNigeriaaredevelopedtoreflectthepotentialsoftheirimmediateenvironment.Onahandcount,they are over 100 products and activitiesspecific industrial clusters across thecountry.Moreover, each region inNigeriapossesses the potential to advance its76ECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020

Many states in the Northern part of thecountrylikeKano,Kaduna,Borno,Zamfarae.t.c. also host many agro-allied andprocessingclusters.SomeoftheseincludeKadawaTomatoClusterinKano,GassolRiceClusterinTaraba,MakurdiCitrusClusterinBenu,Agadu-AlapaCassavaclusterinKogi,DawanauProcessingCluster,Kanoamongothers.Alltheseprovideopportunitiesthat

competitivenessandjobcreationacrosskeysub-sectors of the manufacturing sector(seeBox1).Forexample,SoutheastNigeriademonstrates considerable potentials fori n v e s tm e n t s i n p r o c e s s i n g a n dmanufacturingactivities.Thisisevidentwiththe widespread of specialised industrialclusters like Ariaria Leather ProductsC l u s t e r , Ab i a , Nnew i Au tomo t i v eComponents Cluster , Umuahia/AbaGarmentCluster,OsakweIndustrialCluster,Onitsha among others. In SouthwestNigeria, there is a mixture of economicopportunitiesduetothepresenceofalargeconsumer market along with manymanufacturinghubs.

Nigeria can leverage to establish a robustindustrial sector and achieve economicgrowth.One of these issues is limited access tomodern industr ia l equ ipment andtechnologies.Forexample,theAbaleatherandNnewiautomobileclustersinSoutheastNigeriahaveovertheyearsreliedonlocallyfabricated equipment and crude ways ofknowledgetransferfromonegenerationtotheothers.Thisisdespitetheavailabilityofnewerandmoremoderntechnologiesthatcan foster productivity and increaseoutputs ; but the adopt ion of suchtechnologiesstayslowornon-existent.Also,thereislittleornoknownlinkagesbetweenindus t r ia l c lus ters in N iger ia anduniversitiesaswellasinstitutionalresearchactivities. In Kano, the age-long leatherprocessing act iv i t ies rely solely ontraditionaltechnologiesuse.Thisisdespitethe presence of many universities oftechnology and science in the region.Consequently,thereislowvalue-additionaswellaspoorqualityofleatherproductsfrom

IndustrialClustersinNigeria:Wakingthe'SleepingGiant'forGrowthandJobCreation

Box1:Industrialclusters&jobcreationpotentialsinNigeriaThere iswidespreadkeyagro-allied,processing,andmanufacturing industrialclusters inNigeria. Specifically, Lagos and Kano have all key industrial potentials and large retailmarkets.Ontopofthat,OgunState isreapingthespill-overbenefitsof thepresenceofsizeableretailmarketsinLagosandIbadan.Abia,Kaduna,andAnambraarekeyprocessingstateswithmassiveexportpotentials.Thesestateshavethemostconsiderablepotentialsfor job creation, economic growth, and enhancing inclusiveness. Within the industrialclustersbelow,agro-alliedandmanufacturingclustershavethehighestpotentialstoabsorbtalents. According to the Nigerian Job Creation Strategy 2016, an enhancement of theoperationsofkeyagro-Alliedindustrialclusterscouldstimulateover2millionnewjobsinthree 77ECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020

Figure1:Distributionofclusters&JobcreationpotentialsIndustrialClustersinNigeria:Wakingthe'SleepingGiant'forGrowthandJobCreation

78

theclusters. (Aremuetal,2016).All theseaccountforthedisappointingperformanceofmanyindustrialclusters.Therefore,thispaper addresses policy suggestionstowards reviving and using the industrialclusters for economic prosperity andinclusivegrowthinNigeria.Industrial clusters and economicprosperity: Some conceptual andempiricalevidenceThere are established shreds of evidence(both theoretical and empirical) on thepivotalrolesplayedbyindustrialclustersinfostering economic prosperity in manymode rn d ev e l opmen t e c onom i c sliteratures.Itisclaimedthatthepresenceofindustrial clusters in many developingc o u n t r i e s p r o v i d e s emp l o ymen topportunities formany low-skillsworkers.Thisisbecausethereisalowbarriertoentryto the labour market and less externalcompetition for this class of workers(McCormick,1999).Several studies have also confirmed the

association between the presence ofindustrial clusters and low poverty rate(Fowler andKleit, 2013;Manoet al, 2011;Weijland,1999amongothers).Thestudiesargued that industrial clusters had thepotentialtoreducetheisolationthatSmalland Medium Enterprises (SMEs) face indeveloping countries. In this way, manySMEs are linked to large-sized companieswhich bring about a synergy that unlocksemployment opportunities for a largenumberofpeople(FowlerandKleit,2013).Ontheotherhand,animprovementintheperformanceofindustrialclustersthroughthe upgrading of technology will increaselabour productivity and provide workerswith the opportunities to receive higherwages.Withthis,workersearnawageratethatwillmakethemescapethepovertytrap(McCormick,1999).AstudybyFowlerandKleit (2013) found growth in industrialclusters is associated with a reduction inpoverty rates in the United States ofAmerica. In the same way, Kimura (2011)discovered that the transformation of atraditionalhandicraftvillageintoamodernECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020


Box2:EvolutionofindustrialclustersandeconomicprosperityThestageofdevelopmentofindustrialclustersreflectsthelevelofeconomicprosperityinaneconomy.Therebydemonstratingtothepotencyofindustrialclustersinboostinggrowth,jobcreationandeffectivedistributionofresources.Thereareaboutsixstagesofdevelopmentofindustrial clusters – cluster emergence, stagnation and demise, critical mass effects,evolution/growth, constructive force, and demise and re-birth. Having achieved littleprogressinindustrialization,Nigeriahasbeenstrugglingtotranscendbeyondthestagnationanddemisestage.79

industrialclusterinNorthernVietnam.Asaresult,thepercapitaincomeofthevillageincreased from USD 400 in 1995 to USD2000by2005.Alongtheprocess,therewereincreased in employmentopportunities inthe country as many surround ingagriculturalsettlementsbenefittedfromthespill-overeffects.

A couple of challenges have constitutedheadwinds to the performance of manyindustrialclustersinNigeria.Someofthesechallengesarenotedbelow.Challenges impeding the growth ofIndustrial Clusters performance inNigeria

InmostAfricancountries,includingNigeria,thedegreeof impactof industrialclustersoneconomicprosperityislimited.Manyoftheavailableindustrialclustersarestayingtoolongatstagnationordemiseandcriticalmasseffectstagesofdevelopment(seebox2).Owingtomanystructural issues, theseclusters have failed to achieve significantprogressandarestayingoverlylonginthisstage.Therefore,makingindustrialclusterstocontributelittletoeconomicprosperityinmany African countries (Christian, 2017;Aremuetal,2016.).

There is a huge decay ofmarket linkagesinfrastructure, especially within industrial

Frequent change of policies by successivegovernments in Nigeria has led to thediscontinuation of projects or procedureskick-started to improve performance oftargeted industrial clusters. For example,the National Industrial Revolution Plan of2012 identified the development of mid-sized logistics hub close to key industrialclusters.Butthisplanwasnevermentionedin theNew JobCreation Strategyof 2016.Also, both plans ident ified var iouscategoriesof industrialclustersasa focusfordevelopment.Therefore,creatingpolicyinconsistency risk for the growth ofindustr ia l c lusters in the country.Poormarketinfrastructure.

Low government commitment to theexecutionofindustrialpolicies.Inalmostall industrialisation policy documents inNigeria, development or enhancing thegrowthof industrial clusters remain a keycomponent.However,therehasbeenlittlecommitmentbythegovernmentatalllevelto this part of the industrial developmentplans.



80

Figure2:Industrialcluster&economicprosperity

clusterareas.Asaresult,manyclustersarecurrentlyperformingsub-optimallyintermsof job creation and contributing to theoverall growthof theeconomy.Key roadsconnecting many industrial clusters inLagosandOgunareinpoorshape,andthishasledtothelossofincomeandshut-downofmanyindustriesinNigeria.Forinstance,all key roads connecting the Agbaraindustrial estate in Ogun state are in aterrible state including the Lagos-BadagryExpressway. All these contribute to anincrease in the cost of production anddistribution, among others. Other keymarket infrastructure in short supply inmajorindustrialclustersarepowersupply,socialcapitallikewaterandsanitation,e.t.c

Insufficientsupplyoflabourwithcriticalskillsandtalentsneededtoimprovetheproductivity of industrial clusters. Thelevelofskillofamassofavailableworkforceisbelowtherequiredlevelfortheeffectivefunctioningofindustrialclusters.Owingtothis, many industrial clusters concentrateontheprimarystageofproduction.Inthecase of manufacturing activities, thesophisticated industrial processes areusuallymanagedbyexpatriatesfromAsiancountries.With the current level of skills, manyindustrial clusters in Nigeria are lesscompetitive, innovativeand can't enhancethe value-chain of their products. This,ECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020


Actively engage the private sector todrivemarketinfrastructureprovision.Aframeworkforco-operationbetweenpublicandprivatesectorstodevelopmentneededmarket infrastructures like roads, energyand electricity, water among others. The

Inmaking the industrial clusterswork forNigeria's prosperity and inclusive growthagenda, the following interventions areneeded t o imp rove t he bu s i ne s senvironmentandenhancegrowthforfirmsin the industrial clusters. Thereby,makingthem properly placed to achieve jobcreationtargets.

PolicyInterventions

therefore, makesmany industrial clustersoperateatsubsistencelevels.Failure to conform to internationalstandards.Becauseofthelimiteduseoftechnologyinthe production process, goods producedfrom many clusters in Nigeria are belowsafety and quality standards set byadvancedcountries.ManyoftheproductsproducedbytheseclustersroutinelyfailthequalitytestsofbothlocalandinternationalstandardagencieslikeSON,NAFDAC,GlobalGAP,NICERTamongothers. The failure tomeet these standards s ignificant lycontributestothepoorlinkageofindustrialclustersinNigeriatotheglobalvaluechainof their respective product. Consequently,this resulted in low exports earnings formany manufacturing and processingclustersinthecountry.

privatesectorwillprovide fundswhile thegovernment monitors and reinforces theimplementation. By doing this, themobi l izat ion of investments and aconducive business environment will beachieved. Also, this will foster the Box 3:EnergizingEconomiesInitiativeoftheRuralElectrificationAgency(REA)The Energizing Economies Initiativerepresents a case example of marketinfrastructure project which is funded byprivate-sector investors/developers butimplemented by the government throughtheREA.Theprojectisaimedtoprovideoff-grid electricity solutions to over 100,000MSME'sinover340economicclusters(likemarkets , shopping complexes andagricultural/industrialclusters)inNigeriaby2023.UnderPhase1of theproject,over80,000shopsacross16economicclustersinLagos,Ondo, Ogun, Abia and Edo states werecovered.AccordingtoExecutiveDirectorofREA,theprojecthascreatedover2,500jobs,whileservingover18millionNigerians.growthofoutputanddevelopmentofmanyindustrialclusters.S uppo r t ed by t h e a v a i l a b i l i t y o finfrastructural facilities, the output andqualityofproductsofindustrialclustersinNigeria will improve leading to efficiencyandbettercompetitiveness.Inthiscase,theproblem of access to finance will beminimizedasbusinessesoperatingintheseclusters becomemore attractive for bank81ECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020

IndustrialClustersinNigeria:Wakingthe'SleepingGiant'forGrowthandJobCreationfinancing,localandforeigninvestors.Strengthenvalue-chainand linkages tomarket for industrial clusters withc omp a r a t i v e a n d c omp e t i t i v eadvantages.Thefirststepforthegovernmenttoidentifykey clusters (products) with substantialcomparative and competitive advantages.Thiswill provide thegovernmentwithkey

clusters to prioritise in driving economicgrowthandjobcreation.Thereisaneedtoworkonincreasingthevalueadditionatthelevel of processing, packaging andsecondary production, of key products.Also,aplatformconnectingbothlocalandinternationalkeystakeholders–operatingfirms, buyers, investors, off-takers andregulatorybodies,shouldbedevelopedtoincrease the performance of the clusters

UnderPhase1oftheproject,over80,000shopsacross16economicclustersinLagos,Ondo,Ogun,AbiaandEdostateswerecovered.AccordingtoExecutiveDirectorofREA,theprojecthascreatedover2,500jobs,whileservingover18millionNigerians.

Box3:EnergizingEconomiesInitiativeoftheRuralElectrificationAgency(REA)The Energizing Economies Initiative represents a case example ofmarket infrastructureprojectwhich is funded by private-sector investors/developers but implemented by thegovernmentthroughtheREA.Theprojectisaimedtoprovideoff-gridelectricitysolutionstoover100,000MSME'sinover340economicclusters(likemarkets,shoppingcomplexesandagricultural/industrialclusters)inNigeriaby2023.while connecting effectively to the globalvaluechain.Aone-stopshoplikeOne-StopInvestmentCentre(OSIC)oftheNigeriaInvestment Promotion Council (NIPC)can be considered for industrial clusters.Nigeria stands a chance to harnessmorebenefits from the intervention given thecountry's market size and potentials ofhavingmanycommoditiesthatcanserveasafoundationforglobalintegration.Provision of information on marketopportunities and capacity building onmodern product ion process andtechnology.There is a need to provide adequate andtimelyinformationonmarketopportunities

to clusters across the country. Thegovernment can incentivize the privatesectortomanagetheprocess.Asidesfrominformation, there is an urgent need forcapacity building of firms operating inexisting industrial clusters across thecountryontheuseofmoderntechnologyintheiroperation.Inmostclusters,especiallyinprocessing,manyfirmssignificantlyrelyonthetraditionalmethodoruseofhoaryequipment thereby reducing the outputlevel,productivityandqualityofproducts.Inaddressing the situation, the governmentcanenter intoPPParrangementswhereintrainingofworkersandotherunemployedpersons in areas close to the clusters arestructuredtomeettheneedofclusters.82ECONOMIC&POLICYREVIEWJOURNALVOL18NO1|JUNE2020

IndustrialClustersinNigeria:Wakingthe'SleepingGiant'forGrowthandJobCreationBecauseofthisarrangement,thequalityofproducts from many clusters will beenhanced. Therefore, unlocking them to opportunities in the international marketwhile increasing patronage from thedomesticmarket.


Mano,Y.,TakashiY.,AyaS.,&TomoyaM.(2011).Localandpersonalnetworksinemploymentandthedevelopmentoflabourmarkets:EvidencefromthecutflowerindustryinEthiopia.WorldDevelopment,39(10),1760-1770McCormick,D.(1999).Africanenterprisesclustersandindustrialization:Theoryandreality.”WorldDevelopment,27(9),1531-1551OECD (2019). Regions in Industrial Transition: Policies for People and Places. OECDPublishingPorter, M. E. The Competitive Advantage of Nations. New York: Free Press, 1990.(Republishedwithanewintroduction,1998.)Porter,M.(2003).Theeconomicperformanceofregions.RegionalStudies,37(6-7),549-578Weijland,H. (1999).Microenterprise clusters in rural Indonesia: Industrial seedbedandpolicytarget.WorldDevelopment,27(9),1515-1530

Ketels,C. (2017).ClusterMappingasaTool forDevelopment. Institute forStrategyandCompetitiveness-HarvardBusinessSchool:Boston,MA,USAKimura,Y. (2011).“Knowledgediffusionandmodernizationofrural industrialclusters:Apaper-manufacturingvillageinnorthernVietnam.”WorldDevelopment,39(12),2105-2118.Malacarne,M.(2013).Theroleofclusterorganisationsinsupportingemergingindustriesviacross-sectorialinnovation.PaperpresentedatECIAPLPmeeting–Milano,8November2013

AremuF.A.,Kwaghe,P.V.,Agbiboa,D.E.,&Jijji,S.A.(2016).PoliticalSettlementAnalysisofEmploymentCreationinAgricultureandAgro-industriesinNigeria.PartnershipforAfricanSocialandGovernanceResearchWorkingPaperNo.015,Nairobi,KenyaFowler,C.S.,andKleit,R.G.(2013).Theeffectofindustrialclustersonthepovertyrate.EconomicGeography.DOI:10.1111/ecge.12038Hausmann,R.,Hidalgo,C.A.,Bustos,S.,Coscia,M.,Simoes,A.,&Yildirim,M.A.(2014).Theatlasofeconomiccomplexity:Mappingpathstoprosperity.MITPress

REFERENCE



TheNESGEconomicandPolicyReview

85

1SSN:1595-20307


www.nesgroup.org