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Between Rising Inequality and Fight against Poverty

12 Sep 2019

Ugo Aliogo examines the latest Oxfam International report which revealed that three richest billionaires have more wealth than the bottom 50 percent in the continent and its implication

The latest Oxfam International report has revealed that the richest persons in Africa own 40 per cent of the wealth of the entire continent, adding that three richest billionaires have more wealth than the bottom 50 percent of the population of Africa, approximately 650 million people.

The report explained that the continent was rapidly becoming the epicentre of global extreme poverty, adding that while massive reduction in the numbers living on less than $1.90 a day have been achieved in Asia, these numbers are rising in Africa.
The report titled: ‘A tale of two continent,’ further examined efforts by African countries to reduce the gap between rich and poor.

According to the Executive Director, Oxfam International, Winnie Byanyima, “Africa is ready to rise – but only once its leaders have the courage to back a more human economy that works for the many and not a few super-rich men. “They can achieve this by investing in inequality-busting, universal and quality public services like health and education and by developing truly progressive tax systems. These are particularly powerful for women and girls living in poverty. They can also back a transformation towards decent and dignified work that protects the rights of workers, especially in the age of the African Free Trade Area and the new digital era.”

Experts’ View
The report noted that in Nigeria, poverty and destitution were stubbornly high, adding that around 10 million children are out of school, a quarter of citizens lack access to safe drinking water, and half are living below the $1.90 poverty line.
Commenting on the findings of Oxfam, the Director, Research and Training, National Institute for Legislative and Democratic Study, Prof. Yemi Fajingbesi, noted that an individual cannot solve the problem of poverty.
According to him, it requires inclusive policies that include everybody.

He stated that from the report, it could be inferred that there was problem with the income distribution policy, adding that there should be deliberate and sustained policies by government would encourage redistribution of income in a fair manner.

“Nobody is saying that income should be distributed equally; there is a difference between equality and equity or fair distribution. Unlike in advanced societies where the sources of income of individuals are known, the system in those societies are also able to know what is coming in and then impose taxes,” he added.
Fajingbesi explained that in Sub-Sahara Africa, the rich don’t pay taxes, but are easily collected from the poor citizens with low income than rich men with high income.

“In addressing poverty, what is key is the creation of the environment that will lead to provision of job opportunities that will give income and food that can end poverty, it is not just the bringing the $24 billion that the report stated will help end poverty.
“But the issue should be more on how the money will be spent or appropriated. There are other activities that are better in poverty reduction which the money can be invested in. Therefore, in solving poverty there should be an effective mechanism to target the poor.
“Most of the policies of government are targeted at the poor and it widens the gap between the rich and poor, whereas there should be policies that close the gap. The policy will also encourage redistribution of income in such a manner that the inequality we are witnessing now will reduce to the barest minimum. There is nowhere in the world, where there is equality in income distribution.

“The economist uses Gini-coefficient to measure income distribution, when you calculate the income distribution, the closer you are to one, the more uneven is the distribution, the closer to zero, the even the distribution. When you talk about even distribution, it doesn’t mean everybody will be endowed with income, what it simply means is that what is the percentage of income that is held by x-amount of the population? We have a situation where 20 percent of the population is controlling the wealth of 20 percent of the country in that manner,” he said.

Also reacting to the report, the Executive Director, Director Civil Society Legislative Advocacy Center (CISLAC), Auwal Rafsanjani, opined that the issue around poverty alleviation was multi-faceted and requires strategic intervention.
He explained that the engagements so far have taken the form of short to medium term remedies which would not yield much result that the short-term results that would reduce poverty and inequality.
He added that poverty eradication in Nigeria would require a long term strategic and consistent plan and implementation to solve the issue or even reduce it to the minimum.

Poverty Alleviation Outlook
Fajingbesi, stated that government had in the past put in place various programmes and initiatives to address poverty, but government lacks the political will to follow these initiatives to fruitful end.
Rafsanjani, argued that the poverty alleviation outlook has been more of humanitarian handouts than the strategic planning and implementation that it really requires.

The CISLAC boss further stated that there was need to examine the process of accessing the specific needs that predisposes each locality to poverty which may differ from the other, “so far we have been approaching the issues with a one cap fits all interventions. This may not yield as much results and impact as may be anticipated.”

According to Fajingbesi, “The policies are well crafted and designed, but the issue is implementation. When it is time for implementation, we bring in issues such as ethnicity, religion, and party politics comes into it. Our policies implementation has been fraught with a lot of irregularities and the major problems are politics and religion. Any country that feds its policy on religion is doomed to fail. The political will to really implement the programme has been a major problem.

“Now government is talking about the Economic Recovery Growth Plan (ERGP). One of the main focuses of the plan is to reduce poverty and the same thing is applicable to the Sustainable Development Growth plan (SDG); but my challenge is that we are not short of policies and programmes. The problem has been the implementation of these programmes to the objectives of which those programmes were designed. The programmes were designed, but government didn’t follow up by providing adequate resources to ensure full implementation of those programmes.”

Education, Health and Social Protection
On his part, Rafsanjani espoused that spending on pro-poor sectors such as education, health and social protection, have a major role to play in reducing poverty and inequality, adding that in the country, “there has not been any meaningful share and size of the allocations to these sectors both allocation and implementation (non receives up to 7% of the budget).”

He maintained that there was no streamlined monitoring of what goes into those sectors and how optimally they are used.
According to him, “The education trust fund generated from the education tax is not properly administered both in collection and implementation of the projects. There is high level of drain of human resources in the health sector occasioned by an alleged poor funding in the sector leaving that aspect of the economy contributing very minimal to human development in Nigeria especially as it affects the low-income earners. These and many more contribute to the poor performance from these sectors and consequent expansion of the poverty and inequality gap.”

Fajingbesi, remarked that the country’s spending whether social or economy was very low, adding that the country’s per capita spending was still low compared with other countries.
He explained that due to the low budgetary spending, the country would not be able to address health problems, saying there was need to invest more money into the budget.

He added: “It is noteworthy to state here that allocation is backed up by cash and often times, there is approval for certain projects but there is no cash backing, so that is the major problem why budgets are not implemented. We depend on oil and we don’t pay taxes.
“In other advanced economics, the major source of revenue is taxation. It is easier to predict how much you can get from tax as revenue, than oil because we don’t have control over oil prices, the volatility in prices, and the regulating body OPEC allocates the barrel each country produces daily. Taxes cannot be taken because income is low, those who control the resources don’t pay taxes, and government has no control over them.”

Way Forward
Fajingbesi affirmed that in order to properly position the economy, there is a need to embark on effective tax reforms that would help to block all holes that encourage tax exemption, adding that there is need for government go after implementing luxury taxes.
He urged government not to allow double taxation and a tax system that discourages investment, “government needs to take stock on those people who are supposed to pay tax, but are not paying tax. We have to build a database for tax collection in the country.”

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