#1Public Disclosure Authorized NIGERIA THE WORLD BANK IBRD ⚫IDA | WORLD BANK GROUP Public Disclosure Authorized A Better Future for All Nigerians: Nigeria Poverty Assessment 2022 March 22, 2022 WORLD BANK GROUP#2THE SCALE OF NIGERIA'S POVERTY-REDUCTION CHALLENGE CANNOT BE OVERSTATED NIGERIA THE WORLD BANK IBRD ⚫IDA | WORLD BANK GROUP#318 16 2001-2019 EVEN BEFORE COVID-19, NIGERIA'S GROWTH WAS INSUFFICIENT TO LIFT PEOPLE OUT OF POVERTY Economic growth and population growth in Nigeria, 14 12 10 Real GDP and population growth rate (percent) 2 0 -2 -4 NIGERIA THE WORLD BANK 1 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 -Real GDP -Population Note: Real GDP deflated using the GDP deflator. Source: Nigerian National Bureau of Statistics (NBS) and World Bank estimates. IBRD ⚫IDA | WORLD BANK GROUP 2019 • Nigeria aspires to lift 100 million people out of poverty by 2030 • Yet since 2015, and right through the COVID-19 crisis, population growth outstripped real GDP growth, pushing living standards down Indeed, the COVID-19 crisis ushered in the deepest recession in Nigeria since the 1980s More than two-thirds of Nigerians are aged less than 30 - with a young and growing population, the need for Nigeria to harness the potential of its demographic dividend is more urgent than ever 2#4SOME 4 IN 10 NIGERIANS LIVE BELOW THE POVERTY LINE, WITH POVERTY CONCENTRATED IN RURAL AREAS, IN NORTHERN NIGERIA The 2018/19 Nigerian Living Standards Survey (NLSS) yielded the first official estimates of poverty in Nigeria in a decade Poverty is high in Nigeria – at 40.1 percent in 2018/19 – but it is also clustered in the north; Nigeria is spatially unequal - - Poverty headcount rate in Nigeria in 2018/19, by urban-rural State-level poverty headcount rate in 2018/19 Poverty headcount rate (percent) 60 50 40 30 20 10 0 Total Urban H Rural (64,100] (56,64] (48,56] (40,48] (32,40] (24,32] (16,24] (8,16] [0,8] Note: Estimates exclude Borno. Poverty rate calculated using Nigeria's national poverty line. Source: 2018/19 NLSS, Humanitarian Data Exchange (for shapefiles), and World Bank estimates. No data NIGERIA THE WORLD BANK IBRD ⚫IDA | WORLD BANK GROUP 3#5NON-MONETARY INDICATORS OF POVERTY OVERLAP SIGNIFICANTLY WITH MONETARY POVERTY, AND TELL A SIMILAR SPATIAL STORY Overlaps between different dimensions of poverty in Nigeria in 2018/19, by north-south Share deprived (percent) South 0.8 5.2 3.2 2.9 10.7 4.6 17.9 22.9 North 3.8 2.0 2.9 31.9 17.1 10.5 • • Non-monetary deprivation in terms of education and basic infrastructure - including electricity, water, and sanitation – is also widespread - This means almost half (47.3 percent) of Nigerians were multidimensionally poor in 2018/19 Like monetary poverty, non-monetary deprivations are also more concentrated in northern Nigeria and in rural areas -Monetary poor Education deprived -Infrastructure deprived Note: Estimates exclude Borno. Poverty dimensions defined according to the 2020 World Bank Poverty and Shared Prosperity Report. Source: 2018/19 NLSS and World Bank calculations. • As such, the overlap between different dimensions of poverty is also large, especially in rural areas and in the north - this has implications for targeting programs NIGERIA THE WORLD BANK IBRD ⚫IDA | WORLD BANK GROUP 4#6WHY DOES POVERTY PERSIST? PRODUCTIVE JOBS ARE SCARCE AND DELINKED FROM GROWTH, WHILE SHOCKS ARE RIFE NIGERIA THE WORLD BANK IBRD ⚫IDA | WORLD BANK GROUP#7POVERTY REDUCTION IN NIGERIA WAS STAGNATING EVEN BEFORE COVID-19, IN PART DUE TO THE STRUCTURE OF ECONOMIC GROWTH 50 Estimated poverty trends in Nigeria, 2010-2019 Poverty headcount rate (percent) 30 20 10 3425222515 40 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -Back-cast ◆ Survey-to-survey imputation 2018/19 NLSS official poverty rate Note: Estimates exclude Borno. Poverty rate calculated using the international poverty line of 1.90 USD 2011 PPP per person per day. Further details on back-casting and survey-to-survey imputations provided in Lain, Schoch, and Vishwanath (2022). Back-casting and imputations required due to lack of comparability between the 2009/10 HNLSS and the 2018/19 NLSS. Source: GHS, 2018/19 NLSS, and World Bank calculations. NIGERIA THE WORLD BANK IBRD ⚫IDA | WORLD BANK GROUP • . Specialized statistical techniques suggest that poverty declined slowly in the first half of the 2010s, but this reversed after the 2016 recession hit When Nigeria was growing, richer Nigerians appeared to benefit more; their fortunes waxed and waned with economic growth more than the fate of the poor This begs a key question: why might living standards be delinked from growth in Nigeria? Could the labor market influence the structure of growth? 6#8THE LABOR MARKET IS NOT CREATING ENOUGH OF THE JOBS THAT COULD LIFT PEOPLE OUT OF POVERTY The total share of people working is similar among poor and non-poor Nigerians, but poorer Nigerians face underemployment... Share of the working-age population (percent) 100 90 80 70 67.7 69.6 68.9 60 50 40 30 20 10 0 Poor Non-poor ■Working 40+ hours per week Total ...and wage jobs are very scarce, especially for the poor Share of workers (percent) 100 90 80 70 60 50 82852322 40 30 20 10 0 III Working <20 hours per week ◆ Total working ■Working 20-40 hours per week Not working Note: Estimates exclude Borno. Sample restricted to those of working age, that is, those aged 15-64. Poverty status classified using the national poverty line. Source: 2018/19 NLSS and World Bank calculations. Poor ■Wage ■Farming Non-poor Non-farm enterprise Total Apprentice Note: Estimates exclude Borno. Sample restricted to those working. Poverty status classified using the national poverty line. Source: 2018/19 NLSS and World Bank calculations. While oil makes up 80 percent of Nigerian exports, mining and extractives comprise less than 1 percent of jobs NIGERIA THE WORLD BANK IBRD ⚫IDA | WORLD BANK GROUP 7#9NIGERIANS' JOBS ARE PRECARIOUS - THE LABOR MARKET HAS SHOWN SIGNIFICANT CHURN WHEN SHOCKS LIKE COVID-19 HIT Despite a dramatic initial drop, Nigerians soon returned to work after COVID-19 first struck - Yet as the crisis continued, households turned to small-scale non-farm enterprise activities to cope – just as they had turned to farming in the 2016 recession - with the additional work sometimes coming at the expense of education Share of respondents (percent) 100 ៩ ៦៦ ១៨ ៖ ៖ ៖ 90 Overall labor market responses to the COVID-19 crisis Panel A: Share of respondents working Panel B: Job type for full working-age population 100 NIGERIA THE WORLD BANK IBRD ⚫IDA | WORLD BANK GROUP Note: Sample is the main respondent in each NLPS household. Source: NLPS and World Bank calculations. Before Mar 2020 Jun 2020 Apr/May 2020 Jul 2020 Aug 2020 Sep 2020 Oct 2020 Nov 2020 Dec 2020 Jan 2021 Feb 2021 Mar 2021 Share of the working-age population (percent) 6420 80 80 0 Jan-Feb 2019 ■Wage Farming Apprentice or other Not working Note: Sample is all individuals of working age, that is, those aged 15–64. Primary job refers to the job that individuals spent the most hours doing in the last week. Sample restricted to a balanced panel of individuals observed throughout the period of interest. Source: NLPS and World Bank calculations. Feb 2021 ■ Non-farm enterprise ◆ All working 8#10CLIMATE AND CONFLICT SHOCKS WERE PROLIFERATING IN NIGERIA EVEN BEFORE COVID-19, BUT SOCIAL PROTECTION IS SCANT 14°N- Conflict events with fatalities in Nigeria, 2000-2020 2000-2005 2005-2010 Climate and conflict shocks were proliferating in Nigeria even before COVID-19; especially in places where poor Nigerians live 12°N- 10°N- 8°N- 6°N- 4°N- 2010-2015 2015-2020 14°N- 12°N- 10°N- 8°N- 6°N- 4°N- 4ºE 6°E 8°E 10°E 12°E 14°E 4ºE 6°E 8°E 10°E 12°E 14°E Fatal conflict events 1 10 100 1000 1751 Source: ACLED and World Bank estimates. NIGERIA THE WORLD BANK IBRD⚫IDA WORLD BANK GROUP Further shocks continue to emerge; with the effects of COVID-19 persisting, the Ukraine conflict could impact the price of key commodities Mechanisms to insure against these shocks for Nigerian households remain limited, despite current efforts to expand; in 2018/19, less than 2 percent of Nigerians lived in a household enrolled in the National Social Safety Nets Project (NASSP), and less than 4 percent of households received any cash transfers during the COVID-19 crisis This exposure to shocks has led to dangerous coping strategies - such as scaling back education and reducing food consumption – which could have negative long-run consequences for human capital 6#11WHAT SHOULD BE DONE? THE RECOMMENDATIONS ARE NOT NEW - BUILD HUMAN CAPITAL, BOLSTER PRODUCTIVE JOBS, AND EXPAND SOCIAL PROTECTION – BUT THE TIME IS NOW - NIGERIA THE WORLD BANK IBRD ⚫IDA | WORLD BANK GROUP#12THREE IMMEDIATE POLICY PRIORITIES CAN HELP NIGERIA RECOVER FROM THE COVID-19 CRISIS IN THE SHORT TERM Ward-level poverty map for Nigeria, developed using Big Data and machine learning techniques 1. Roll out vaccines quickly and equitably: tackling the direct health effects of the virus remains critical, especially given uncertainty around new variants 2. Recoup the learning lost from school closures: encouraging physical school attendance is essential, but low-tech remote solutions that work for the poor should be ready just in case 3. Expand social protection: new data and techniques could enable rapid geographical targeting to reach the right people quickly and transparently; in the long-run this could help households undertake higher-risk higher-productivity activities NIGERIA THE WORLD BANK IBRD ⚫IDA | WORLD BANK GROUP Note: Darker areas have a higher concentration of poverty. Source: 2018 DHS, 2018/19 NLSS, National Social Safety Nets Coordinating Office for shapefile, and Chi, Fang, Chatterjee, and Blumenstock (2021) for poverty estimates. 11 11#13AT LEAST THREE TYPES OF DEEP REFORMS ARE NEEDED TO FOSTER AND SUSTAIN PRO-POOR GROWTH FOR POVERTY REDUCTION - 1. Macroeconomic reforms – including to fiscal, trade, and exchange rate policy - could help diversify the economy, invigorate structural transformation, and hence create good, productive jobs especially wage jobs that offer the best pathways out of poverty 2. Policies to boost the productivity of farm and non-farm household enterprises - including access to inputs, credit, and markets - will be crucial, as structural transformation will not happen overnight 3. The bedrock of infrastructure needs to be strengthened: access to electricity, water, and sanitation is strongly linked to monetary poverty, while information and communication technologies could boost access to jobs and markets and support the roll-out of key government policies, including social protection NIGERIA THE WORLD BANK IBRD ⚫IDA | WORLD BANK GROUP 12#14• AS WELL AS THE 'WHAT', IT IS ALSO VITAL TO CONSIDER 'HOW' TO IMPLEMENT PRO-POOR POLICIES IN NIGERIA - TRUST MATTERS Many pro-poor policies hinge on unlocking fiscal space in order to fund them: this requires increased emphasis on revenue collection but also potentially redirecting spending from expensive subsidies, such as those on fuel Level of trust in different institutions in Nigeria 100 90 80 70 and all other African countries, 2019 • • • Yet difficult reforms can only succeed by developing the foundations of trust in the government – sequencing policies to support the poor first, alongside clear communication strategies, could help Trust is crucial for the example of fuel subsidy reform: in 2018, more than half of Nigerians were "not at all satisfied" or "not very satisfied" with how the state administration spent tax revenues Given the proliferation of conflict, policies need to be adapted and implemented in simple and flexible ways so as to mitigate any risks of further violence Share of the population with that level of trust in each institution (percent) 60 50 40 30 20 10 0 Nigeria All Nigeria All Nigeria All others President Not at all A lot others Parliament others Local government ■ Just a little Somewhat Refused ■Don't know Note: Nigeria results are weighted using within-country weights ('withinwt' variable). All other country results are weighted using cross-country weights, which give equal weight to each country ('Combinwt' variable). "All other countries" covers the remaining 33 countries besides Nigeria captured in the Afrobarometer survey. Source: Afrobarometer 2019 and World Bank estimates. NIGERIA THE WORLD BANK IBRD ⚫IDA | WORLD BANK GROUP 13#15BY INVESTING IN DATA, NIGERIA CAN BUILD TRUST, ACCOUNTABILITY, AND TRANSPARENCY, MAKING THE VOICES OF NIGERIANS HEARD AND TAKING BIG STRIDES FORWARD ON ITS PATHWAY TO POVERTY REDUCTION NIGERIA THE WORLD BANK IBRD ⚫IDA | WORLD BANK GROUP#16THANK YOU