CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Prior to the commercial mining of fossil oil in Nigeria the economy depend mainly on agricultural products for its domestic food supply and foreign exchange earnings. This situation however, changed as the advent of oil boom led to the neglect of the agricultural sector. In addition, the nation’s economic policies during the oil boom period paid little or no attention to the non-oil export sector. The result of this neglect was that Nigeria turned from being a major agricultural exporter and largely self-sufficient in food in the 1960s to a net food importer in the 1970s (Atolaye, 1997). The World Bank report on poverty and welfare in Nigeria (World Bank, n.d) which described the undesirable effects for developing one sector on the activities in other sector(s) of the economy provided a good illustration of the crisis in Nigeria.

The report revealed that though Nigeria has abundant land, oil and natural resources, many of her citizens are very poor. Central Bank observed that the country’s earnings of about U.S $200 billion between 1970 -1990 from oil had impacted little to the welfare of the people, especially the poor, as the oil revenue had not been wisely invested in productive ventures to provide a sustainable stream of benefits to the poor. The situation of poverty and unemployment in the country continues to worsen amidst policies and strategies to lessen the effect.

The  economic depression in the economy became glaring as the growth rates in the nation’s gross domestic product (GDP) which average 10 percent  between 1970 and 1973, and 8% between 1974 and 1980 did not only decline but became negative  from 1980 with an average of 6% between 1980 and 1984 (Osagie, 1992). According to Central Bank of Nigeria and World Bank (1999), as from the late 1970s, the nation has had to contend with deteriorating terms of trade, excessive importation and debt over-hand amidst adverse economic environment caused by oil shocks and world economic depression.

The Nigerian government in a bid to curb the depression adopted the Structural Adjustment Programme (SAP) in 1986. The cardinal objectives of SAP included diversification of the productive base of the economy so as to curtail dependence on the oil sector and imports to achieve a fiscal and balance of payment viability over the medium term, laying solid foundation for non-inflationary growth and lessening the importance of non-productive investments in the public sector efficiency. During the implementation of the Structural Adjustment Programme, it was realized that unintended negative effects of the programme such as accentuation of life became more prominent in the Nigerian state with the poor being the most affected group (National Planning Commission, 1995). As pointed out by Demery and Addison (1988). Adjusted policies could affect the poor adversely in two ways. First, in the short-run, adjustment policies may reduce the real income and consumption of poor groups. Secondly, in the long run, some poor groups may not benefit from the processes put in place by the adjustment effort. To Demery and Addison (1988), adjustment policies shape development and influence the distribution of income for years into the future and will have different effects on the poor. This view has been buttressed by Atoloye’s  (1997)  who argued that marginalization of the middle class in Nigeria’s economic growth process especially since the introduction of SAP had disrupted the traditional economic link between the middle and the low-income group (those  mostly affected by poverty) by which the former complemented the latter. Hence, the  problem associated with the Structural Adjustment Programme has gone beyond crossing of the  desert, as the marginalized of the middle class, has in addition to disruption of the economic link between this class and the low income group (the poor) led to the emergence of the of the new poor.

It is the realization of the adverse effects of SAP on the poor that prompted the introduction of policies and programmes to alleviate poverty and provide safety-nets for the poor in the economy (National Planning Commission, 1995).

Nigeria is among the few Sub-Saharan African countries in which the government has mapped out poverty alleviation programmes and strategies as an important economic policy objectives. The emergence of a democratically elected government in Nigeria promised to put yearnings of the nation’s poor masses through poverty alleviation. The Nigerian masses continue to  grapple with poverty and other socio-economic uncertainties amidst available resources.

The high incidence of available resources become a concern to policy makers and indeed all well-meaning Nigerians as argued by  United  Nations Development programme (2001), it has not only increased from 27.2% in 1980 to 8% in 1978 but it is estimated to be rising by 10% in every 3 years. In addition, despite several efforts by government, non government organizations, international donor, the nation’s poverty situation has become worse judging by different indices.

The nation’s pathetic poverty situation amidst rich resources endowment coupled with efforts to alleviate it has been summarized by Ali-Apajak and Pyke (2003:6). All documentation, official or otherwise shows that poverty in Nigeria in all forms is rising at an increasingly fast pace. Nigeria’s  social statistics rank it among the worst in South  Saharan Africa even though  it possesses the greatest  natural resources…. Given that Nigeria is the seventh largest exporter of oil in the world, these revelations are distressing. The poverty profile of Nigeria does indeed present a very somber picture of a rich nation in  decline/ the nation’s poverty situation becomes more disturbing when compared with nation that are similarly or even less-endowed with resources as it has been described by Kwanashie (2000) as one of  the poorest nations in the world despite its abundant resources.

Nigeria is world’s seventh largest exporter of oil, sixth largest produces in OPEC, Africa’s largest oil exporter and the fifth biggest source of United State’s oil imports. This enormous wealth is a good potential for effective alleviation or reduction and possibly eradication of poverty (National Planning Commission, 2004, oil statistics, n.d., Thomas and Canagarajah, 2002) yet Nigeria is not only one of the poorest countries in the world but also in Africa and indeed in South  Saharan Africa. As long as majority of Nigerians remain poor, accompanied by limited social development, the nation’s great natural wealth not withstanding it will be difficult for the country to meet the Millennium Development Goals (MDGs).