Investment in human capital remains the only veritable tool towards addressing poverty in Nigeria, says Roman Oseghale, Chief Executive Officer of IntelServe Incorporated. He joins CNBC Africa to assess Nigeria’s economic model for reducing poverty in the country.
___The 2018 Budget, Between President Buhari and The National Assembly…A Critical Look at Data
“As long as Poverty, Injustice and Gross Inequality persist in our world, none of us can truly rest”……Nelson Mandela
In 1981 with a population of 75.7m people and 47% living below the poverty line, Nigeria had 35.6m people living in Poverty. By year 2000, a year after the Country had returned to democracy rule and with a population of 122.3m people, percentage living in Poverty had increased to 65% bringing the total headcount of people living below the poverty line to 79.5m people.
But something happened in the early 2000’s, The Federal Government in trying to cub the growing rate of Poverty, introduced The Poverty Alleviation Program (PAP) and by 2004 with a population of 135.4m people, Poverty as a percentage of population had reduced to 54.4% and headcount reduced to 73.7m people. This means that between 1981 and 2004 a period of 23 years, Nigeria added 38.1m people to poverty, an increase of 107%.
In 1981 Nigeria’s GDP was $61.1bn and in 2004 GDP was $87.85bn, between 1981 and 2004 the GDP never went above $87.85 bn, in fact it reached its all-time lows between 1981 and 2004 with $20.7bn in 1986, and $21.35bn in 1993. So between 1981 and 2004 (23 years), Nigeria’s GDP only appreciated by $26.75 bn, an increase of 43.8%.
But in 2004, The Poverty Alleviation failed because the root cause of increasing poverty was not addressed which is investments in Human Capital Development and Infrastructural Investment to help the people create and generate wealth, rather government gave money to the people which was not sustainable.
Between 2004 and 2010 (6 years), Nigeria’s GDP exploded from $87.85bn in 2004 to $369.1bn in 2010, an increase of $281.25 bn and percentage increase of 320.2%, but the interesting thing was that poverty as a percentage of population also increased to 70%, and with a population of 158.6m people in 2010, the headcount living below the poverty line increased to 111m, an increase of 33.3m people in just 6 years.
While Nigeria rebased its economy in 2013 with GDP at $510bn and reaching an all-time high of $569bn in 2014, Poverty as a percentage of population still stood at 70%. As at 2018 and a population of 198 m people, percentage living in Poverty in Nigeria still stands at 70% which means that about 138.6 m people are living in poverty in Nigeria. This means that between 2004 and 2018, a period of 14 years, 64.9m people were added to poverty, increase of 88.1% in 14 years. And between 2004 with a GDP of $87.85bn and 2018 with a GDP of $406bn, Nigeria’s GDP has increased by $318.15 bn, a percentage increase of 362.2%.
PRESIDENT BUHARI AND NASS
While the President had submitted a budget to boost infrastructure, and use the investment as a fiscal policy to help grow the economy, it is imperative to note that Nigeria has been operating an Expense Budget and not Investment Budgets since the Mid-80’s (Majorly recurrent expenditure) which has made it almost impossible for its citizens to grow wealth since investment in Human Capital Development and Infrastructural Developments are what helps the country create and generate wealth.
Since coming into office, the President has continued to Increase Capital Expenditure as a percentage of the Budget, from 23.8% in 2014 and 15% in 2015, Capital Expenditure has stood at 30% of the Budget since 2016. But the 2018 budget which has taken 7 months to approve by NASS, the legislative arm of government has cut N347bn in the allocations to 4,700 projects from the original budget summited to them and introduced 6,403 projects of their own which amounts to N578 bn, as usual funds are allocated as constituency allowance for projects but they are never executed, as in some cases to be seen to have done something, the projects are so over bloated that even an idiot knows they have been ripped off.
The President had stated that some of the Strategic National/Regional infrastructure which the NASS had cut funding from which was supposed to help the country included the Mambilla Power plant, Second Niger Bridge/Ancillary roads, The East-West Road, Bonny-Bodo Road, Lagos-Ibadan Expressway, and Itakpe-Ajaokuta Rail Project. Others include Abuja arterial roads and Mass Transit Rail Projects, the Rehabilitation of the United Nations building, Interventions in the Health Sector which included Tertiary Health Institutions, Provision of Security Infrastructure in the 104 Unity Schools, Federal Government National Housing programme. Take off grant for the Maritime University, Enugu Airport, Export Expansion Grant and Special Economic Zones/Industrial parks.
While NASS is cutting down on funding of critical projects that will grow the economy and reduce Poverty, they are increasing their budget to put money in their own pockets. NASS through Statutory Transfer has increased its budget by N14.5bn from N125bn to N139.5bn. These are major reasons Poverty will never reduce in Nigeria because funds meant to grow the economy are directed to end up in people’s pockets.
COMPARING NIGERIA TO OTHER COUNTRIES…….
“Poverty is the absence of all human rights. The frustrations, hostility and anger generated by abject poverty cannot sustain peace in any society”……Muhammad Yunus
Nigeria is the only Emerging Economy in the world where GDP is increasing and Poverty is also increasing, between 1981 and 2016, other countries that have recorded economic growth have succesfully reduced Poverty. China while recording economic growth has lifted 789.5 million people out of Poverty, Indonesia has lifted out 78.7 million people, Thailand has lifted out 29.4 million people, Bangladesh has lifted out 24.4 million people, Malaysia has lifted out 2.93 million people, and India has lifted out 137.2 million people, but Nigeria added 90.4 million people to poverty between 1981 and 2016 alone and a total of 94.7 million from 1981 to 2018.
While the President wants to invest in Infrastructure to help Nigerians and the Nation build Wealth and get out of the Poverty Trap, the National Assembly world rather Nigerian’s continue to live in Poverty while they divert funds into their own pockets.
Nigeria, Education Expenditure, and the Poverty Trap.
Between 1981 and 2016, Nigeria’s GDP grew from $61.1bn to $405bn reaching an all-time high of $569bn in 2014. Yet from 1981 to 2016 Nigeria added 90.4 million people to Poverty which has continued to increase to date.
On the 25th of May, 2018, I had a session on Channels TV on why we have had increasing “Economic Growth” over the years and why Poverty in also growing creating what is called the Poverty Trap for citizens of the country.
Economic growth should lead to Economic Development and further lead to Human Development, while Nigeria has had Economic growth over the years, it has not led to both Economic Development and Human Development.
Main while other countries that have recorded Economic Growth have succeeded in reducing poverty over the same period. China has lifted 789.5 million people out of Poverty, Indonesia has lifted out 78.7 million people out of Poverty, Thailand has lifted 29.4 million people out of Poverty, Bangladesh has lifted 24.3 million people out of Poverty, Malaysia has lifted 2.93 million people out of Poverty, and India has lifted 137.2 million people out of Poverty.
Find out how government’s lack of investment in Education (Human Capital Development) and how school fees has plunged the average family in Nigeria into what is called the Poverty Trap and Economic Stagnation for the country.
Watch the complete session and understand why Poverty will continue to increase in Nigeria despite increasing economic growth.
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Nigeria: IntelServe CEO Traces Nigeria’s Socioeconomic Challenges to Poor Funding in Human Capital Development.
Roman Oseghale, Head Consultant and CEO of IntelServe Inc. a Canadian Business Analytical Services Company spoke at the Oct. 2nd, 2017 edition of The Platform under the topic “Education Funding and it’s Socioeconomic Impact” where he reiterated the importance of Human Capital Development using data to back up his research. He stated that no nation among over 100 countries that has been surveyed in the research relegated education and prospered, everything Nigeria is facing today is as a result of poor education funding, he stated that the blue print for national development was Human Capital Development and that the answer was right in front of everyone but no one is looking in the right direction.
His research and presentation at The Platform revealed how the socioeconomic activities of the country is falling apart because of governments inadequate investment in Human Capital Development (Education and Skills) in the youths of the country. In 2017 with a projected GDP of USD$408.3 bn, a population of 182 million, Nigeria’s education budget is USD$1.77 bn representing 7.4% of the budget and 0.43% of expected GDP at the end of the year compared to USD$3.038 bn in 1981 with a GDP of USD$61.1 bn with a population of 75.7 million which represented about 30% of the budget and 4.97% of the GDP.
Compared to other countries that were surveyed, Nigeria has only spent USD$52.79 bn from the federal level in 46 years despite being one of the most populated countries. Brazil has spent USD$1.6 tn, Chile has spent USD$131.2 bn, Mexico USD$939.8 bn, Canada USD$1.68 tn, United Kingdom USD$2.88 tn, Germany USD$3.74 tn, USA$ 18.01 tn, Egypt USD$161.3 bn, South Africa USD$372.6 bn, Thailand USD$234 bn, Indonesia USD$282.6 bn, and Malaysia USD$214.4 bn to mention a few.
He pointed out that investment in the knowledge economy was the main driver of economic growth, he made it known that because of lack of education investment, Nigeria has continued to slip down the Global Competitiveness Index, from 83rd position in 2005, to 127th position in 2010 and has remained at 127th since…he stated that countries that invest heavily in education were moving up the ranks, examples were Indonesia from 69 to 41, China from 48 to 28, Malaysia which stayed at 25, Singapore from 5 to 2, and Philippines from 73 to 57.
He stated that Nigeria was relatively stable in the 60’s, 70’s and early 80’s and had a balance in its socioeconomic activities because the country was investing in Human Capital Development which reached its peak of 4.97% of GDP approximately 5% of GDP as stipulated by the United Nations in 1981. He stated that the country may not understand the concept of education beyond an institution, a place where knowledge is obtained, certificate and degrees are given, and a tool that moves a child out of poverty, he argued that education was the weapon used in balancing all facets of the socioeconomic activities and as education funding continued to drop those facets of the society started falling apart creating a threat to both social and economic stability of the country.
He pointed out that education is an investment and not an expense, a tool used for economic growth and sustainability and that education is the weapon used to balance the socioeconomic activities of any country, if you destroy education you destroy everything. He stated that once public education is underfunded and destroyed, the country invariably destroys the socioeconomic activities and every facet of the socioeconomic factors starts to fall apart. He stated that education is the glue that holds the socioeconomic activities of a country together, whIle education is the lifeblood of the socioeconomic system, funding is the lifeblood of education.
The research showed that from 1982 education expenditure started dropping and dropped below USD$1 bn in 1986 and stayed below USD$1 bn, it wasn’t until 2006 that education expenditure climbed above USD$1 bn again in 20 years. He pointed out that education expenditure did not reach USD$3 bn again until 2011, the sane amount government spent in 1981…..it took government 30 years to spend the same amount they spent in 1981 on education. And all the while education expenditure was reducing, population was increasing.
Through his research he was able to point out how Nigeria was ahead of many Asian countries in per capita income in the 60’s, 70’s, and early 80’s because of Nigeria’s investment in Education, but as soon as Nigeria stopped investing in education and the Asian countries picked up, their per capita income grew and surpassed that of Nigeria. He stated that government has abandoned Human Capital Development and it was destroying all facet of the society.
He developed a model which he used in his presentation to show what happens when education is underfunded and how the socioeconomic activities of the country falls apart: Stating that underfunding education leads to fall in Per Capita Income, which leads to population explosion, increase in poverty, with poverty leading to crime, at the same time with poverty also leading to social unrest, and social unrest leading to state/regional instability which leads to economic loss for the country. On the other hand population explosion also leads to environmental degradation which leads to health issues and leads to economic loss for the country.
The research showed how Nigeria’s per capita income started falling after we stopped investing in education, Nigerians were poorer for 25 years without knowing it through fall in per capita income. In 1980 per capita income was USD$871 and from 1981 per capita income started dropping and did not go above USD$871 until 2006 when it reached USD$1,015, first time in 25 years. This is because as level of education and skills dropped, people’s earning power also dropped while spending on education is also recorded in the Adjusted Net savings of the country as investment assets and not expense.
He explained that as people’s earnings dropped population soared, this is because prosperity caused people to have smaller families, uneducated people saw many kids as their assets for old age, educated women used contraceptives, families often choose to educate the male child when in the midst of poverty, and also education delays marriage……women on average stop having kids at age 40, so a girl child given out in marriage at age 15 has a window period of 25 years to keep having kids unlike a girl child that pursues education and graduates at age 24, marries at 26, and starts having kids at age 28….as a working class mother, she only has between 10 to 12 years to have kids. Also working class mothers space out their kids so fertility rate is much more lower compared to a stay at home and uneducated mother.
He stated that Nigeria’s had one of the lowest annual growth rate in the 60’s and 70’s with 1.99% in 1960, Egypt, South Africa, Thailand, Indonesia, Malaysia Chile, Brazil, Mexico, Canada, to mention a few among the surveyed countries all had higher population growth, but the reverse is the case today, Nigeria’s Population growth as at 2014 was 2.66% with an average of 2.52% in 55 years and fertility rate of 5.6% is among the highest in the world, and as population increased poverty also increased.
He stated through his research that Poverty leads to increasing population, and increasing population leads to increasing poverty, as population increases, per capita income continues to fall…from 47% living below the poverty line in 1981, representing 35.6m of the total population, Nigeria’s population living below the poverty line increased to 70% in 2010 representing 114.7m of the population and reaching 120.4m in 2013. By 2014 Nigeria was ranked the 6th country in the world with the highest percentage of people living below the poverty line. He explained that all the agitations, kidnapping, instability in the country today is as a result of poverty which was caused by our lack of investment in Human Capital Development.
The research highlighted the worrisome part, extreme poverty has continued to drop in the world and by region, total living in extreme poverty as a percentage of population in the world dropped from 52.7% in 1981 to 10.7% in 2013. While the largest regions with extreme poverty has also continued to drop…Sub-Saharan Africa has dropped from 52.8% in 1981 to 41% in 2013, South Asia from 61.4% to 15.1%, East Asia/Pacific has dropped from 78% to 3.5% in the same period.
Nigeria share of extreme poverty as a percentage of people living in extreme poverty in Sub-Saharan Africa has continued to increase….from 17.6% in 1981 to 28.4% in 2011, and to 32.2% in 2013….while Nigeria is 18.8% the population of Sub-Saharan Africa, Nigeria share of extreme poverty is 32.2%…..which means that as at 2013, one in every three persons living in extreme poverty in Sub-Saharan Africa was a Nigerian while in 1981 it was one in every 5.6 persons….while extreme poverty is reducing in Sub-Saharan Africa, that of Nigeria is increasing. Nigeria share of extreme poverty increased by 83% between 1981 and 2013.
The research also showed that among all the largest world developing nations: China, India, Indonesia, Brazil, Pakistan, Nigeria, Bangladesh, Russia, Mexico, Philippines,…..NIGERIA IS THE ONLY COUNTRY WHERE GDP IS GROWING AND EXTREME POVERTY IS ALSO GROWING. China reduced extreme poverty from 84% of population in 1981 to 6% in 2017, Indonesia from 72% to 12% with all other countries reducing as well, but Nigeria moved from 47% to 70%.
He stated that as poverty increases, crime increases…..data showed that Nigeria’s prison population increased by 26% between 2011 to 2015 while population increased by 10% during the same period, with offence against properties and offence against persons being the highest. He further stated that as at today, Nigeria has under aged children in prisons because of petty stealing and street trading, stating that while the country has refused to invest in these kids, the country is incarcerating them.
He further explained that the social unrest in the country today, from the North East, South-South, South East, and South West is as a result of poverty and lack of Human Capital Development. He stated that no educated person who is prosperous will become a miscreant to the society.
“The War against Terror is Bound up in the War against Poverty”…..General Collin Powell
The research showed that as at 2013, Nigeria had 10.5m kids outside school which represented 20% of their age bracket, while many claim the number is now more. He warned that Nigeria had the second largest number of kids outside school in the world after Pakistan. While Nigeria is 2.5% of world population, it holds 4% of the total number of kids outside school in the world from the 263m kids as estimated by the United nations.
He stated that of all the countries survey where terrorist cells operates, the countries with terrorist cells had three things in common: Low education expenditure, high poverty rate, and high number of kids outside school. He further warned that we must start to consider the consequences to both state and regional stability as only 87 countries out of 196 countries of the world have populations greater than 10.5m. He pointed out that between 2014 and 2017, a total of 125 kids have been used as suicide bombers in Nigeria with 83 in 2017 alone…..increase of 96.7% in just one year. Group like Boko Haram is using financial incentives to lure kids due to poverty.
Boko Haram has killed over 20,000 since 2010, while over 2 million has been displaced, which has caused the economic loss and stagnation of the North East of the country, while the Gulf of Guinea is now rated the most dangerous waters in the world due to kidnapping and ransom. In 2016, 54 attacks were carried out costing over USD$ 700 in economic damage while about 1000 seafarers were subject to attack in 2015, all were blamed on poverty and lack of economic opportunities with the youths.
Nigeria is also slipping down on all worldwide indexes….from a rating of 118 amongst 163 countries in the Global Peace Index in 2008, Nigeria has slipped down the ladder to 149th position, while the country has also slipped down the United Nations Human Development Index from 142 in 2010 to 152 amongst the 188 countries rated. This also led to the economic loss for the country which saw FDI reduce from USD$8.84 bn in 2011 to USD$3.13 bn in 2015 (65%) at the height of the Boko Haram Insurgencies.
He urged the government to make every efforts to register kids that were not in school, and also those that are past high school age to be registered to train for one skill or the other to reduce crime, he warned that all global rating on Nigeria was not looking good and government must invest more in Education if the country is to survive global competition as the Global Competitiveness index is mainly driven by education, hence the country will become a dumping ground. With 182 million population, if the youths are not empowered to create wealth, they will become a threat to national security in the country and region as it is already happening.
Roman Oseghale, an Architect, Consultant, and a Business Analyst is the Head Consultant of IntelServe Inc. a Canadian company which is into Consulting and Business Analytical Services spoke at The Platform on May 1st, 2017 on developing sustainable economic growth for Nigeria. Mr. Oseghale argues that Africa which is one of the 6 continents is the richest in Mineral Resources but the poorest in per capita income, he noted that 1/3 (33.3%) of all earths mineral resources is buried in Africa, 2/3 (66.6%) of all global mined diamond comes from Africa, 1/10 (10%) of global oil reserve is in Africa, 75% of all cocoa beans is from Africa, and Africa is home to some of the rarest mineral resources.
Presenting a research that cost him about 600 hours of work, demonstrated how Investing in Human Capital Development has been the secret to how progressive nations have developed a Sustainable Economy and growth over the last 60 years. He stated that the Netherlands which does not grow cocoa processes 13% of all cocoa beans worldwide and Europe and Russia which equally don’t grow cocoa processes 38% of all cocoa beans, and the tens of products manufactured from cocoa are shipped back to Nigeria and Africa to be sold, and while the worldwide cocoa industry is estimated to be over USD$100 billion, Africa’s share is just 2% percent (USD$2 billion) despite producing 75% of the cocoa beans.
He stated through his research that developing a Sustainable Economic Growth ensures both economic and political stability in any country and is the gateway to creating wealth, building confidence in any economy and prevents the devastating and inefficient impact of corporate premature failure and death. Using analysis from both Business Survey and Business Intelligence and gathering both qualitative and quantitative data, Mr. Oseghale took the country back 57 years to 1960 and matched these data along timelines to know where Nigeria deviated from the progressive economic growth of the 60’s and 70’s. He also matched the data with those of 80 other countries across the 6 continents for the 57 years to be sure of his hypothesis.
He stated through his research the direct correlation between education expenditure and per capita income of countries and that all progressive countries were operating the Knowledge Economy, he stated that progressive countries develop individuals and as they earn more or create wealth, it ultimately increases the GDP of the country. He stated that Nigeria and most African countries were still operating the mineral resources economy and if the country was to make progress it must switch over to the knowledge economy and treat education as an investment rather than an expense stating that education is an economic tool for growth and sustainability.
He stated through his research that in the 60’s and 70’s, and early 80’s, Nigeria invested in education pushing to reach the United Nations stipulated mandate of 26% of budget or 5% of GDP on education Investment both on Federal and State levels, and reached an all-time high of 4.9% of GDP in 1981. He argued that for the UN to have stipulated that 26% be invested in Education and 15% in Health, a combined investment of 41% of the budget on investments which has to do with direct investments on human capital only proves one thing…..that Human Capital was the greatest assets and true wealth of a nation and not mineral resources as Nigeria and most African countries seem to think.
The highlight of his presentation was how the research showed how Nigeria was ahead of countries like Egypt and a lot of the Asian countries in Per Capita Income in the 70’s and early 80’s when Nigeria heavily invested in Education and treated it as an investment while those countries did not invest as much in education and treated education as an expense. But the reverse was to start happening from 1982, these other countries started investing heavily in education building a knowledge economy having realised that the knowledge economy was the future and the key to economic growth and sustainability while Nigeria kept reducing its education expenditure and reaching an all-time low of 0.77% of GDP in 1991 and it has remained at 0.8% annually ever since. While population was increasing, Nigeria’s education expenditure was reducing over the years and the country did not increase education expenditure in 30 years.
In 1981 at USD$3.038b representing 4.9% of GDP, Nigeria’s education investment remained below USD$1b for 20 years, between 1986 and 2006, and only climbed to USD$3.3b in 2011 after 30 years. His research also shows that no nation amongst the 80 countries used for the survey and research ever reduced education expenditure for more that 3 to 4 years in a row but Nigeria did not increase hers in 30 years. He noted that Nigeria was the only country that had the highest increase in population between 1981 and 2014 (134.5%) but only increased education expenditure by only 53.7%, while countries like Egypt increased in population by 101.5% and increased education expenditure by 1,709%, Thailand increased in population by 40.1% with increase in education expenditure by 2,625%, and Indonesia increased in population by 68.5% but increased education expenditure by 2,469% in 33 years from 1981 to 2014, and this is the reason these countries are ahead of Nigeria today.
The research also showed that the Federal Government has only invested USD$48.8 billion in education in 44 years (1970 – 2014) despite having a large and fastest growing population compared to countries like Brazil that has invested USD$1.5 trillion, Chile USD$120.5 with just 10% of Nigeria’s population, Mexico USD$882.6 billion, Canada USD$1.6 trillion, United States USD$17.2 trillion, United Kingdom USD$2.7 trillion, Germany USD$3.5 trillion, Egypt USD$148 billion, South Africa USD$354 billion, Thailand USD$218.9 billion, and Indonesia USD$222 billion. He stated that these countries and the others used in the survey treat education as an investment and economic tool of growth and sustainability, and that is why they have a progressive economy.
The research also highlighted the cost of our negligence, how Nigeria’s public education sector and infrastructure is now decaying and the country not able to meet up with the massive number of students seeking university admission yearly. He also stated that most of the kids are now seeking admission outside the country which is now costing the economy billions of dollars yearly, and while we may think the country is only paying school fees and upkeep, Nigeria is losing billions in Intangible assets annually as the country is losing its best brains.
He concluded that government must start treating education as an investment rather than expenditure and must immediately return the country back to the economic model of the 70’s when government invested in Human Capital Development and provided the citizens with the right skills noting that the knowledge economy was the future and no nation has ever recorded progress in economic growth and sustainability with the relegation of education.
He also stated that government should develop skills acquisition centres, stating that education does not just end with students graduating from the universities but they must be armed with the right skills to succeed and increase productivity, which ultimately benefits the country and that government should provide incentives of low interest loans for graduates of skills and acquisition centres who wish to go into manufacturing, he stated that this is the model the Asian countries have been practicing and that’s why they have been able to turn their countries to the manufacturing hub of the world.
________Why we must look at data before reaching a logical conclusion!!!…….
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