Economy, Nigeria and the United

Economy, Nigeria and the United States

Below is a comparison of the growth and income distribution of Nigeria and the United States since the 1960's.

Nigeria

Between fiscal year (FY) 1959 and 1967, GDP grew by 6.0% annually. According to statistics, GDP shrank at an annual rate of 1.1% between FY 1967 and FY 1970. However, this does not take into account political upheavals such as the secession of the Eastern Region in 1968 or the war that ended in 1970. It is thus highly likely that the decline in net domestic production is understated in the statistics, since annual measures of GDP do not reflect wartime capital destruction.

During the early 1960's, annual population growth is estimated at more or less 2%. This rises to 2.5 to 3.0% from the mid-1960's to late 1970's, and 3.0 to 3.5% during the 1980's. GDP growth per person is then estimated at 4.0% during the 1960's, 3.0 to 3.5% during the mid-1960's, -3.5 to -4.0% during the war, 7% during the 1970's, -6.0% during the early 1980's, and -2.5% during the later 1980's.

Real GNP per capita declined to U.S.$290 by 1988. This placed Nigeria below India, Pakistan and Ghana in low-income status. Other elements influenced by this poverty rating includes life expectancy and infant mortality. For the former the country ranks 155th out of 177 countries, and for the latter Nigeria is placed at 148th out of 173 countries. This is consistent with the low income per capita (Left Business Observer, 1998: 38).

The wealth distribution in the country is however unequal, and those who own property hold influential positions and education. These elements then result in the fact that these persons are offered opportunities that are not open to persons of lower income. These economic opportunities then inflate the income of the rich, while the lack of same for the poor remains, thus widening the gap between rich and poor in the country. Production and profitability, rather than distribution, are thus favored (Left Business Observer, 1998:56).

From 1960 to 1978 then, the rural poverty rate declined, but the number of poor in rural areas remained constant. The rate of urban poverty also declined, but the numbers of urban poor doubled in number. This is indicative of the above phenomenon of inequality as well as concentrated profitability rather than distribution. There was also an increase in income concentration from 1969 to 1976 in the country, which exacerbates income inequality in the country as a whole. On the other hand, increased salaries for low-income workers would have eased the inequality from 1976 towards the end of the 1970's. The problem of income distribution was officially addressed in interurban redistribution, as the rural masses had little political influence (Left Business Observer, 1998: 36).

During the 1970's, industrial developments driven by oil resulted in urbanization and increased poverty for the rural areas. The effect on the poor was exacerbated during the 1980's by rising debt and falling average income. Whatever progress was made during the 1960's and 1970's was nullified by the crisis during the 1980's. Rising urban poverty then also resulted in a narrower gap between urban and rural income averages. The situation was somewhat remedied by lifting the wage freeze during 1988, and inflation abated in late 1989. Still, the country's problems remain in terms of wealth inequality and general poverty.

The United States

The United States, despite being one of the richest countries in the world, share with Nigeria the phenomenon of unequal distribution of wealth. Since the 1960's, the existing polarization in the United States increased, and the gap between rich and poor in the country during the 1990's was at its widest.

A similar pattern to Nigeria can also be detected in the wage average growth in the United States. Indeed, stagnation and a slight downward base can be detected in the income of poor to middle-class households, while a sharp rise is manifest in the income of the higher-scale earners. Like their Nigerian counterparts then, most of the economic growth and its attached benefits have been the privilege of the richest 5% of American households., while 15% of households have done reasonably well, with the remaining 85% either remaining stagnant or declining in their income level. During the 1980's and 1990's, the median real income of U.S. households fell 7.3%, while the income figure given for 1996 is 3.0% lower than that of 1989 (Smolensky and Plotnick, 1992:3).

An aspect that is more prominent in the United States than in Nigeria is the differences in income dictated by race and sex. Since the 1960's, black households have experienced broad income gains, unlike the rural poor of Nigeria. Combined with this is declining incomes for the lower 80% of the white population. The gap is however still significant, with black incomes averaging 63% of those earned by whites (Smolensky and Plotnick, 1992:6). Other races such as Hispanics however still suffer from rising poverty rates.