Poverty in the informal sector of kwara state nigeria
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Poverty in the Urban Informal Sector of Kwara State, Nigeria 2011
Ijaiya, GT., Bello, RA., Arosanyin, GT., Oyeyemi, GM., Raheem, UA and Yakubu, AT Page 1
CHAPTER 1
INTRODUCTION
1.1. Statement of the Problem
The activities of the people operating in the informal sector in most urban settlements in less
developed countries cannot be ignored since they play significant role in the development of
the economies of these countries. For instance, the sector employs between 35 percent and 65
percent of the labour force; and contributes between 20 percent and 40 percent of the Gross
Domestic Product (GDP) in less developed countries (Braun and Laoyza, 1994). In Africa,
the sector has grown to be a major source of income to a large population of urban poor and
women. In fact, about 400 million African workers earn their livelihood in the informal sector
and income generated supports additional 200 million others to survive (Grey-Johnson,
1992). In Nigeria, the sector is known to have contributed about 58 percent of the nation‘s
Gross Domestic Income (GDI) and provided over 50 percent of urban jobs. The sector also
provides most of the population with a means of livelihood or essential supplementary
income. Most probably the sector is also the only reliable source of livelihood for women and
the poor for whom the formal sector has no accommodation for economic upliftment
(Fapohunda, 1978; Fapohunda and Lubell, 1978; Fapohunda, 1985; Ariyo, 1996, Schneider,
2002, Ijaiya and Chika, 2004; Arosanyin, et.al 2009).
Despite its contribution to economic development, the sector is still regarded as the sector
where the bulk of the poor are found. Scientific studies on the prevalence of poverty in the
informal sector are still scanty. It is therefore difficult for government and policy makers to
provide pragmatic solutions to the poverty situation in the sector. In order to provide
objective solution to the poverty situation in the sector in Kwara State, this study becomes
imperative. The basic questions in this study are: To what extent are the people operating in
the urban informal sector of Kwara State poor? What are the causes and consequences of
poverty among the people operating in the urban informal sector of Kwara State? What
intervention measures are needed in addressing the problems of poverty in the urban informal
sector of Kwara State?
1.2. Objective of the Study
The main objective of the study is to examine the rate of poverty in the informal sector of
Kwara State, Nigeria. The study has the following objectives:
To examine the extent of poverty in the urban informal sector of Kwara State by
measuring its prevalence.
To determine the causes and the consequences of poverty in the urban informal
sector of Kwara State.
To proffer intervention measures that can be used in addressing the problems of
poverty in the urban informal sector of Kwara State.
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1.3. Justification for the Study
In Nigeria, significant efforts have been made to reduce poverty, but what some scholars
found difficult to comprehend is its continuing and persistent increase1 despite the different
strategies suggested and put in place by various governments, non-governmental
organizations, community-based organizations and individuals at reducing it. The failure of
these strategies (e.g. the Better Life for Rural Women Programme, the Family Support
Programme, the Operation Feed the Nation, the Green Revolution, the Directorate for Food,
Road and Rural Infrastructure, the Integrated Rural Development Programme, the Mass
Transit Programme, the National Directorate for Employment and the recently introduced
National Poverty Eradication Programme) can be traced to the lack of continuity in the
implementation of the programmes. This lack of continuity have inhibited progress; and
created a climate of uncertainties, budgetary constraints, mismanagement of the
projects/programmes funds and corruption. Most importantly, the poor have not been
adequately served by these programmes. Targeting the poor requires identification of who is
poor? Why are they poor? And where do they live?
Drawing from the above, it becomes important that an analysis of poverty in order to capture
those that are poor and why they are poor in the urban informal sector of Kwara State is
carried out. Results from this study would be useful in understanding and designing
appropriate poverty reduction measures by the government, its agencies and development
partners for the people operating in this sector, which is hoped would fulfilled some of the
aspirations of State‘s Economic Empowerment Development Strategy (SEEDS) and those of
the Millennium Development Goals that include, among others, eradication of extreme
poverty and hunger by 2015.
1 In Nigeria, the incidence of poverty that was 28.1 percent in 1980, increased to about 64 percent in the year
2004, with rural poverty increasing from 22 percent in 1980 to 68 percent in 2004. Similarly, Nigeria‘s rank in
the Human Development Index remained low, being the 152nd
out of 175 countries. The nation‘s life expectancy
at birth that was 51.9 in 2001 also dropped to 44 years in 2005 (ADB, 2003; FOS, 2004; FOS various years;
World Bank 2005ab, ADB 2010).
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CHAPTER 2
INFORMAL SECTOR AND POVERTY
2.1. The Informal Sector
The earlier studies on the informal sector can be traced to the studies by the International
Labour Organization (ILO) in Kenya in 1972 and Keith Hart in Ghana in 1973 (ILO 1972;
Hart 1973; Amin 2002; Chen, et.al 2002; ILO 2002a; ILO 2002b; Thomas 2002). However,
in theory the emergence of the study on the informal sector can be linked to Lewis (1954) and
Hirschmann (1958) which conceptualized economic development as the emergence and
growth of manufacturing sector (the ―modern‖ sector) through the absorption of labor being
freed from agriculture (the ―traditional‖ sector), due to the more efficient means of
production in the former (cited in Todaro 1987; Usman and Ijaiya 2000; Potts 2007;
Arosanyin, et. al 2009; Srinivas 2009).
The study by Rogers and Swinnerton (2004) saw the emergence of the sector as a result of
undesirable economic distortions and unfavourable policies of government. Studies by
Loayza (1994, 1997), Azuma and Grossman (2002), Xaba et.al (2002) saw its emergence from
the growth of urbanization and the problems that come with it- unemployment and low skills,
heavy burden on taxes fees, labour market restrictions and inefficient government institutions.
The studies also shows how the informal sector arises in a neoclassical model when some
firms choose to remain small to enjoy legal exemption from a mandated minimum wage
policy and tax which distorts resources away from first best allocations.
2.1.1. Definition and characteristics of Informal Sector
The informal sector covers a wide range of labour market activities that combine two groups
of different nature. On one hand, the informal sector is formed by the coping behaviour of
individuals and families in an economic environment where earning opportunities are scarce.
On the other hand, the informal sector is a product of rational behaviour of entrepreneurs that
desire to escape state regulations.
The two types of informal sector activities can be described as follows:
Coping strategies (survival activities): casual jobs, temporary jobs, unpaid jobs,
subsistence agriculture, multiple job holding;
Unofficial earning strategies (illegality in business): (i) unofficial business activities:
tax evasion, avoidance of labour regulation and other government or institutional
regulations, no registration of the company; and (ii) underground activities: crime,
corruption - activities not registered by statistical offices (GDRC 2009).
The simplest definition of informal economic activity is any exchange of goods or services
involving economic value in which the act escapes regulation of similar such acts (Wikipedia
2008). ILO (2009) refers to it as all economic activities by workers and economic units that
are – in law or in practice – not covered or insufficiently covered by formal arrangements.
Their activities are not included in the law, which means that they are operating outside the
formal reach of the law; or they are not covered in practice, which means that – although they
are operating within the formal reach of the law, the law is not applied or not enforced; or the
law discourages compliance because it is inappropriate, burdensome, or imposes excessive
costs (see also Bernabè, 2002; Howell 2002; Musiolek 2002; Thomas 2002; Hussmanns
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2004; Daza 2005; Adeyinka 2006). Blaauw, (2005) also defined the informal sector as
unorganized, unregulated and mostly legal but unregistered economic activities that are
individually or family owned and use simple, labour intensive technology.
The informal sector often referred to as subterranean economy, underground economy,
shadow economy, non-corporate enterprises, micro-enterprises and petty producers is also
defined as a large volume of self employed in developing countries who are engaged in
small-scale intensive work such as tailoring, food preparation, trading, shoe repairing, etc.
These people are often regarded as unemployed or underemployed as they cannot be included
in the national employment statistics but they are often highly productive and make a
significant contribution to national income. Their work in general is characterized by low-
capital-output ratio, that is, the ratio of the level of equipment or capital relative to output is
low (Hart 1972; Trager 1987; Steams 1988; Sanyal 1991; Pearce 1992; Cheaker and Nangbe
1998; Wickware 1998; Ijaiya and Umar 2004; Soares, 2005).
Fluitman (1989) saw the informal sector as a heterogeneous phenomenal which encompassed
a wide variety of economic activities which tend to be overlooked in statistics including all
sorts of manufacturing activities, construction, trade and commerce, repair and other services.
For example, informal sector workers made beds, pots and pan, they repair watches, cars and
radio, they write letters, lend money, run restaurant, and barber-shops in the side walk, they
transport goods and people on their motorbikes, they sell fruits and cooking oil and cigarettes
by the piece. Informal sector activities are mostly carried out in small units owned and
operated by one or a few individuals with little capital, they are usually labour intensive
activities which result in low quality but relatively cheap goods and services (see also Loayza
1997).
Many of the names by which the ‗informal‘ sector is called (black market, casual work,
clandestine activities, community of the poor, family-enterprise sector, hidden sector,
informal economy, informal opportunities, intermediate sector, invisible sector, irregular
sector, lower-circuit of the urban economy, non-plan activities, non-westernized sector, one-
person enterprise, parallel economy, people's economy, petty commodity production,
shadow economy, trade-service sector, transient sector, underground economy, unobserved
economy, unofficial economy, unorganized sector, unrecorded economic activities,
unremunerated sector, unstructured sector, urban subsistence sector), essentially characterizes
it in terms of what it is not: it is not the formal sector (non-formal), it is not controlled by the
government (non-plan, hidden, unofficial, unrecorded), it is not legal (illegal, black, shadow)
and it is not taxable (unrecorded, parallel). But recent research and exploration on the issue
has resulted in a more benign approach, where the names and definitions have used the
characteristics of the sector itself (casual, family enterprise). Some emphasize its poverty
focus (subsistence, petty commodity, and one-person enterprise) as well as its 'temporary'
nature (transient, intermediate). In reality, it is all of these taken together, that define all the
characteristics of the sector (GDRC 2009).
2.1.2 Characteristics of enterprises in the informal sector
As observed by Women in Informal Employment-Globalizing and Organizing (WIEGO)
(2009) early debates regarding the causes and characteristics of the informal sector were
crystallized into four dominant schools of thought namely the dualist school; the structuralist
school; the legalist school and the il-legalist school.
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The characteristics of the informal sector include among others: ease of entry; predominant
use of local resources, family ownership of the enterprises; small scale of operation;
adaptation of largely labour-intensive technology; acquisition of skills mainly outside the
formal system of education and training; and operation in an unregulated competitive market
(ILO, 1972). The informal sector characterised to comprise these economic enterprises which
employ less than certain number of persons (e.g. 5 or 10, depending on the country's official
procedures) per unit, and which simultaneously satisfy one or more of the following criteria:
(a) it operates in open spaces, (b) it is housed in a temporary or semi-permanent structure, (c)
it does not operate from spaces assigned by the government, municipality or private
organizers of officially recognized market-places, (d) it operates from residences or
backyards, and (e) it is not registered. The ILO/ICFTU international symposium on the
informal sector in 1999 proposed that the informal sector workforce can be categorized into
three broad groups: (a) owner-employers of micro enterprises, which employ a few paid
workers, with or without apprentices; (b) own-account workers, who own and operate one-
person business, who work alone or with the help of unpaid workers, generally family
members and apprentices; and (c) dependent workers, paid or unpaid, including wage
workers in micro enterprises, unpaid family workers, apprentices, contract labor, home
workers and paid domestic workers (El-Mahdi, 2002; Hussmanns, 2004; Daza, 2005; Slack,
2006; GDRC, 2009).
Looking at the enterprise side, there are also a number of defining features, which
characterize these businesses in Africa. These include: low set up costs and entry
requirements, which are presented above as key factors behind informalization. Operations
are typically on a small scale with only a few workers. Skills required for the business
activities are usually gained outside formal education. The production of goods and services
is labour intensive. Again turning to the Doing Business Database compiled by the World
Bank, it is interesting to consider the heterogeneity in some of the key business factors behind
the development of the sector in Africa. The database contains figures for various indicators
representing the ease of starting up a business, hiring and firing workers, registering property,
getting credit, protecting investors, enforcing contracts, licensing requirements and closing a
business. For example, based on certain assumptions regarding the nature and location of the
business, sub-Saharan enterprises are required to complete 11 procedures on average in order
to establish a new business, the equal highest amongst all regions. This process takes over 63
days in sub-Saharan Africa, the longest of any region. The cost of starting a business in sub-
Saharan Africa (SSA) represents 215.3 percent of GNI per capita, which is over three times
higher than the next most expensive region (Middle East and North Africa). This figure,
however, masks the heterogeneity in SSA: the percentage ranges in fact from 8.6 percent of
per capita GNI in South Africa to 1,442.5 percent in Zimbabwe. Overall, these figures show
that establishing a business in the formal sector in SSA is a complex, lengthy and costly
undertaking, which are all reasons for enterprises to remain informal (Verick, 2006).
Another barrier for enterprises to operate in the formal economy is licensing. In sub-Saharan
Africa there are on average 20.1 licensing procedures for a business in the construction
industry to build a standardized warehouse. These procedures include obtaining licenses and
permits, completing notifications, inspections and submitting the necessary documents (see
www.doingbusiness.org). The figure for SSA varies from 11 in Kenya and Namibia to 48 in
Sierra Leone. The only region that has more licensing procedures than SSA is Europe and
Central Asia (21.4). These procedures take approximately 251.8 days in sub-Saharan Africa,
ranging from 127 in Ghana to 569 in Cote d‘Ivoire. On average the cost of registration
amounts to 1,597.3 percent of GNI per capita, with a minimum in Mauritius of 16.7 percent
Poverty in the Urban Informal Sector of Kwara State, Nigeria 2011
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and maximum of over 10,000 percent for Burundi. This cost illustrates another barrier
enterprises face when undertaking such an investment (Verick, 2006 ).
The different dimensions covered by the World Bank‘s Doing Business database allows for a
more detailed empirical country-level analysis of the most important factors determining the
size of the informal economy. A first look at the correlations between the size variable and
other characteristics reveals that the following factors are positively and significantly
correlated with the size of the informal economy: time to get a license; cost of registering a
property; and the number of documents required for exporting. The relationship between the
size and the cost of property registration is illustrated in Figure 3 above. This graph shows
that an increase in the cost of registration by 1 percentage point is associated with an increase
in the size of the informal economy by 0.6 of a percentage point. While there are many
potential variables that influence the formation and growth of the informal economy, this
preliminary analysis indicates that these barriers and costs to doing business are important
factors behind this phenomenon (Verick 2006).
The informal sector in Africa is dominated by trade-related activities, with services and
manufacturing accounting for only a small percentage of this sector. For example, in Angola,
Nigeria, South Africa and Uganda, a majority of informal sector workers are active in retail
trade. Most of these workers are self-employed, which accounts for 70 percent of workers in
this sector in SSA, with the remainder in wage employment. Street vending is one particular
informal activity that is prevalent on the continent. Available data in 1992 indicate that street
vendors represented 80.7 percent of all economic units surveyed in urban areas in Benin, with
women making up over 75 percent of vendors (Verick, 2006 ).
2.1.3. Informal Sector and Economic Development
The contribution of the informal sector to economic development is enormous. As Morgan
(1989) puts it, ―though detail statistics on the enterprises are hard to come by owing to lack
of extensive data bases. It is clear that in many countries their role is extremely important as
contributors to the nation‘s wealth. Evidences from developing economies show that micro-
enterprises are a major engine in industrial and commercial development.
The informal sector represents an important part of the economy and certainly of the labour
market in many countries, especially developing countries, and thus plays a major role in
employment creation, production and income generation. In countries with high rates of
population growth and/or urbanization, the informal sector tends to absorb most of the
growing labour force in the urban areas. Informal sector employment is a necessary survival
strategy in countries that lack social safety nets such as unemployment insurance or where
wages, especially in the public sector, and pensions are low. In such situations, indicators
such as the unemployment rate and time-related underemployment are not sufficient to
describe the labour market situation. In other countries, the process of industrial restructuring
in the formal sector is seen as leading to a greater decentralization of production through
subcontracting to small enterprises, many of which are in the informal sector (Akintoye,
2008; Hussmanns and Mehran, 2008).
Evidence from a number of countries has shown that an increased proportion of employment,
income and output are originating from the sector. For instance, the International Labour
Office (ILO) has estimated that in the poorest countries, 80 percent of workers operate in the
informal and agricultural sector while for middle-income countries the informal/agricultural
Poverty in the Urban Informal Sector of Kwara State, Nigeria 2011
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figure exceeds 40 percent. On the average, 30 percent of workers in developing world cities
are informal. In a few cases, this percentage is lower; in many it is substantially higher.
According to a recent statistical compilation by the ILO of total urban employment the
informal sector portion accounts for 49 percent in Peru, 40 percent in Ecuador and 54 percent
in Columbia. Among 15 Sub-Saharan African nations urban informal employment as a
percentage of total informal employment ranges from between 9 and 44 percent in Zimbabwe
to 80 percent in Benin, 22 percent in Swaziland, 43 percent in Zambia, 89 percent in Ghana
and in Nigeria one-third of urban labour force are found in the informal sector, with a median
of 49 percent in five Asian countries, the corresponding percentages range from 17 percent to
67 percent (Wickware, 1998; Xaba, et.al 2002).
A study conducted in 1992 by the Economic Commission for Africa indicates that the
informal sector‘s contribution to GDP in the African countries is estimated at about 20
percent and its contribution to the GDP of the non-agricultural sector stood at 34 percent. For
instance, its contribution to GDP was 38 percent in Guinea, 10.3 percent in Tanzania, 30
percent in Burkina Faso, 24.5 percent in Nigeria and 20 percent in Niger. Available data
show that trade represents about 50 percent of the production of the informal sector.
Manufactured production represents 32 percent, while services and transport represent 14 and
40 percent respectively (Kankwanda, et. al 2000).
Its contribution to economic development can also be viewed from the interaction between
the various operators in the sector and between the informal sector operators and the formal
sector operators. According to Herchbach (1989) and Lanjouw (1998) the relationship among
the operators in the informal sector and the relationship between the informal sector operators
and the formal sector operators have contributed to the growth of the informal sector and to
its contribution to economic development and poverty reduction. For instance, the linkages
among the informal sector operators has helped improved the quality of goods and services
produced by the operators thus making them compete favourably with what obtained in the
formal sector. Their relationship with the formal sector has made them powerful distributors
for the goods and services produced by the formal sector enterprises. And the formal sector
enterprises are also known to provide inputs and services to informal sector enterprises
through sub-contracting (see Abumere, 1995).
Grey-Johnson (1993) also reiterates that the linkages with the formal sector are strong,
providing it with a wide array of intermediate and final products. For instance, there are more
demands for informal goods from outside the sector than from within it. For instance, the
informal sector operators consume only 5 percent of their products whereas 50 percent are
consumed in the formal sector and the remainder in subsistence agriculture.
2.2 Poverty: Meaning, Measurement, Causes and Consequences
2.2.1. Poverty: Meaning and Measurement
Poverty has been a difficult concept to define due to its multi-dimensional nature. Earlier
studies on poverty have always linked it to a situation where an individual is confronted with
low income or low consumption-expenditure which is often used for the construction of
poverty line. However, over the years various theories have been advanced in order to put in
proper perspective the mechanics of poverty. The orthodox Western views of poverty,
reflected in the ―Vicious Circle Hypothesis‖ stated that a poor person is poor because he is
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poor, and may remain poor, unless the person‘s income level increases significantly enough
to pull the person in question out of the poverty trap. This thought sees poverty from the point
of absoluteness, i.e. when poverty is seen as the level of income below what is required to
have a decent standard of living, which in other words is a situation where the total earnings
of individuals/families are insufficient to obtain the minimum necessaries for the
maintenance of merely physical efficiency. In contrast to this is relative poverty which
explicitly relates poverty to a reference group. Rather than refer to a supposedly objective
standard, it links poverty to a particular point in the distribution curve of a particular variable
such as income. People are judged to be poor if they are poor in comparison to those around
them. This notion of poverty is therefore particularly relevant when debates on social justice
do not merely focus on the needs of bare survival, but also on the question of inequality in
society (Booth, (1887; 1888; 1903); Walker, (1897), Naoniji, (1901); Rowntree, (1901);
Townsand, (1962); Harrington, (1962); Anderson, (1964) cited in Denevert, (1973); Mead,
(1996); Ajakanye and Adeyeye, (2001); Laderchi, et. al (2003); Bradshaw, (2006) and Nunes,
(2008)].
In recent time, a number of studies on poverty have come to see poverty beyond the lack of
income and its skewed distribution, but relate it to hunger, lack of basic capabilities to live in
dignity, lack of shelter, being sick and not being able to go to school, not knowing how to
read, not being able to speak properly, not having a job, fear for the future, losing a child to
illness brought about by unclean water, powerlessness, lack of representation and freedom
(Sen, 1985; World Bank, 1999; World Bank, 2001; Sengupta, 2003; Hunt, et .al 2004). In the
light of the International Bill of Rights, poverty is seen as a human condition characterized by
sustained or chronic deprivation of the resources, capabilities, choices, security and power
necessary for the enjoyment of an adequate standard of living and other civil, cultural,
economic, political and social rights (UN, 2001; UN, 2002).
Closely related to these definitions of poverty is the measurement of poverty. Over time,
different methods were identified and used in the measurement of poverty. Key among them
is the use of a poverty line that separates the ―poor‖ from the ―non-poor‖. There are two types
of poverty lines which are generally used: first, is that which represents the value of a
selection of goods or services that are identified as necessary, and second, is that which
relates to the distribution of income/expenditure within a society. Poverty line which
represents the value of a selection of goods or services that are identified as ‗needs‘ is
generally calculated by giving a monetary value to a basket of goods or services that are
identified according to the standard of living or well-being that policy makers decide should
reflect a state of impoverishment. This type of poverty line can be used to depict what is
known as a ―head-count‖ of the total number of people living in poverty. Second is the
poverty line that relates to the distribution of income/expenditure within a society which is
often relative and set at the level that includes people living below a particular
threshold/bench mark. An example is when the poverty line is set at the level that indicates
that people living below 20 percent of national income of a nation as being very poor like in
the case of South Africa or a poverty line set at $275 and $370 per person a year for the
extreme poor and for the moderate poor respectively or a poverty line set at $1 and $2 dollars
a day for the extreme poor and for the moderate poor respectively as provided by the World
Bank. One advantage of this measure of poverty is that it allow for comparisons of poverty
levels between countries to be drawn with relative ease (World Bank, 1990; 2001).
Related to the above measure of poverty is that provided by Foster, et.al (1984), which
includes the following: (i) the head count poverty index given by the percentage of the
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population that live in the household with a consumption per capita less than the poverty line;
(ii) poverty gap index which reflects the depth of poverty by taking into account, how far the
average poor persons income is from the poverty line; and (iii) the distributional sensitive
measure of squared poverty gap defined as the means of the squared proportionate poverty
gap which reflects the severity of poverty. Put together, they are referred to as P-alpha Class
measure of poverty1.
Recently too, the use of income and consumption-expenditure as basis for determining the
poverty line are beginning to lose much of their relevance since the method of calculation
was not adapted to the new economic trends resulting from high rate of inflation and the
prevailing high increase in interest rate and exchange rate devaluation. Thus the Minimum
Wage and Minimum Pension2, Food Insecurity Measures of Poverty (FIMP)
3, Human
Development Index (HDI)4 and Capability Poverty Measure (CPM)
5 and Indices of Multiple
Deprivation (IMP)6 are now advocated.
1 The index for poverty measures as give by Foster, et.al (1984) is:
q
P = 1/ n ( z-yi / z)
i=1
Where:
n = number of heads of households in the zones.
q = number of heads of households that are poor in the zones.
z = poverty line.
yi = total consumption–expenditure of individual i in the zones.
= poverty aversion parameter.
The poverty aversion parameter () can take any positive value or zero. The higher the value the more the index weights the
situation of the poor in the zones, i.e. the people farthest below the poverty line. Of specific interest are the cases where: =
0,1 and 2. 2 Cited in Grootaert (1995:9) 3 FIMP sought to cost a nutritionally balanced minima list diet for a household (SPII, 2007) 4 The Human Development Index (HDI) combines three components: longevity (life expectancy at birth) educational
attainment and standard of living (UNDP, 2009). 5 Capability Poverty Measure (CPM) focuses on human capabilities just as the Human Development Index does. Instead of
examining the average state of people‘s capabilities it reflects the percentage of people who lack basic or minimally essential
(UNDP, 2009) 6 The index is made up of the following: Health deprivation, Employment deprivation, Income and material deprivation,
Education deprivation and Living environment deprivation(SPII, 2007)
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2.2.2 Causes of Poverty
Theoretically, a number of studies have over time provided and discussed some of the factors
that are the root causes of poverty. For instance, as observed by Bradshaw (2006) key among
the causes are those that focus on the individuals as responsible for their poverty situation; those
linked to the culture of the people; those linked to economic, political and social
distortions/discrimination; those linked to geographical disparities; and those caused by
cumulative and cyclical interdependencies. The theory that focused on individuals typically
blame individuals in poverty for creating their own problems, and argued that with hard work and
better choices the poor could have avoided their problems or remedy them. Other variations of
the individual theory of poverty ascribe poverty to lack of genetic qualities such as intelligence
that are not so easily reversed. The belief that poverty stems from individual deficiencies is old.
For instance, religious doctrine that equated wealth with the favour of God was central to the
Protestant reformation. Ironically, neo-classical economics reinforces individualistic sources of
poverty. The core premise of this dominant paradigm for the study of the conditions leading to
poverty is that individuals seek to maximize their own well-being by making choices and
investments, and that (assuming that they have perfect information) they seek to maximize their
well-being. When some people choose short term and low-payoff returns, economic theory holds
the individual largely responsible for their individual choices, for example, to forego college
education or other training that will lead to better paying jobs in the future.
The theory that focused on the culture of the people suggests that poverty is created by the
transmission over generations of a set of beliefs, values, and skills that are socially generated
but individually held. Individuals are not necessarily to blame because they are victims of
their dysfunctional sub-culture or culture. Culture is socially generated and perpetuated,
reflecting the interaction of individual and community. This makes the ―culture of poverty‖
theory different from the ―individual‖ theories that link poverty explicitly to individual
abilities and motivation. Technically, the culture of poverty is a sub-culture of poor people in
ghettos, poor regions, or social contexts where they develop a shared set of beliefs, values
and norms for behaviour that are separated from but embedded in the culture of the main
society. Oscar Lewis was one of the main writers that define the culture of poverty as a set of
beliefs and values passed from generation to generation. He writes:
Once the culture of poverty has come into
existence it tends to perpetuate itself. By the time
slum children are six or seven they have usually
absorbed the basic attitudes and values of their
subculture. Thereafter they are psychologically
unready to take full advantage of changing
conditions or improving opportunities that may
develop in their lifetime.
With regard to the theory of poverty that is caused by economic, political and social
distortions/discrimination, theorists in this tradition look not to the individual as a source of
poverty, but to the economic, political, and social system which causes people to have limited
opportunities and resources with which to achieve income and well-being. For example, Marx
showed how the economic system of capitalism created the ―reserve army of the unemployed‖ as
a conscientious strategy to keep wages low. Marx‘s theoretical formulation was largely based
on the principle of exploitation of labour. The theoretical formulations presents the economy
as ultimately polarized into a few rich capitalists and the masses made up of the poor
miserable workers. Technological progress, he argued, was labour saving, but resulted in
displacement of workers that joined the reserved army of the unemployed, and where labour
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was not displaced wage level was depressed. The consequence at the end was increase in the
number of people that are poor. Cases of parallel barrier against the poor also exist with the
political system in which the interests and participation of the poor is either impossible or is
deceptive. A number of studies have confirmed the linkage between wealth and power, and how
poor people are less involved in political discussions. Coupled with racial discrimination, poor
people lack influence in the political system that they might use to mobilize economic benefits
and justice.
At the global level, is the process of marginalization arising out of work relations in the capitalist
global economy and the composition of the neoliberal global economic order. A look at the
structural composition of the global economy seems to rest on three main components. First,
institutional arrangements for free trade under the World Trade Organization (WTO) and
supported by a worldwide program of deregulation and privatization of economic activity
engineered by the World Bank (WB) and the International Monetary Fund (IMF). Secondly,
the massive drive for capital accumulation by transnational capital under the leadership of
transnational corporations (TNCs). And thirdly, the unequal participation of southern elites in
the global capitalist order, which breeds structural imbalances between the industrial north
and the undeveloped south. This structural set-up serves the interests of dominant capitalist
class of a handful Western developed countries who underwrite the rules for global
economic, business, technological and financial interactions but also work in collaboration
with the dominant social forces in the developing countries as junior partners. The pattern of
collaboration, although unequal and based on a dominant versus dominated relationship,
produces a structure that tends to be biased in favour of the rich and wealthy people to the
detriment of the poor everywhere. Poverty is a necessary by-product of this structural
composition and functional mechanism of the global economy (Nuruzzaman, undated;
Mbeki, 2009). A critical look at the Structural Adjustment Programs (SAPs) carried out by
the WB and the IMF will be seen to have further weakened and damaged the interests of the
developing countries. The policy package SAPs advocate rests on three important elements:
dismantling the role of the state in economic development; liberalization of trade and
investment regimes; and privatization of economic activities. Of course, the two Bretton
Woods institutions did not spontaneously formulate the SAPs and then imposed these on the
developing countries across the South; indeed, the debt crisis of the 1980s created the prelude
to devise the SAPs and Mexico‘s second collapse in 1995 led to further tightening of the
SAPs. It is more than two decades the IMF and the WB are experimenting with SAPs but no
major progress has still been achieved. Rather, the experiences of developing countries,
particularly those in South Asia and Sub-Saharan Africa, confirm that the SAPs have very
little to do with achieving the much-expected economic growth but structural subordination
of the South to the North and its impoverishment (Nuruzzaman, undated).
Another theory of the root cause of poverty that is built on the above is the poverty caused by
geographical disparities such as rural poverty, ghetto poverty, urban disinvestment and third
world poverty. The existence of this type of poverty is the fact that people, institutions, and
cultures in certain areas lack the objective resources needed to generate well-being and
income, and that they lack the power to claim redistribution (Bradshaw, 2006). This position
was in line with that of Bigman and Fofack (2000) who gave the following reasons why some
geographic areas become pockets of poverty, while others have become islands of prosperity:
differences in agro-climatic condition; endowment of natural resources, or geographic
conditions (particularly the distance to a sea outlet and to centers of commerce); and biases in
government policies. On a general note, they said the causes of poverty include; the low
quality of public services particularly in education and health in some areas (which further
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impedes the accumulation of human capital and thus earnings capacity of the people); the
poor condition of rural infrastructure which limits trade and retards local investment and
growth; the low level of social capital which slows the diffusion and adoption of new farm
technologies, and thus reduces farmers earning capacity; and the distance from urban centers
which inhibits trade, specialization in production and access to credit.
A more interesting and complex theory of the root causes of poverty is the poverty caused by
cumulative and cyclical interdependencies. This theory of the cause of poverty is, to some
degree, built on the components of each of the other theories discussed above, in that it looks at
the individual and their community as caught in a spiral of opportunity and problems, and that
once problems dominate they close other opportunities and create a cumulative set of problems
that make any effective response nearly impossible. This theory has its origins in economics in
the work of Myrdal published in 1957. In the book, Myrdal developed a theory of ―interlocking
circular interdependence within a process of cumulative causation‖. The theory helps explain
economic underdevelopment and development. Myrdal notes that personal and community well-
being are closely linked in a cascade of negative consequences, and that closure of a factory or
other crisis can lead to a cascade of personal and community problems including migration of
people from a community. Thus the interdependence of factors creating poverty actually
accelerates once a cycle of decline is started.
In furtherance to the above position, Bradshaw (2006) also cited the work of Jonathan Sher
(published in 1977) on the interaction between education and employment at the country and
individual level. For instance, at the community level, a lack of employment opportunities leads
to out-migration, closing retail stores, and declining local tax revenues, which leads to
deterioration of the schools, which leads to poorly trained workers, leading firms not to be able to
utilize cutting edge technology and to the inability to recruit new firms to the area, which leads
back to a greater lack of employment. At the individual level, the lack of employment leads to
lack of consumption and spending due to inadequate incomes, and to inadequate savings,
which means that individuals can not invest in training, and individuals also lack the ability to
invest in businesses or to start their own businesses, which leads to lack of expansion, erosion
of markets, and disinvestment, all of which contribute back to more inadequate community
opportunities.
In order to better understand and be able to distinguish between levels of causes of poverty,
McCaston and Rewald (2005) developed a causal hierarchy that is useful in understanding
the underlying causes of poverty. This causal hierarchy is broken down into three categories:
immediate causes; intermediate causes; and underlying causes as shown in Table 2.1 below. Table 2.1: A Causal Hierarchy of Causes of Poverty
Some Examples
Immediate Causes These are causes that are directly related to life and
survival and include:
• Disease
• Famine
• Environmental disasters
• Conflict
Intermediate Causes These causes affect people‘s well-being and
opportunities for development and livelihood security,
and include:
• Low livelihood (agric or income) productivity;
• Limited livelihood opportunities;
• Lack of skills; inadequate access to food;
• Inadequate care for women and children;
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• Lack of basic services, e.g., health, education, water
and sanitation, education
Underlying Causes These causes are related to the structural
underpinnings of underdevelopment, specifically
social systems and political and economic structures,
and environmental issues. They involve:
• Economic: Inequitable resource distribution
(distributive justice); globalization; terms of trade;
structural adjustment
• Political: Poor governance and institutional capacity;
corruption; violent conflict; lack of political will;
domination by regional/global superpowers
• Social: Marginalization, inequality, social exclusion
(based on gender, class, ethnicity); harmful societal
norms, customs and cultural practices, over-population
• Environmental: Carrying capacity; resource-based
conflict; environmental disasters; propensity for
human disease; propensity for crop & livestock disease
Source: McCaston and Rewald, 2005.
2.2.3 Consequences of Poverty
According to Von Hauff and Kruse (1994), the consequences of poverty include among other
things: (i) the consequences arising from physical and psychological misery, which
understandably are caused by inadequate nourishment, lack of medical care, a lack of basic
and job related education and marginalization in the labour markets; (ii) the consequences
arising through the formation of slums in cities, a worsening of ecological problems
particularly, as a result of predatory exploitation in the agricultural sector and through the
failure to use the available human resources; and (iii) the consequences that tend to preserve
or reinforce the existing power structures and thus also the privileges of a minority of the
population. In some cases this involves corrupt elites. These privileged minorities in the
population are not generally interested in structural changes for the benefit of the poor
population.
As observed by Narayan, et. al (2000a) when people are poor, they tend to lack protection
against violence, extortion and intimidation and also lack civility and predictability in
interactions with public officials. The poor is also prevented from taking advantage of new
economic opportunities and engaging in activities outside their immediate zone. Threat of
physical force or arbitrary bureaucratic power makes it difficult for them to engage in public
affairs, to make their interests known and to have them taken into account.
Narayan, et al. (2000b) also indicates that with poverty, a lot of people are also confronted
with agonizing choices became they are powerless and voiceless. Powerless as they are in
many respects, poor people face options that are often exceptionally constrained. In making
choices the best they can do may be to look for the least negative and the damaging. They
have little cushion against mistakes. They have to choose with care, for example, among
different sources of cash or credit for daily needs or for an emergency. They are forced again
and again to trade-off one bad thing against another just like trading off a good candidate for
a bad one during an election because of money.
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2.3. Poverty in Nigeria and in Kwara State
Available data on the poverty situation in Nigeria has shown that over time, there has been an
increase in the total poverty head count. As indicated in Table 2.2, the total poverty head
count has had a steady increase from 28.1 percent in 1980 to 65.6 percent in 1996, with a
slight drop to 54.4 percent in 2004. A comparison of the rate of urban and rural poverty
indicates that urban poverty rose from 17.2 per cent in 1980 to 58.2 percent in 1996, but
declined to 43.2 per cent in 2004 while that of the rural area increase from 28.3 percent in
1980 to 69.3 percent in 1996, with a slight decline to 63.3 percent in 2004. Of the six geo-
political zones in Nigeria, the North West witnessed an increase in the rate of poverty head
count from 37.7 percent in 1980 to 77.2 percent in 1996. However, in 2004 the poverty head
count in the zone dropped to 71.2 percent in 2004. In Kwara State, the Core Welfare
Indicators Questionnaire (CWIQ) Survey conducted in 2006 by the National Bureau of
Statistics indicated that total poverty head count was 83.3 per cent for the whole State, while
poverty head count for both the rural and urban areas were 95.9 percent and 97.3 percent
respectively (NBS, 2006).
Table 2.2: Incidence of poverty in Nigeria, 2004
1980 1985 1992 1996 2004
National 28.1 46.3 42.7 65.6 54.4
Urban 17.2 37.8 37.5 58.2 43.2
Rural 28.3 51.4 66.0 69.3 63.3
South-South 13.2 45.7 40.8 58.2 35.1
South-East 12.9 30.4 41.0 53.5 26.7
South-West 13.4 38.6 43.1 60.9 43.0
North-Central 32.2 50.8 46.0 64.7 67.0
North East 35.6 54.9 54.0 70.1 71.2
North West 37.7 52.1 36.5 77.2 71.2
Sources: NBS 2004; UNDP 2009
Some of the theoretical causes of poverty discussed in section 2.2 above were not far
different from the causes of poverty in Nigeria. For instance, as observed by Obadan (1997)
the main factors that are causes of poverty in Nigeria include: inadequate access to
employment opportunities; inadequate physical assets, such as land and capital and minimal
access by the poor to credit even on a small scale; inadequate access to the means of
supporting rural development in poor regions; inadequate access to markets where the poor
can sell goods and services; low endowment of human capital, destruction of natural
resources leading to environmental degradation especially in the Niger Delta and reduced
productivity; and inadequate access to assistance for those living at the margin and those
victimized by transitory poverty and lack of participation. That is, failure to draw the poor
into the design of development programmes. Ijaiya (2000) also confirmed these causes in a
study of Ilorin, Kwara State. They include the lack of or limited supply of some basic needs
of life such as food, shelter, portable water basic health care services, sanitation facilities,
transportation and electricity are some of the causes of poverty in the city. For instance, the
non-accessibility of health care services has aggravated the health situation of most of the
households in the city. Sickness is usually devastating and drains the affected people‘s
meager resources because it disrupts the economic activities of the entire household. The
urban cities in the State also have a long history of acute water shortage. This shortage has
caused a lot of hardship for most of the households who have to spend time daily looking for
water which in effect cuts down their productive time and adversely affects their income
generating efforts and welfare.
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2.4. Urban Poverty Incidence
Urban poverty situations are usually linked to the problems associated with urbanization,
which in turn is linked to the massive movement of people from the rural areas to the cities.
As observed by Dale (2009) and Sabry (2010), given the massive movement of people from
the rural areas to the cities, the scale of urban poverty has been on the rise worldwide, thus
creating urban slums, often referred to as informal settlements, which are areas without
enough resources, with degraded environmental conditions, without or with limited access to
proper sanitation, clean water, electricity and health care facilities. These worsening
environmental conditions in turn damage residents‘ health and entrench the stigma and
isolation of living in informal settlements, making it all the more difficult to escape from
poverty (see Montgomery and Hewett, 2004) .
Some of the recent studies on urban poverty are those of Ijaiya (2000), Sabry (2010). The
study by Sabry (2009, 2010) indicates that the poverty estimates in the Egyptian urban areas
in 2009 was 11 percent. In Cairo, especially the Greater Cairo made up of Giza, Qalyoubia,
Helwan and 6th October areas the poverty rate is high because they form parts of the
slums/informal settlements in the city. The study also revealed that these areas have the
highest rate of malnutrition, where about 16 percent of children were underweight which is
much higher than the recorded income poverty rate in urban areas. The study also revealed
that the costs of basic non-food needs—such as for housing, transportation, basic education
and health, and access to water, sanitation and electricity—are much higher than commonly
recognized. In the poor environmental conditions of these slums/informal settlements, the
chances of getting ill are high because the public health system in Egypt is severely
deteriorated. Poor people rarely find the free medicine that is supposed to be available. Thus,
their health expenses are extremely high. Thus, it is not surprising to find that the scale of
untreated illnesses in these areas was colossal. Health conditions in the informal settlements
are often deplorable because of the lack of access to essential services. For example,
connections to the public sanitation networks are missing from entire areas. This means that
residents have to pay once or twice a month (at 50-80 LE) just to have their trenches emptied
of sewerage. Even when there are water connections in the slums, low pressure makes its
supply scarce. Just to be connected to the water network costs an average of 15 LE per
month.
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CHAPTER 3
METHODOLOGY
3.1. Study Area
The study area is Kwara State, Nigeria. The State was created on the 27th
of May 1967. The
population of the state is about 3.3million people, based on the 2006 National Population
Census. The distribution of this figure by local government and by gender is shown Table
3.1.
Kwara State occupies geographically vantage position on the map of Nigeria. It is situated
between Latitudes 110 2
‘ and 11
0 45‘N and between Longitude 2
0 45‘ and 6
0 4‘E. It also lies
midway between the Northern and Southern parts of Nigeria bounded in the North by Niger
State and shares international boundary with the Republic of Benin in the West. To its eastern
border is Kogi State; while in the south it shares boundary with the four states of Ekiti, Osun
and Oyo. The State is covered by the Sudan and Woody Savanna vegetation with a mean
annual rainfall and temperature of 1,338mm/year and 26.50C respectively.
Table 3.1. Population Distribution of Kwara State, 2006 Census
S/No LGA Headquarters Gender Total
Male Female
1. Asa Afon 64,982 61,453 126,435
2. Baruteen Kosubosu 108,153 101,306 209,459
3. Edu Lafiagi 104,944 96,525 201,469
4. Ekiti Araromi-Opin 28,402 26,448 54,850
5. Ifelodun Share 106,056 99,986 206,042
6. Ilorin East Oke-Oyi 104,402 99,908 204,691
7. Ilorin South Fufu 104,504 104,187 208,691
8. Ilorin West Ilorin 181,875 182,791 364,666
9. Irepodun Omu-Aran 75,539 73,071 148,610
10. Isin Owu Isin 30,833 28,905 59,738
11. Kaiama Kaiama 68,240 55,924 124,164
12. Moro Bode-Saadu 55,630 53,162 108,792
13. Offa Offa 46,266 43,408 89,674
14. Oke Ero Ilofa 29,515 28,104 57,619
15. Oyun Ilemona 48,601 45,652 94,253
16. Patigi Patigi 62,639 49,678 112,317
Total 1,220,581 1,150,508 3,271,089
Source: national Population Commission, Abuja.
3.2. Model for Poverty Analysis
Both qualitative and quantitative methods were used in analyzing the data collected for the
study. The qualitative analysis based on content analysis and the perception of the people
operating in the urban informal sector was used in determining the causes and consequences
of poverty in the urban informal sector of Kwara State. The quantitative method comprised
the use of descriptive statistics such as percentile, in describing the socio-demographic
characteristics of the respondents and in describing the nature of the urban informal sector of
Kwara State. Other quantitative methods used were the household consumption-expenditure
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per adult equivalent adopted by Organization for Economic Co-operation and Development
(OECD) and the P-alpha class measures of poverty adopted by Foster and others in 1984 in
determining the extent of poverty (i.e. the incidence, the depth and the severity of poverty).
These methods were in line with most recent works on poverty.
In this study thus, the poverty analysis was based on money–metric measure of utility and
welfare. For measure of utility and welfare, total consumption-expenditure of the heads of
household operating in the urban informal sector was used as a measure of their welfare and
for determining the poverty line. The analysis also took into consideration differences in
needs due to the difference in the respondents‘ household size and composition, and therefore
used the household consumption- expenditure per adult equivalent as the welfare measure.
There are wide choices of adult equivalent scales and different scales used in different
countries. The most commonly used is that of the Organization for Economic Co-operation
and Development (OECD) because of its simplicity of use and wide familiarity. This scale is
expressed as follow:
EXPeq = EXP / n( 0.7)
(3.1)
Where:
EXP = total consumption-expenditure of the operators in the
urban informal sector
n = household size of the operators in the
urban informal sector
0.7 = exponential formation representing other adults in the
household of the operators (Glewwe, 1990; Grootaert and
Braithwaite, 1998).
A cut–off point was selected to serve as poverty line across the distribution of real household
expenditure per adult equivalent. An absolute line such as $1 a day [Purchasing Power Parity
(PPP$)] was used in identifying the poor (World Bank 2001).
The next stage in the analysis of poverty in the urban informal sector of Kwara State was the
use of the popular P–alpha class of poverty measures introduced by Foster, Greer and
Thorbecke in 1984.The index is defined as:
q
P = 1/ n (z-yi / z)
(3.2)
i=1
Where:
n = number of households in the urban informal sector
q = number of poor households in the urban informal sector
z = poverty line
yi = total consumption – expenditure of individual head of household
in the urban informal sector
= poverty aversion parameter.
The poverty aversion parameter () can take any positive value or zero. The higher the value
the more the index weights the situation of the poor households in the urban informal sector
i.e. households that are farthest below the poverty line. Of specific interest are the cases
where = 0,1 and 2.
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If = 0 the index becomes:
P0 = q/n (3.3)
which is the simple head count poverty rate, i.e. the number of poor households in the
urban informal sector of Kwara State as a percentage of the total population. Although, as a
useful first indicator, it fails to pay attention to the depth (or gap) and severity of poverty in
the urban informal sector.
To arrive at the depth of poverty and severity of poverty we looked at the extent to which the
expenditure of the poor households in the urban informal sector falls below the poverty line.
This is customarily expressed as the ―income gap ratio‖ or ―expenditure gap ratio‖ which
expresses the average shortfalls as a fraction of the poverty line itself, i.e.:
z – yi/z (3.4)
Where:
yi is the average income or expenditure of the poor households in the sector.
A useful index was obtained when the head count poverty ratio was multiplied by the income
or expenditure gap ratio. Thus corresponding to:
P1 = q/n( z-yi/z ) (3.5)
which reflects both the incidence and depth of poverty in the sector. These measures have
particularly useful interpretation because they indicate what fraction of the poverty line
would have to be contributed by every individual household in the sector to eradicate poverty
through transfer under the assumption of perfect targeting.
The severity of poverty index is the mean of the squared proportion of the poverty gap
expressed as:
P2 = q/n ( z – yi/z) 2
(3.6)
This index allows for concern about the poverty of the poor households in the sector by
attaching greater weight to the poverty of the poorest ones among them than to those just
below the line.
3.3. Data Requirements and Sources
In addition to the use of secondary data, a survey aimed at generating primary household data
on the measurement of poverty in the urban informal sector of Kwara State was conducted
using a structured questionnaire, a Participatory Poverty Assessment method and the P-alpha
class measures of poverty. The questionnaire was based on the World Bank Living Standards
Measurement Study (LSMS); International Labour Organization‘s Rapid Assessment Surveys
of Poverty (RASP); World Bank Household Priority Surveys ( HPSs) and the National
Bureau of Statistics‘ National Integrated Surveys on Households (NISHs) methods, which,
among other things, provide a comprehensive monetary measure of welfare and its
distribution and the description of the patterns of access to and use of social services e.g.
education and health care services. The Participatory Poverty Assessment (PPA) method was
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used to obtain information from key informants in the urban informal sector on their
perception of the causes and consequences of poverty in the sector (Grootaert, 1986; Robb,
2000; NBS, 2008).
3.4. Sample Selection Method
A multi-stage stratified random sampling method was used in the selection of the
respondents. To have an unbiased selection of samples the study area was divided into the 16
local government areas in the State. In accordance with these sample units, a structured
questionnaire was distributed to about 1000 respondents based on a normal distribution
model in the urban informal sector of the State (an average of 60 respondents per local
government area). Only 86 per cent of the administered questionnaires were retrieved for
analysis.
The issues raised in the questionnaire include the background of the respondents (i.e. age,
marital status, educational status, employment status, household size and composition);
income; total consumption-expenditure; and access to social services (e.g. health care
services and medical attention in case of illness, safe drinking water, healthy and safe
environment and education, etc).
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CHAPTER 4
DATA ANALYSIS, INTERPRETATION AND DISCUSSION OF RESULT
4.1. Characteristics of the Operators
The socio-demographic characteristics of 856 respondents in the Urban Informal
Sector of Kwara State included in the analysis are presented in Table 4.1. Table 4.1. Socio-demographic Characteristics of the Respondents
Characteristics
Percentage (%)
a.. Gender of the Respondents
Male 36.9
Female 63.1
b. Age of the Respondents
Below 31 23.1
31- 40 46.5
Above 40 30.4
c. Marital Status of the Respondents
Single 35.4
Ever Married 64.6
d. Household Size of the Respondents
1-5 56.5
6-10 13.7
More than 10 29.8
e. Educational Status of the Respondents
No formal schooling 11.5
Primary Education 14.1
Junior Secondary 12.4
Senior Secondary/Technical School 32.0
Post Secondary 1 (OND/NCE) 15.7
Post Secondary 2 (HND, B.Sc) 13.2
Post Secondary (Master and above) 1.1
Source: Authors‘ computation The survey conducted on urban informal sector of Kwara State showed that 63.1 per
cent of the operators are female while 36.9 per cent are male. It further shows that 23.1 per
cent are below 31 years; 46.5 percent is within the 31- 40 years age bracket; and about 30.4
percent were found to be above 40 years. The study shows that 64.6 per cent are married.
Operators with 6 household members constitute 56.5 per cent while those with 6-10
household members were found to constitute 13.7 per cent. Operators with more than 10
household members stood at 29.8 per cent.
The minimum year of schooling in Nigeria is nine years, which is equivalent to completed
Junior Secondary School. The survey revealed that about 74.4 per cent of the operators had
the required minimum years of schooling.
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4.2. Nature of the Informal Sector in Kwara State
The salient features of the informal sector in the Kwara State, Nigeria are shown in Table 4.2.
Table 4.2. The Nature of the Informal Sector of Kwara State, Nigeria
Variable Percentage (%)
a. Type of informal sector activity
Trading (buying and selling) 24.9
Tailoring/Sewing/Knitting 13.3
Hairdressing 9.4
Manufacturing 8.2
Food Vendor/Catering 6.8
Food processing 3.9
Repair services 12.5
Transportation 8.2
Others 12.8
b. Ownership Structure of the Business
Self/Sole Proprietorship 81.2
Family Owned 10.9
Partnership 6.3
Others 1.7
c. Other Type of Work engaged in
Farming 45.9
Government Work 22.2
Other Informal Activities 19.2
Organized Private Sector 6.5
Others 6.3
d. Nature of Employment
Part time 31.7
Full time 68.3
e. Reasons for establishing the Business
Lack of employment in formal sector 35.0
To help family members earn more income 35.7
Personal interest 27.2
Others 2.1
f. Major source of financing Start-up Capital
Inheritance 11.7
Personal savings 49.2
Fund from spouse/relation/friends 26.3
Cooperative Society 6.8
Bank loan 1.8
Government loan (NDE, NAPEP, PAP, etc.) 0.5
Others 3.7
g. Range of hour of operation per day
1- 8 hours 37.7
Above 8 hours 62.3
h. Number of Employees
Nil 32.9
1-5 60.4
Above 5 6.7
i. Number of Apprentice
Nil 12.8
1-5 62.2
6-10 20.9
Above 10 4.1
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j. Number of Apprentice trained since establishing the business
Nil 14.0
1-5 65.6
6-10 12.9
Above 10 7.5
Source: Field Survey.
In terms of single activity, 24.9 percent of the informal sector operators are engaged in
trading (buying and selling); followed by tailoring and repair services which accounted for
13.3 and 12.5 per cent respectively. Other activities accounted for 12.8 per cent. The
ownership of business as usual in this type of sector is dominated by sole proprietorship,
which accounted for 81.2 per cent of the businesses surveyed. The reasons for the dominance
of sole proprietorship are; ease of entry and exit; low start-up capital requirement; and no
accountability to business regulators.
This study also revealed that in establishing some of the informal sector businesses factors
such as lack of employment in formal sector, the desire to help family members earn more
income and personal interest determined the establishment of some of the enterprises. Of
these factors, 35.7 percent of the operators established their businesses due to the desire to
assist family members earn more income, while 35 per cent established the outfits due to lack
of employment in the formal sector. Personal interest was responsible for the establishment of
27.2 per cent of the businesses.
The source of finance for start-up capital revealed that 49 per cent of the operators sourced
their capital from personal savings. In terms of formality of sources of finance 97.7 per cent
of the operators got their start-up capital from the informal financial sector while formal
financial sector accounted for only 2.3 per cent. The informal sector of Kwara State was
found to provide avenue for training of prospective informal sector operators through the
apprenticeship system. It also employs urban semi skilled and unskilled labour as shown in
Table 4.2.
The study reveals that 62.3 per cent of the enterprises operate above 8 hours per day. The
reason for this may partly be because most of the people operate within their homes. To their
clients it is an avenue to reach them any time the need arises and to the operators it allows
them to continue to attend to their clients with the long run effect of increasing the supply of
goods and services at cheaper rates and increasing their own income and standards of living.
4.3. Result of the Poverty situation in the Urban Informal Sector of Kwara State
This section provides an overview of the poverty situation in the urban informal sector of
Kwara State. The analysis of poverty in the sector was first done by estimating the incidence,
the depth and the severity of poverty in the urban areas, by gender and by economic activities
in the sector. In estimating the poverty indices, this study measures the well-being of
individual heads of households (who incidentally are also the operators in the informal
sector) by their total consumption-expenditure on non-durable goods and by household size,
using the adult equivalent scale formula.
Having established the individual households consumption-expenditure, a cut-off point,
which served as the poverty line (using the 2/3 of the mean per capita consumption-
expenditure of the whole population which was converted to the World Bank $1 per day)
was set at N9,837.66 per month per adult equivalent. From this, the popular P-alpha class of
Poverty in the Urban Informal Sector of Kwara State, Nigeria 2011
Ijaiya, GT., Bello, RA., Arosanyin, GT., Oyeyemi, GM., Raheem, UA and Yakubu, AT Page 23
poverty measures was used in determining the incidence, the depth and the severity of
poverty in the urban informal sector of Kwara State. Table 4.1 below provides the estimates
of the rate of poverty in the urban informal sector of the State, by gender and by economic
activities based on the three (3) measures of poverty: the head count poverty index, the
poverty gap (depth) and the severity of poverty index as at November 2010. In the urban
areas, the head count poverty index was 0.63, which represent 63 percent of the people in the
urban informal sector of Kwara State whose consumption-expenditure level falls below the
poverty line (N9,837.66 per month).
Table 4.3: Foster-Greer-Thornbecke (FGT) Poverty Measures for Kwara State.
Source: Authors‘ Computation.
Within the same period, the poverty gap index was 0.42 which represent 42 percent of the
extent of shortfall of the average income of the poor from the poverty line. That is, how poor
a person is from the poverty line. This gap is referred to as the poor‘s degree of misery. Thus
representing the percentage of the expenditure required to bring each individual person that is
poor below the poverty line up to the poverty line. The severity of poverty index was 0.28,
which represent 28 percent of the poorest of the poor households in the urban informal sector
of Kwara State whom policy makers must pay attention to in the State in the distribution of
the standards of living indicators such as health care services, clean water, sanitation, food
and income generating activities.
No. of Poor
Households
based on
N9,837.00
Poverty
Line
Poverty
Head
Count
Index Po
Poverty
Gap
Index P1
FGT
Index
P2
Whole State 663 0.63 0.42 0.28
Male 184 0.68 0.44 0.28
Female 235 0.59 0.41 0.28
Informal Sector
Activity:
Trading 55 0.36 0.24 0.15
Tailoring/Sowing/Knit
ting
58 0.67 0.40 0.24
Hair Dressing 43 0.64 0.36 0.20
Manufacturing 27 0.51 0.40 0.32
Food Vendor
Services/Catering
34 0.66 0.47 0.34
Food Processing 15 0.71 0.46 0.29
Repair Services 60 0.72 0.49 0.33
Transportation 26 0.52 0.40 0.32
Others 36 0.54 0.37 0.25
Poverty in the Urban Informal Sector of Kwara State, Nigeria 2011
Ijaiya, GT., Bello, RA., Arosanyin, GT., Oyeyemi, GM., Raheem, UA and Yakubu, AT Page 24
By gender, the study revealed that 68 percent of those that are poor in the sector are male. Of
all the economic activities in the sector 72 percent of the poor are mostly found in the repair
services activities of the sector.
Generally thus, the use of these three (3) measures of poverty clearly indicates that the rate of
poverty in the urban informal sector of Kwara State is relatively high when compared with
the total percentage of the people that are poor in Nigeria [(64 percent as provided by the
African Development Bank in 2004 (see ADB, 2010)].
Poverty in the Urban Informal Sector of Kwara State, Nigeria 2011
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CHAPTER FIVE
CONCLUSION AND RECOMMENDATIONS
An empirical analysis of the rate of poverty in the urban informal sector of Kwara State was
carried out using a set of household data and the P-alpha class poverty measure. The result of
the analysis indicates that the rate of poverty in the urban informal sector of Kwara State is
high with 63 percent of the operators‘ consumption-expenditure per adult equivalent falling
below the poverty line of N9, 837.66 per month. The poverty gap index was 0.42 and the
severity of poverty index stood at 0.28.
Drawn from the result, to address the poverty situation in the sector, there is the need to look
at the challenges raised by the poor operating in the sector. First is that the government
especially the local government authorities should recognize the contribution of the operators
in the sector to the economic development of Kwara State and to also see them as partners in
development than nuisance. The incessant displacement, demolition, arrest and harassment of
the operators by the police and the local law enforcement agencies; and the incessant increase
in trading fees that are inimical to entrepreneurial development, as well as to the
improvement of their wellbeing should also be addressed. A situation where operators are
displaced and their shops are demolished without compensation and alternative locations is
detrimental to entrepreneurial development and improvement in the wellbeing of the
operators.
The operators in the urban informal sector of Kwara State should resort to self
help/communal assistance and the tenets of social capital since the governments over time
have failed to recognize the operators as partners in development and in providing social
services to the people. With self help the efforts of the operators would be frequently geared
toward changing the critical situations they found themselves in and in influencing their
political and social conditions, such as securing freedom for themselves. With self help there
is also the conviction that their efforts or the efforts resulting from the solidarity of the group
would be a decisive factor in the formation of a feeling of self-esteem. With self help the
operator‘s own resources in the form of labour, capital, land and skills would also be used for
the upliftment of their standard of living. On the other hand, social capital often referred to as
norms and social relations, when embedded in the social structures of the operators in the
urban informal sector would enable them coordinate actions or act collectively in order to
achieve their desired goals, key among them is the upliftment of their standard of living.
The government should also address some of the critical infrastructure challenges the
operators are facing. First, there should be regular supply of electricity and safe water which
are important to the operation of businesses in the sector and to the live of the people
operating within the sector. Second, government should also assist in the provision of credit
facilities at the micro level and the provision of micro insurance facilities to serve as coping
measure in case of unforeseen situations. For the purpose of efficient disbursement of the
credit facilities the government can make use of trade associations and cooperative societies
the operators belong to.
Finally and critical too is the involvement of the operators in the urban informal sector in
activities that affect their lives and the fight against corruption. Their involvement for
instance, would allow for proper representation, adequate information flow, consultation,
Poverty in the Urban Informal Sector of Kwara State, Nigeria 2011
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negotiation, mediation and commitment on the part of the people. The fight against
corruption would guide against the diversion of funds and material resources that are meant
for the development of the sector and the communities where they operate.
Poverty in the Urban Informal Sector of Kwara State, Nigeria 2011
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