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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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
(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
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 9
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
Poverty in the Urban Informal Sector of Kwara State, Nigeria 2011
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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
Poverty in the Urban Informal Sector of Kwara State, Nigeria 2011
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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;
Poverty in the Urban Informal Sector of Kwara State, Nigeria 2011
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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