Poverty of information and the information of poverty

Today we address a serious African problem which is more prevalent in Nigeria. It is the dearth of timely and reliable information. In Nigeria everyone has an opinion. It never ceases to amaze me how people can point fingers at everyone but themselves for every single calamity but yet we have institutions that ought to generate fact based data but do not. Even when they do try their best the average Nigerian finds it difficult to accept these facts because such institutions are compromised by incompetency and bad politics to hold the moral high ground. To addres this trend, there is perhaps no one better than our guest writer, Professor Charles Soludo who rose through the ranks of academia to first head the national economic management team before serving two terms as Governor of the Central Bank. His time saw the consolidation of the Nigerian banking industry, an event that many say led to the better-than-average performance of Nigerian banks in the world wide recession. Others point out that this consolidation caused greater irresponsibility by the boards of banks and exposed gross errors in regulation. His analysis is timely and riveting. As usual you are encouraged to post your comments.

The Soludo Solution By Chukwuma Charles Soludo

Wolfgang Stolper’s 1966 classic lamented that Nigeria’s First National Development Plan 1962 - 68 was an exercise in planning with limited statistics. Almost 50 years after, the concern is deepening. Several of the most important national data (if they are available and on time) are either of poor quality or downright wrong. Do you believe that Nigeria’s population is 167 million this year? Do you believe that GDP is growing at nearly 8 per cent (led by the non-oil sector) and at the same time poverty has worsened to all time high of 72 per cent in 2011? Do you believe the school enrolment figures? Does the inflation figure make sense to you? Do you believe the data on consumption, investment, etc? I am at pains to admit that I am not sure.

“If you cannot measure it, you cannot improve it.” That was the seminal conclusion of Lord Kelvin in 1883. Without timely and reliable data on social and economic conditions of a society, much of public policy becomes an exercise in shadow-boxing. Policy analysis becomes a case of garbage in, garbage out. Many commentators and policy analysts casually refer to the poor quality of our national data, but I am not sure the public and the government truly appreciate the magnitude of the crisis. When I accepted to write this column, I also decided to ensure that it is evidence-based. But not without the necessary caveat emptor with regards to my articles on Nigeria! That explains the focus of this first article.

Of course, in Nigeria everyone is a moving statistical agency. Everyone reels out his or her own statistics on anything. Some will tell you that poverty incidence is 90 per cent; 70 per cent or that unemployment is 80 per cent and all kinds of numbers are bandied around. Ask them the source of their statistics and they will be surprised that you “can’t see it”. Don’t try to get into the argument that no person, based on his limited observations, can postulate about the conditions of the entire country covering 774 local governments. The reality is that aside from some sectoral data produced by a myriad of agencies, only the former Federal Office of Statistics (FOS) and now the National Bureau of Statistics (NBS) has the national mandate and organisation to produce nationwide statistics on the social and economic conditions of the country.

Sometimes, one is embarrassed to see even officers of government reeling out unsubstantiated statistics from their heads or quoting figures from the World Bank. Quoting World Bank figures by government officials is an admission that the government does not trust its own statistics. Nothing is a more national embarrassment than seeing the National Planning Commission (which supervises the NBS) repeatedly refer to World Bank ‘estimates’ in its Vision 2020 document. The World Bank does not have the operational infrastructure to collect economy-wide primary statistics on Nigeria. It relies on national statistics produced by NBS and other government agencies plus its own ‘staff estimates’. I know that some of the World Bank figures are suspect.

In 2001, I wrote an article entitled ‘The numbers do not add up’. This highlighted the inconsistencies and contradictions in the statistics published by the Central Bank of Nigeria (CBN), the FOS and the Ministry of Finance on the Nigerian economy.  In 2003, I became Chief Economic Adviser to the President and CEO of the National Planning Commission (with FOS as one of the parastatals to supervise). I faced the true reality of the pitiable state of our national statistical system. A diagnostic evaluation of the FOS revealed a systemic collapse. Less than 20 per cent of the thousands of staff had any professional qualification or experience to work in such an institution. It had no office building, grossly underfunded, and did not have the technology to function.

I believed we needed to reconstruct a new statistical agency from the scratch. We produced the “Statistical Master Plan for the Nigeria National Statistical System (2004/5-2008/9)”; renamed the FOS to the current name of NBS; set out to secure its current office building, and drew a huge agenda for total transformation including manpower recruitment and training, aiming to have at least 80 per cent of the staff as professionals. I left for the CBN a few months later and I want to believe that the reforms are still work-in-progress. From what I can see, we still have a very long way to go.

In the last few years, I have been advising institutional investors on Africa and have had to tease out information from country statistics of many African countries. My experience is that there are few African countries whose statistics are as poor as Nigeria’s. Investors keep asking me about the conflicting figures on the Nigerian economy. It is serious!

Every data is important. However, it is extremely difficult for policymakers to make or measure progress without reliable data on demography (population and its characteristics); income or GDP and its distribution; unemployment; poverty; inflation; health and educational standards. In advanced democracies, the fate of governments depends critically on the standard of living of the people measured by unemployment and poverty. In Nigeria, I guess these numbers don’t excite the public because they either do not understand or do not believe them.

We know that our population figures and school enrolment rates are tied to revenue allocation from Abuja. Recall the dispute between the National Population Commission and Lagos State as to whether the state’s population was 9 million or 18 million? We know what happened during the census. We also know what goes on with school enrolment figures. States are in competition to maximise these numbers to get more money. Ultimately our population figures are political figures designed to balance and maintain some presumed structures of the country. Truth be told: we don’t know how many Nigerians we are planning for. If we are serious, there is the technology to undertake biometric capture of all citizens, without any duplication.

Recently, the NBS released a bombshell on poverty incidence. According to NBS, poverty has worsened from 54 per cent in 2004 to 69 per cent in 2010 and 72 per cent in 2011. A decomposition of the figures reveals that states in the South contributed 70 per cent of the deterioration while states in the North contributed 30 per cent. Wonderful! This is a subject for another day. In more organised societies, such figures (if they are believable) can pull down a government. But, are they believable?

Empirical evidence for Africa in the late 1990s showed that a GDP growth rate of about 4-5 per cent was required to stop poverty from getting worse; and 7 per cent or more to achieve the MDG goal of halving poverty by 2015. In fact, I do not know any country with a broad-based GDP growth rate of 5 per cent or more for a decade without a significant reduction in poverty. Income (measured by GDP) is the most important determinant of poverty.

For Nigeria, NBS tells us the economy has been growing (at least since 2003) by an average of 7 per cent or more. It also says that the growth is driven mostly by non-oil sector whose growth rate exceeds 8 per cent. Agriculture which employs most of the poor people is said to be growing at an average of 7 per cent per annum. So, the growth is broadly shared.  Furthermore, the statistics says Nigeria has become less unequal. Gini coefficient has declined from 49 per cent in 2004 to 44 per cent in 2010 -- bringing the level of inequality in Nigeria to just about the level in China. Hmmm!

The explanations given by the NBS for the recent deterioration in poverty are, to say the least, very flimsy. The NBS 2005 detailed report has more robust and plausible explanation of poverty dynamics in Nigeria.

I am not making any judgment as to which of the statistics is right or wrong, but both cannot be right at the same time. You cannot have ‘high broadly-shared’ growth of 7 per cent or more (as reported) and escalating poverty at the same time. If the poverty numbers are correct, then the GDP numbers are wrong. If the GDP numbers are correct, then the poverty numbers must be wrong. Let me be more emphatic: if the GDP numbers are correct, poverty will be below 50 per cent in 2011; and if the poverty numbers are correct, then GDP must have been contracting dangerously!

All the pedestrian explanations for increased poverty including insecurity, corruption, waste, poor infrastructure including power, etc ought to show up in the GDP growth rate. If, in spite of all these, GDP or income is still growing rapidly as claimed, then poverty cannot be rising. In a layman’s language, the GDP data claim that most people are getting richer. Nigeria cannot publish data showing us that people are getting richer and poorer at the same time. Investors are getting confused.

To further illustrate the absurdities, let us rewind back to 1985. With the collapse of oil prices in 1982, the economy massively imploded, with stringent austerity measures, mass retrenchment of workers and non-payment of salaries, queuing for essential commodities, negative average income growth, and yet poverty incidence was reported at just 45 per cent. Under the SAP era, poverty was reported to have fallen to 42 per cent in 1992, before climbing dramatically to 66 per cent in 1996. Between 1996 and 2003, average GDP growth rate was about 4 per cent, and poverty dropped to 54 per cent. Now came the ‘boom era’—income growth of 7 per cent or more since 2003, and paradoxically, poverty also exploded to all time high of 72 per cent in 2011. Something is definitely not adding up!

I suspect a fundamental flaw in the sampling process and computational technique. Nigeria must get to work. Full implementation of the Statistical Master Plan is an important first step. Reliable statistical system costs money but it is an inevitable soft infrastructure of development. As CEO of National Planning, I refused to sign on to a $50 million World Bank loan for NBS. For me, Nigeria should only borrow for bankable projects, and not for all kinds of waste pipes dressed as ‘capacity building’. If we cannot adequately fund NBS, I wonder what else deserves better attention.

Source: Thisday Newspapers backpage

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