THE IMPACT OF ECONOMIC DOWNTURN ON POVERTY AND INEQUALITY IN NIGERIA (THE EXPERIENCE UNDER TINUBU ADMINISTRATION).

CHAPTER ONE

INTRODUCTION

Background of the Study

An economic downturn is a time frame of decreased economic activity typified by declining GDP, diminished global demand, sluggish employment creation, rising borrowing prices, and restricted credit availability. An economic downturn can occur inside a nation, a region, or on a worldwide scale4. An economic downturn might persist for a few months or longer, and is usually followed by a recovery. An economic slowdown that lasts for at least six months is considered a recession (Market Business New, 2024). Nigeria, which is the most populated nation in Africa and Africa's largest economy, has been experiencing economic downturn since 2020, characterized by low economic growth, high inflation, and widespread unemployment (World Bank, 2022). The country's economic woes have been exacerbated by declining oil prices, political instability, and poor economic management (OPEC, 2022).

Nigeria's poverty rate has been steadily increasing, from 40% in 2019 to 45% in 2022 (National Bureau of Statistics, 2024). The country's income inequality has also worsened, with the Gini coefficient increasing from 0.4 in 2019 to 0.45 in 2022 (UNDP, 2022). The economic volatility of the Nigerian economy further worsen the poverty and inequality gap in Nigeria.

The impact of economic downturn on poverty and inequality has been well-documented in the literature (World Bank, 2022; UNDP, 2022). Economic downturn can lead to increased poverty and inequality, as vulnerable populations are often the hardest hit (IMF, 2022). The economic downturn has had a disproportionate impact on vulnerable populations, including low-income households, women, and youth (UNDP, 2022). These groups have been affected by limited access to basic services, including healthcare and education (UNICEF, 2022).

The current administration led by President Bola Tinubu, which took over power in May, 2024, has implemented certain policies and programs to help mitigate the rising economic downturn. Some of these initiatives include: monetary tightening measures by the Central Bank of Nigeria to control inflation, fiscal reforms to increase government revenue, and social investment programs to support vulnerable populations. Critics argue that some measures, such as the removal of fuel subsidies, have had adverse short-term effects on the poor and middle class, exacerbating the economic hardship (Financial Times, 2023).

Despite these policies, the Nigerian economy still suffers greatly, the Naira continues to depreciate, the inflation rate is still very high and there is a gross increase in the unemployment rates in Nigeria. It is therefore necessary to critical examine the economic downturn rate and proffer solutions to improving the economic situation in Nigeria (ThisDay, 2023).

Statement of the Study

The impact economic downturn has on the population of a country is immense, often plaguing the poor and the middle-class, dwelling in the rural or sub-urban areas. The National Bureau of Statistics (NBS) reported that Nigeria's inflation rate reached 22.8% in June 2023, driven primarily by escalating food prices and the devaluation of the Naira (NBS, 2023). The increased inflation rate has advance effects on the purchasing power of Nigerian, further pushing them below the poverty line. ). According to a report by the World Bank, approximately 40% of Nigerians live below the poverty line, and the economic crisis has pushed more people into poverty (World Bank, 2023). 

Despite these challenges and government efforts to mitigate them, it is imperative for this study to look into the impact economic downturn has on poverty and inequality in Nigeria under this current administration led by President Bola Tinubu.

Objective of the Study

The primary objective of this study is to understand the impact of economic downturn on poverty and inequality in Nigeria under Tinubu administration.

Other specific objectives include:

Determine the extent economic downturn has affected the income distribution pattern in Nigeria.

Determine the extent economic downturn has affected the purchasing power of Nigerian.

Determine the extent economic downturn has affected the equal accessibility of basic facilities.

Provide policy recommendations for mitigating poverty and inequality in Nigeria.

Research Questions

Here are some research questions relevant to the study

What extent does economic downturn affect income distribution pattern in Nigeria?

What extent does economic downturn affect the purchasing power of Nigerians?

What extent does economic downturn affect the equal accessibility of basic facilities?

What are the solutions for mitigating poverty and inequality in Nigeria?

Research Hypothesis

Here are some research hypothesis relevant to this study

H0: Economic downturn has no significant effect on the income distribution pattern in Nigeria.

H1: Economic downturn has significant effect on income distribution pattern in Nigeria.

Significance of the Study

Significance of the study the impact of economic downturn on poverty and inequality in Nigeria (the experience under Tinubu administration), would contribute to existing literatures on economic downturn, it will also aid other researchers in there literature review. 

The study will shed more light the impact of economic downturn on poverty and inequality in Nigeria (the experience under Tinubu administration), 

The result from this study will contributes immensely to the body of academic knowledge with regards to the impact of economic downturn on poverty and inequality in Nigeria (the experience under Tinubu administration).

Scope of the Study

The study would focus on the impact of economic downturn on poverty and inequality in Nigeria (the experience under Tinubu administration). Empirically, this study will determine the extent economic downturn has affected the income distribution pattern in Nigeria, determine the extent economic downturn has affected the purchasing power of Nigerian, determine the extent economic downturn has affected the equal accessibility of basic facilities, and also, provide policy recommendations for mitigating poverty and inequality in Nigeria.

This study will be carried out in Nigeria.

1.8 Limitation of the Study

The study may not be carried out for an extensive period of time to understand the impact of economic downturn on poverty and inequality in Nigeria under Tinubu administration.

The sample size is also limited to the current administration which may not reflect the overall role past administration has played in the impact the current economic downturn has on poverty and inequality rates in Nigeria.

The study relies of self-reported data, which is subject to biases, errors and inaccuracies.

Definition of Terms

Economic downturn:  An economic downturn is a period of slowed economic activity marked by declining GDP, reduced global demand, sluggish job growth, increased borrowing costs, and reduced credit availability.

Inflation: It is a situation of rising prices in the economy.

Administration: Administration in government refers to the management of a government or large institution. In American usage, the term generally refers to the executive branch under a specific president or the term of a particular executive. It can also refer to the period when a President is in office. Administration can also refer to the people who are in government.

Poverty: The state of one who lacks a usual or socially acceptable amount of money or material possessions. Poverty is said to exist when people lack the means to satisfy their basic needs.

Inequality: Difference in size, degree, circumstances, etc.; lack of equality.