Selected Issues

Abstract

Selected Issues

Distributional Impact of Fiscal Reforms in Nigeria1

Income inequality and poverty rates are high in Nigeria, with the latter having declined more slowly compared to other countries. At the same time, moving closer to achieving the sustainable development goals and addressing Nigeria’s large development needs will require additional financing. This chapter finds that reforms to generate fiscal space—increases in value-added tax collection, excises, and electricity tariffs—are progressive, i.e. they reduce income inequality. However, they increase poverty gaps and rates to varying extents. Scaling up social safety net transfers and expanding their scope to cover a wider share of the poor can, to some extent, compensate for these adverse impacts at relatively low cost, and bring down poverty rates more generally. In the short term, other measures to shield vulnerable households’ income, including through lifeline electricity tariffs, and higher spending on health and education are needed.

A. Motivation

1. Addressing Nigeria’s development needs and making progress towards the sustainable development goals will require fiscal space. Nigeria faces large development gaps (see section B). Increasing revenues and reducing non-priority recurrent expenditures would create room to address these challenges by allowing for: (i) an increase in public capital expenditures to narrow the infrastructure gap that is currently perceived as one of the main constraints to private sector-led growth and thus to employment and poverty reduction opportunities; (ii) a higher allocation of resources to health and education to build human capital—creating more equal opportunities across income groups; and (iii) expanding and scaling-up transfers through social safety nets—currently covering only a very small share of the population—that would lift a significant share of the population out of poverty.

2. Against this background, it is important to ensure that fiscal reforms to create fiscal space do not further worsen inequality and poverty. Sections D and E assess the welfare impact of the package of policy measures included in IMF staff recommendations and the authorities’ Economic Recovery and Growth Plan (ERGP). It simulates the impact of revenue measures—an increase in value-added tax (VAT) collection, and excises—and an increase in electricity tariffs on fiscal space, the poverty gap (average distance of the poor from the poverty line in percent of poverty line) and poverty headcount, as well as on income inequality. The results suggest that most measures are progressive (i.e. reduce income inequality) but increase poverty. The measures are estimated to generate significant revenue that allows for compensatory social transfers and an expansion of the social safety net more generally. As the results do not take into account the positive impact from increased expenditures on infrastructure and other development areas that can be unlocked by increased fiscal space, the simulated increases in poverty rates could be overstating the actual impact.

B. Background: High Poverty and Inequality; Large Development Needs

3. Poverty and income inequality remain high in Nigeria; economic growth has been less inclusive than in other sub-Saharan African countries. Latest published data for Nigeria show that:

  • Income inequality in 2016, as measured by both the Theil and Gini Index, has decreased from its 2013 level but remains above levels observed more than a decade ago (Figure 1, Panel 1). Almost one third of income in Nigeria belongs to the 10 percent at the upper end of the income distribution, while less than three percent goes to the 10 percent at the bottom (Figure 1, Panel 2).

  • Poverty rates have declined more slowly than in other sub-Saharan African countries with similar GDP per capita growth (Figure, Panel 3). Latest publicly available data suggest that the poverty headcount is high, with 62.6 percent of the population living below the poverty line (HNLSS 2010). Poverty rates reached above 80 percent in one quarter of states in 2010—in these states, rates were double the ones observed, e.g., in Osun, Iso and Lagos states.

  • Policies have been less inclusive elsewhere. Nigeria ranks last among 152 countries assessed on Oxfam’s 2017 Commitment to Reducing Inequality Index that captures governments’ actions with respect to social spending, tax and labour rights.

Figure 1.
Figure 1.

Income Inequality and Poverty

Citation: IMF Staff Country Reports 2018, 064; 10.5089/9781484345481.002.A002

Sources: National Bureau of Statistics; IMF staff calculations; World Bank World Development Indicators, PovcalNet.

4. Nigeria also faces large development needs, including to meet the sustainable development goals. A large infrastructure gap impedes private sector activity and economic growth, and making progress towards achieving the sustainable development goals has been difficult:

  • Infrastructure. Annex III of IMF (2018) highlights Nigeria’s vast infrastructure gap and its implications for growth. In addition, these gaps are likely to impede opportunities for the more vulnerable parts of the population: Access to electricity has grown but is only reaching three out of five people (Figure 2, Panel 1); similar statistics apply to access to clean water (Figure 2, Panel 2). Richer households are more likely to be connected to the grid, and spend a larger share of their income on electricity, while less than two fifth of the population are connected to the grid in the North of Nigeria. Just about one third of Nigerians have access to improved sanitations facilities.

  • Health. With infant mortality at almost 7 percent and 8 in 1000 mothers dying giving live birth, Nigeria’s health statistics lag behind the outcomes observed in middle-income countries, and are significantly outperformed even by the average low-income country (Figure 3, Panel 1 and 2). Undernourishment remains above 25 percent, every sixth child under the age of 5 is malnourished, and more than 10 percent of children die before reaching this age. With only about every second child being vaccinated against major diseases, such as DPT and measles, immunization rates are far below the above 70 percent rates observed in the average sub-Saharan African country (Figure 3, Panel 3). Prevalence of anemia among children under 5, at almost 7 percent, exceeds the sub-Saharan Africa average. At the same time, expenditures on health, both in percent of GDP and per capita, are much lower than those observed in peer countries, and they have stagnated (Figure 3, Panel 4).

  • Educational attainment remains particularly low in several geographical zones, with net enrollment rates suggesting that less than one in two children is enrolled in primary education in the North East (less than one third in secondary education)—while rates are much higher in the Southern geographical zones of the country (Figure 4). In addition, in the North East, only about one in two men, and one in four women, is literate.

Figure 2.
Figure 2.

Infrastructure Gaps Access to Electricity

(Percent of the population)

Citation: IMF Staff Country Reports 2018, 064; 10.5089/9781484345481.002.A002

Source: World Bank: World Development Indicators.
Figure 3.
Figure 3.

Health Indicators

Citation: IMF Staff Country Reports 2018, 064; 10.5089/9781484345481.002.A002

Source: World Bank World Development Indicators.
Figure 4.
Figure 4.

Net Enrollment Rates

(Percent)

Citation: IMF Staff Country Reports 2018, 064; 10.5089/9781484345481.002.A002

C. Approach and Data

5. To assess the distributional impact on households, this section assesses who is directly impacted by a policy change and to what extent.

  • To this end, it applies incidence analysis that measures the impact of reforms on each household’s budget. This corresponds to an “accounting approach” that looks at the implications on households’ available income, without assumptions on substitution effects to other products and other behavioral changes (Lustig and Higgins 2017). This approach starts from an income concept (e.g., consumable income) and allocates expenditures (e.g. amount of VAT and excises paid on products consumed; electricity tariff paid) and transfers (e.g., social safety net transfers) to each household. It then assumes that demand for different consumption items is inelastic, so that expenditures on these items increase proportionally when their prices change.

  • However, changes in indirect taxes and in subsidies can also impact consumable income indirectly if price increases that apply to intermediate products are passed on to consumers (Jellema and Inchauste 2017). The incidence analysis takes into account the production structure of the economy to take into account these indirect effects where needed.

  • The fiscal incidence analysis in this chapter is partial, i.e., for most simulations, analyzes the impact of revenue and transfer measures separately, while not taking into account the likely beneficial impact of development expenditures that are enabled through the creation of fiscal space.

6. Three main data sources help (i) identify who is affected by the proposed reforms, (ii) track transmissions of reforms through economic sectors, and (iii) scale revenues.

  • The Nigeria General Household Survey (wave 3)—the third round of a nationally representative household survey, capturing 5,000 households across all states in 2015/16—provides the pattern of consumption at the household level.

  • The production structure found in the 2010 supply-and-use tables (SUT) is used to estimate the effective rates for indirect taxes likely to be passed through the economy’s production structure. Applying these rates to households’ reported expenditures allows deriving their indirect tax burden and thus consumable income.

  • Finally, information on the size of revenue items and subsidies from the 2015 fiscal accounts helps scale the revenues derived from the household survey to those actually collected at the time of the household survey.

7. Combining household-level data with the information from the supply and use tables and fiscal accounts, this chapter then focuses on answering three main questions:

  • Efficiency. How much revenue is likely generated?

  • Inclusiveness. What are the implications of proposed changes on available household income? Which households are mainly impacted and what are therefore the implications in terms of changes in poverty rates and in the income distribution?

  • Mitigation. To what extent would existing transfer schemes need to be expanded and scaled up to (i) for an adverse impact and (ii) reduce poverty rates from existing levels?

D. Scenario Analysis: Increasing Fiscal Space

Increasing Revenues from VAT

8. The literature on the distributive impact of VAT is mixed. While studies have shown VAT to be generally regressive (IMF 2017a), i.e. to increase income inequality, in advanced economies, the results for developing countries are more ambiguous (Bastagli and others 2012). More generally, VAT exemptions or lower rates on consumption items that constitute a larger share of the poor’s than the rich’s consumption basket, tend to be progressive. In the case of Nigeria, first evidence from plotting estimated VAT payments against household’s income percentiles, suggests that the share of VAT payments in higher-income households is larger—pointing towards a likely progressive impact from raising VAT revenue in Nigeria (Figure 5).

Figure 5.
Figure 5.

Value-Added Tax

(Percent of consumable income)

Citation: IMF Staff Country Reports 2018, 064; 10.5089/9781484345481.002.A002

Source: GHS, wave 3, Nigeria National Bureau of Statistics.

9. A VAT reform in Nigeria could generate significant fiscal revenue, reduce income inequality; but it would increase poverty. Figure 6 (panel1 and 2) describe the impact on revenues and different measures of poverty and inequality from 6 scenarios that combine increases in VAT rates and compliance rates. Without compensating measures, they show:

  • Scenario 1: A doubling of the existing VAT rate to 10 percent—that is an increase in “indirect taxes on activities and commodities” as implied by supply and use table—would double VAT revenue from its 2015 level, and slightly reduce income inequality. However, it would increase the poverty headcount rate by 2¼ percentage points, and the poverty gap by 1 percentage point.

  • Scenario 2: With a low compliance rate on the payment of VAT (estimated previously at 25 percent), an increase in compliance should strongly impact revenue collection. Indeed, increasing VAT compliance to 70 percent is estimated to increase revenues by a similar order of magnitude as in the first scenario. However, this reform would be slightly more progressive and increase the poverty rate and poverty gap less strongly (by 1¾ and ¾ percentage points, respectively).

  • Scenario 3: An alteration of scenario 2, in which the current exemption on basic food stuff is lifted and all food items are taxed, almost doubles the revenue impact from an increase in VAT compliance. However, this reform has also a substantial impact on vulnerable households, with the poverty headcount rate and poverty gap increasing by almost 4 and almost 2 percentage points, respectively. Meanwhile, income inequality would remain relatively unaffected. The high impact on poverty rates results from the relatively larger shares of income spent on food in low-income households compared to richer households, even if a large share of food consumed is self-produced in lower-income households (Figure 6, panels 3 and 4).

  • Scenario 4: Even with food being exempt from taxation, increasing compliance and doubling the VAT rate could generate significant additional revenue (Naira 2.1 trillion). Such a measure would reduce income inequality by almost one point on the Gini scale. However, it could also imply an increase in the poverty headcount (+6 percentage points) and poverty gap (+2¾ percentage points).

Figure 6.
Figure 6.

Impact from Increased VAT Collection

Citation: IMF Staff Country Reports 2018, 064; 10.5089/9781484345481.002.A002

Source: NGHS, wave 3, NBS.

10. The large increase in poverty rates raises the question as to whether particular households are disproportionately impacted by the change in rates. Figure 7 shows for scenario 4 (doubling of both VAT and increasing compliance to 70 percent) that the impact on the poverty rate from the VAT increase would be higher for urban than for rural households, while, the poverty gap rises more strongly for rural households than for urban ones. This result is driven by the share of people living below the poverty line being larger in rural areas. The impact on the poverty rate and gap for female-headed household is less than half the size of that of male-headed households, possibly due to the relatively larger average household income for female-headed households in the sample.

Figure 7.
Figure 7.

Change in Absolute Poverty Rates (Scenario 4)

(Percentage points)

Citation: IMF Staff Country Reports 2018, 064; 10.5089/9781484345481.002.A002

11. Social safety transfers can help compensate for the adverse impact from the VAT increase on the poor.

  • Targeting mechanism. Households to benefit from transfers in the simulation are chosen through proxy-means testing in the simulation. The proxy-means test (PMT) helps identify households for targeting purposes based on their predicted household expenditure according to a regression of the logarithm of household expenditure per capita on a range of variables that may be easily verifiable in practice—dummies capturing state, rural vs. urban location, ownership of a refrigerator, ownership of a car, and electricity expenditures.

  • As an illustration, scenarios 5 and 6 in Figure 6 (Figure 8) highlight the results from (i) holding the poverty gap constant (scenario 5) by transferring a lump-sum payment to all households with a PMT score below the extreme poverty line and (ii) holding the poverty rate constant, by transferring a lump-sum to households with a PMT score below the poverty line. Holding the poverty gap constant, would require scaling up social transfers by some Naira 400 billion (about one fifth of the revenue gain). Holding the poverty rate constant, would imply transfer expenditures of Naira 1,100 billion, about half the revenue generated by this measure—implying significant revenue gains even after ensuring that poverty rates do not rise.

Figure 8.
Figure 8.

Adding Social Transfers to VAT Reform

Citation: IMF Staff Country Reports 2018, 064; 10.5089/9781484345481.002.A002

Note:5. Same as 4., transfer to the extreme poor, constant poverty gap6. Same as 4. but transfer to the poor, constant poverty headcount

Increasing Excises

12. The impact from doubling excises on both revenue and poverty incidence estimated in the simulations appears limited; but it likely understates the effect of revenue generation due to under-reporting of expenditures by households (Table 1).

  • According to previous studies, increasing excises on alcohol and tobacco tends be desirable for efficiency gains (taking into account negative externalities) and due to their progressivity in developing countries (IMF 2017 Bastagli and others 2012).

  • Doubling existing excise rates on alcohol and tobacco appears to have only a minor impact on revenue generation in Nigeria. Income inequality is largely unaffected, and poverty rates increase only moderately. This result is not surprising given very low shares of excise payments in households’ consumption, bases on reported consumption of these items. In particular, while the share of alcohol excises increases with households’ relative income, it remains below 1 percent (Figure 9, Panel 1). The share of tobacco excises is small (Figure 9, Panel 2).

  • However, these results may underestimate the true impact of an excise increase as households tend to under-report expenditures on alcohol and tobacco (see also section F on caveats). In particular, the estimated revenue impact is smaller than the one estimated in chapter 1.

Table 1.

Nigeria: Impact of Increasing Excises

article image
(1) Double excise on alcohol(2) Double excise on tobacco
Figure 9.
Figure 9.

Expenditure on Excises by Income Percentile

Citation: IMF Staff Country Reports 2018, 064; 10.5089/9781484345481.002.A002

Source: NGHS, wave 3, Nigeria National Bureau of Statistics.

Increasing Electricity Tariffs

13. Progress has been made under the Power Sector Recovery Plan (PSRP); tariff adjustments over time—combined with improved electricity service—will be needed to bring the power sector to a level at which it can operate without a financial deficit. Power supply generation has increased and reached a record high of 5100MW in the grid at the end of 2017, on the back of a number of actions (appropriate budget provisions to ensure government agencies pay their electricity bills; enabling the Bulk Trader to pay for generated power). The tariff increase of 60 percent in 2016 has brought electricity prices closer to cost recovery. The Nigerian authorities expect further tariff increases to have very low public acceptance until service improves from the current very low levels and sector losses and leakages are reduced. The PSRP involves a package of measures to reduce sector inefficiencies and costs, improve payment discipline and adjust tariffs to restore financial viability and ensure power reliability going forward.

14. An increase in electricity tariffs would increase fiscal space significantly and reduce income inequality—but reduce households’ purchasing power, thus increasing poverty rates. For illustration purposes, an increase of electricity tariffs by 30 and 69 percent for residential customers, which were some of the tariff adjustment scenarios initially considered by the Government during the preparation of the PSRP, is estimated. The results suggest that such changes would increase fiscal space (assuming government would be paying the implicit subsidy going forward) by about Naira 100 billion and 200 billion, respectively (Figure 11, Panel 1). With less than 10 percent of total expenditures on electricity made by households at the bottom 50 percent of the income distribution and households at the higher end disproportionately benefiting from the current implicit subsidy (Figure 10), an increase in electricity tariffs would reduce income inequality slightly. The lack of access to electricity for a large share of lower-income households explains the relatively mild impact on the poverty headcount by around ¼ and ½ percentage point in this static simulation (Figure 11, Panel 2).

Figure 10.
Figure 10.

Electricity Subsidies

(Percent of consumable income)

Citation: IMF Staff Country Reports 2018, 064; 10.5089/9781484345481.002.A002

Source: NGHS, wave 3, Nigeria National Bureau of Statistics.
Figure 11.
Figure 11.

Impacts from Tariff Increases

Citation: IMF Staff Country Reports 2018, 064; 10.5089/9781484345481.002.A002

Note:1. Increase residential tariff by 30 percent2. Increase residential tariff by 69 percent3. Same as 2. but including a PMT-targeted transfer to keep the poverty gap constant.4. Same as 2. but including a PMT-targeted transfer to keep the poverty headcount constant.5. Same as 2. but replace existing electricity charges with a lifeline structure: N4/kWh up to 50 kWh/month, then current class 2 tariff raised by 69 percent for kWh>50/month6. Same as 2. but replace existing electricity charges with a lifeline structure: N4/kWh up to 40 kWh/month, then current class 2 tariff raised by 69 percent for kWh>40/month

15. Both increased social transfers and the augmentation of the existing lifeline tariff could mitigate the impact on the poor. Scenarios 3 and 4 build on the 69 percent tariff increase to quantify the expenses needed to keep the poverty gap (scenario 3) or poverty rate (scenario 4) constant, with fiscal space staying positive in both scenarios despite the compensation package. Similarly, the lifeline tariff, which currently benefits only 2 percent of consumers, could be expanded as highlighted in scenarios 5 and 6 (Figure 11). The two scenarios provide this lifeline to all households at a rate of Naira 4/kWh up to 50 kWh/month (as currently the case; scenario 5) and up to 40 kWh/month, respectively, while they increase other prices by 69 percent. These scenarios are roughly budget neutral while decreasing the poverty headcount by ¼ percentage point.

E. Increasing Social Transfers

Expanding the Social Safety Net

16. This section estimates the impact from expanding coverage under the currently set-up National Social Safety Nets Project (NASSP).

  • A number of social transfer programs currently exist in Nigeria but they are relatively small and face limitations (Box 1).

  • To create a more structural approach to social protection, the government, with support from the World Bank, is in the process of rolling out the NASSP, a program intended to provide a national platform for funding, coordinating, and monitoring national safety nets at the central level, with implementation at the state level. Under the NASSP, currently 100,000 households are listed in the registry of poor and vulnerable households, with envisioned expansion to 250,000 households in 2018, and 1 million households (approximately 10 percent of the poor) in 24 states in the medium term.

  • The below simulations build on the transfer size to households under the NASSP (Naira 5000 per household per month) but examine the impact on poverty if the program was expanded to cover a larger share of households than currently envisioned.

Social Safety Nets in Nigeria

A number of social and employment programs exist in Nigeria but their implementation at the federal and state level is impeded by limited coverage, undefined eligibility criteria, and lack of monitoring (World Bank 2016).

  • A few other conditional and unconditional cash transfers have been or are being implemented primarily at the state level but have low overall reach. For example, the effectiveness of the ‘In Care of the People’ (COPE) is constrained by low coverage (22,000 beneficiary households), low benefit levels, and weak incentives for state involvement.

  • The Youth Employment and Social Support Operation (YESSO) program aims, supported by the World Bank, to reach more than 500,000 youth to receive re-orientation and life skills training and 1.5 million youth through public workfare.

  • A number of programs are implemented by the National Directorate for Employment, including training on skills acquisition (e.g. Basic National Open Apprenticeship Scheme: B-NOAS) and entrepreneurship (e.g. women employment program).

The ERGP envisions expanding social programs. The government’s ERGP aims at investing in social infrastructure, by implementing conditional cash transfers for the most vulnerable; advancing school feeding and public work programs; and improving the quality of health care and access to education, in particular (IMF 2017b):

  • The N-Power Job Creation Scheme is a job creation volunteer-service program that aims at mitigating specific problems in local communities through the deployment of unemployed Nigerian graduates.

  • The Homegrown School Feeding program provided basic nutrition needs for children, while creating employment and supporting agricultural production in local communities.

  • The Conditional Cash Transfer program is targeted at supporting the most vulnerable and poorest Nigerians.

  • The General Enterprise and Empowerment Program (GEEP) is a zero-interest, 5 percent administrative fee loan scheme through the Bank of Industry, targeting Nigerian artisans, traders, market men and women, and women cooperatives.

17. Widening social safety nets could make a strong dent in poverty reduction (Figure 12).

  • A final set of simulations estimates the cost, distributional and poverty implications from a stand-alone increase in social safety transfers. The assumed size of the transfer of Naira 60,000 per household per year is in line with the World Bank’s National Social Safety Nets Project (NASSP) that supports the Nigerian government by expanding access for poor households to social safety nets—allocated through PMT as described earlier.

  • The results highlight that expanding the current transfer to cover 20 percent (double the current medium-term target under the program), 50 percent and 100 percent of poor households, respectively, is feasible but would require significant resources (up to Naira 600 billion, excluding administrative cost). In the case where 100 percent of the poor (as identified by PMT) are covered, poverty headcount rates and the poverty gap could drop by 3¼ and almost 3 percent, respectively—more than offsetting the increase in the poverty gap from the VAT, excise and electricity reforms shown above.

Figure 12.
Figure 12.

Impact from Social Transfer Increases

Citation: IMF Staff Country Reports 2018, 064; 10.5089/9781484345481.002.A002

Note:1. 20 percent of the poor get a transfer of N60,000 per year per household2. 50 percent of the poor get a transfer of N60,000 per year per household3. 100 percent of the poor get a transfer of N60,000 per year per household4. Transfer budget implied by 3., transferred as universal income (lower transfers but to all households)

F. Caveats

18. A number of assumptions could impact and bias the above-described results:

  • No changes in behaviors of individuals are assumed throughout the simulations. For example, increasing excises could (and is often intended to) induce a shift away from alcoholic beverages or tobacco. An increase in the cost of electricity, and subsequently (here not captured) more reliable energy as part of the energy reform, could make households change their consumption of energy outside the grid (generators etc.).

  • The impacts simulated in this chapter are static, they therefore do not take into account second round impact of reforms—such as when higher public infrastructure investment financed through additional revenue mobilization raises growth, with positive implications on vulnerable households. As a result, the strong impacts on poverty discussed above could be overstating the actual impact.

  • The PMT targeting identifies households through a regression that is bound to have inclusion and exclusion errors, i.e. some households that receive the transfer will not be poor, while some poor household will not be identified as poor and therefore not receive a transfer. In the above cases, the inclusion error is about one fourth.

  • Scaling up and expanding social safety net to fully compensate for the adverse impact of proposed reforms on the poor is likely unfeasible in the short-term, calling for a carefully designed reform package that includes other measures to mitigate otherwise potentially undesirable short-term effects.

  • The administrative cost of social transfers is relatively high (30 percent in Nigeria). The total cost to make the transfers could therefore be higher than shown in this chapter.

  • Underreporting of some expenditures could result in lower than possible revenue estimations. In particular, as households tend to understate their expenditures on alcohol and tobacco, the revenue impact of increases in excises for these products could be higher, while the distributional consequences of the measure could be different.

G. Conclusion

19. The proposed fiscal measures yield substantial revenue gains and reduce income inequality. This chapter showed that fiscal space gained through proposed fiscal measures—VAT reform, an electricity tariff increase, and an increase in the excise rate on alcohol and tobacco, could be substantial. These measures by themselves are also expected to decrease income inequality.

20. However, poverty gaps and rates would likely rise significantly in response to these measures and call for compensating measures. In all scenarios, poverty rates would increase as consumable household income shrinks in response to larger expenses. Simulations of different degrees of social safety net expansions (increased transfer amount and increase in covered share of the population) show that social safety transfers, if efficiently run, could compensate for the negative impacts from the above-mentioned reforms. As social safety nets may not be immediately scalable to the desired extent in the short term, a package of other measures will be needed to compensate for the adverse impact on the most vulnerable. In particular, imposing a lifeline tariff for electricity will be needed. Using gained fiscal space to increase expenditures in education and health, not captured in the simulation, could improve the progressivity of the suggested measures and decrease the likely increase in poverty.

21. Indeed, estimated transfers and poverty gaps may overestimate the impact on the poor—provided that additional expenditures are efficiently used. Redistributing the generated tax revenues (and savings in subsidies) into public expenditures in itself would generate additional growth benefits, therefore increasing income, including for the poor. Since this chapter does not take into account these dynamic impacts, the sizes of estimated social measures to compensate for negative impacts could be overstated, so that “compensatory” transfers could actually deliver a reduction in poverty levels.

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1

Prepared by Monique Newiak (IMF, AFR) and Stephen Younger (Commitment to Equity Institute), with input from Tu Chi Nguyen (World Bank). This chapter has benefited from comments and inputs from the National Bureau of Statistics Nigeria, the Federal Ministry of Labour and Employment Nigeria, the World Bank, and several IMF colleagues.

Nigeria: Selected Issues
Author: International Monetary Fund. African Dept.