It is quite unfortunate that after 56 years Nigeria is still regarded as a third world country even though the country has crude oil, a resource that has been in demand all over the world for a long time now and that has propelled other countries like Saudi Arabia and United Arab Emirates to become developed countries.
It was as if Professor Ragnar Nurkse had Nigeria in mind when – in his vicious cycle of poverty theory- of 1953 he noted that “a country is poor because it is poor”. According to him, one of the main reasons why third world countries like Nigeria still remains undeveloped is because they are poor. In his theory, he explained that countries find themselves in a vicious cycle in which they are helpless to breakaway from. These poor countries are characterized by low income, which leads to low savings and low consumption, this in turn leads to low investment and low capital formation, low productivity and ultimately low income and so the cycle continues.
In the case of Nigeria, one would easily ask, is Nigeria a poor country?
Based on the analysis of Professor Nurkse, we can say that Nigeria is a poor country. It is a fact that Nigeria is a country blessed with several natural resources, but the high level of resource mismanagement and bad leadership within the country, has led to low income resulting from the use of these resources. The poverty case of Nigeria is like that of a man who has 6 children and he is earning 50,000 naira a month. Because his relatively good income is not enough to provide the basic needs for all his 6 children and wife, the man who is supposed to be rich due to his good salary, is now seen as poor because of his large family.
This is exactly the case with Nigeria. Nigeria is not poor because she is not earning income from her vast resources, but she is poor because the income is not enough to satisfy her vast population. To get a clearer picture, divide the national income of Nigeria by the population count, then you will see the grim picture. Also, if we compare the minimum wage to the price of goods in the market we can see that 18,000 naira is worth nothing; hence the vicious cycle starts.
Due to this low income, consumption is low; people find it hard to eat three times a day. In an attempt to feed, people spend almost all their income on consumption and so they hardly save. Who is talking of saving? When there is no food to eat. As a result of low saving culture and poor consumption, there are no much funds available for firm to put back into production and also inadequate fund for new entrepreneurs to go into production (Low investment). The little available in banks are given out as loans at high interest rates. This low investment causes low output and productivity as goods and services become scarce; the ones available becomes costly. With low output, income made by companies and their workers remain low and so the cycle continues.
In order for the country to be able to break away from this vicious cycle, one remedy is possible and that is increasing the level of income. If Nigeria can be able to diversify its economy, so that income could be gotten from other means aside sales from crude oil, then it can sustain a high income for its people. If the country will be able to find another source of making money aside oil, then they can raise the income of their citizens through providing more jobs, increase minimum wage, pay unemployment benefits, provide basic amenities and so on. If we are able to increase income then and only then can we break away from this VICIOUS CYCLE OF POVERTY and possibly run into a VICIOUS CYCLE OF WEALTH like other developed countries of the world that remain rich even in the worst economic conditions.
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