Spatial Decomposition of Income Inequality in Rural Nigeria

The issue of inequality is especially important in Sub-Saharan Africa (SSA), where economic growth has been slow to change. Policies that result in macro-economic imbalances could result in soaring levels of inflation, with attendant consequences of redistribution of incomes from the poor and vulnerable to the asset-rich, thereby exacerbating inequality and poverty. This study assessed the level of spatial income inequality and identified the contribution of socio-economic and space to inequality in rural Nigeria. The 2003/04 National Living Standard Survey by the National Bureau of Statistics (NBS) was used for the study. Out of 19,158 households with consistent data, 14,512 were rural, and were used for the study. Information on socio-economic characteristics, capital assets and per capita expenditure were extracted from the data set. The data were analysed on Geopolitical Zones (GPZs) comprising Northcentral (NC), Northeast (NE), Northwest (NW), Southeast (SE), Southsouth (SS), and Southwest (SW) using descriptive statistics, Gini coefficient (GC), and Shapley Decomposition (SD) technique. The result showed that inequality for rural Nigeria was 0.4149; with NC being the highest (0.4438) and NW the lowest (0.3456). Also, inequality was higher within male-headed households (0.4094), non-farming households (0.4195) than female-headed (0.4082) and farming households (0.4002) respectively. Inequality values of households without social capital (0.4206) and without credit (0.4174) were higher than those with social capital (0.4090) and credit (0.4005). However, inequality was higher within households with access to electricity (0.4228) than those without (0.4071). The result reveals that with respect to household socio-economic characteristics inequality was highest in NC but highest in SE with respect to household assets. However, in both socio-economic and capital asset decomposition, SW had the lowest level of inequality. The Shapley decomposition shows that the major determinants of rural inequality are household size, gender, primary occupation, membership of local institution and geopolitical zone of residence. Among the GPZs, the NW had the highest contribution (3.9 per cent) to inequality than all other zones while SE had the least (0.4 per cent) relative to the SS. The study suggests that poverty reducing policy should be directed towards equalising of mean income across all the geopolitical zones.