Though poverty is said to result from many causes, poverty is primarily a function of entrenched social and economic inequality at both national and international levels (Oxfam Community Aid Abroad, 1992). At the international level, such inequality is manifested in the areas of trading and financial system where developed countries which are the minority in the world economy enjoy affluent lifestyle at the expense of developing countries which constitute the majority. This view is corroborated by that of Central Bank of Nigeria (1998) which said that poverty results from the international economic system’s interdependency relationship where a set of developed countries gains an economic advantage over another set of countries (developing countries) for a given situation. The CBN continued that developing countries’ indebtedness, payment of increasing prices for imported inputs from developed countries as against their relative low export prices perpetuate international inequality which leads to growing number of poor people in developing countries.
Jhingan (2002), Ajakaiye and Adeyeye (2001), World Bank and International Monetary Fund (1999) identified slow economic growth as a major cause of poverty in developing countries especially for countries like India, Bangladesh and much of Africa which are characterized as being in massive poverty. That the slow growth rates witnessed in developing countries result from adverse changes in terms of trade, changes in world demand for exports as well as the effects of changes in global interest rates on developing countries’ external debt. The World Bank and IMF also observed that in some African countries where economic growth rates have exceeded population growth rates, poverty persisted because of uneven distribution of the benefits of growth and poor governance which diminishes growth’s potential impact on poverty. Hence low productivity which is caused by slow economic growth rate leads to poverty as the consuming unit becomes incapable of earning an adequate income that will enable it maintain decent living standards (Central Bank of Nigeria and World Bank, 1999).
In many countries of the world, macroeconomic disequilibrium caused by balance of payments deficits, poor fiscal management etc, have made it necessary for them to embark on major policy reforms since these conditions on their own would still produce poverty. These reforms have led to monetary and fiscal policy measures that have negatively impacted on cost and access to credit by the poor entrenchment, high cost of domestic production and decline in capacity utilization all of which have worsened poverty situation (Ajakaiye and Adeyeye 2001). Anyanwu and Nsoro (2002) said that policies like privatization commercialization have not only led to greater inequality but denied majority of Africans access to basic necessities of life such as healthcare, potable water and sanitation thereby making them poorer.
In addition, adverse impact of certain economic policies has also brought about the increases in developing countries’ poverty levels. Rural areas have been neglected and marginalized for decades through economic policies which have continued to favour the urban elites. In Nigeria, economic management policies have led to structural shifts that impacted negatively on economic activities embarked upon by the majority thereby causing poverty. Such shift has led to undue concentration on crude oil to the neglect of agricultural which was the main employer of labour. This has brought about untold hardship and swelled the number of poor in Nigeria (CBN and World Bank 1999; CBN 1998; Deng 1994; Ferroni and Kanbur 1990).
Imperfections in the free markets of African countries due to liberalization have led to increasing poverty and its attendant feeling of hopelessness. In the areas where ordinary Africans used to earn average income that guaranteed decent living standard, liberalization has made it difficult foe even higher education graduates to be gainfully employed. Therefore, liberalization is said to have sunk many developing countries into more problems of debt, poverty, unemployment, exploitation and political upheavals (Anyanwu and Nsoro 2002). The imperfections in the markets thus skew income distribution structure in favour of some classes in the society thereby rendering the less favoured class poor, Central Bank of Nigeria and World Bank (1999).
A country whose population growth rate is faster than the Gross Domestic Product growth rate is likely to witness an increase in its poverty level especially if it is characterized by subsistence living conditions. This is because whatever is obtained is consumed as current income is lower than current consumption. In the words of Filipov (n.d.), many developing countries are poor because their rapid population growth is associated with manual subsistence farming, infertile land as well as lack of economic resources (credit) and technology to boost productivity.
Environmental degradation caused by misuse or overuse of land resources also lead to poverty. This is because environmental degradation results to deforestation, desert encroachment, blight and oil spillage all of which are destructive to endowed land resources and this does not only raise the number of those poor but also deepens the incidence of poverty. Such environmental problems have brought about shortage of food, clean water, and raw materials for shelter and thus aggravated poverty in Ethiopia, Sudan and Somalia (Filipov N.D.; CBN and World Bank 1999).
Inadequate or even absence of social services like good education and good health facilities also cause poverty. Governments of developing countries find it difficult to provide for good public schools especially in rural areas without which most people cannot find any meaningful income-generating work. Even for those who manage to acquire some form of education, the availability of only few employment opportunities in developing countries only exacerbate unemployment and poverty as high unemployment leads to high level of poverty (Filipov n.d.).
Central Bank of Nigeria (1998) and Odusola (1997) summarized the causes of poverty to include:
Inadequate access to income earning and productive activities like land, capital as well as necessities of life such as shelter, health and safe water; inadequate participation in the political process and absence of the poor’s influence on the potential life of their societies; inadequate or near absence of developmental efforts in the areas inhabited by the poor in preference to urban and high potential areas; inadequate access to markets for goods and services of the poor in rural areas due to poor road network; and the effects of external economic and financial factors over which governments of developing countries such as those in Africa have no control.