Fried Ambition

Poverty reduction will require something bigger than small grants

The First Lady of Nigeria, Senator Oluremi Tinubu, has drawn criticism for some of her recent remarks regarding poverty and how to empower people. The underlying theme of her remarks was that the government she represents is doing its best to address poverty in Nigeria with grants to start microbusinesses like selling Akara. The comments have spawned many viral Akara-themed videos, with the satirical implications that the wife of the president has no better dreams for Nigerians than being a roadside trader.

The attempts to defend the First Lady’s comments by appeals to the dignity of small traders severely miss the point. There is nothing petty or undignifying about selling Akara, or running any microbusiness. Some of the criticisms were also wrong on substance. The truth is that it would not have mattered if the First Lady had referenced POS machines, mobile phones, or computers instead of Akara. What critics are right about is the ambition. The fundamental question at the heart of the issue is about what works for poverty reduction. And while that question might still be unsettled, what is clear is these kinds of interventions have not proven to work in reducing poverty.

The Pritchett Test

In a recent Voxdev Talks podcast episode, the development economist fiercely criticised the $1 a day measure of poverty that The World Bank has been using since 1990. His main critique boils down to this quote:

This poverty line is crazy, it's just crazy too low. Yes, everyone below this line is poor, but billions of people with higher incomes than this line are also poor by perfectly legitimate and reasonable ways.

He argued for a higher measure of poverty that excludes people who cannot be considered poor by any “reasonable standard”. But in typical Pritchett fashion, there was something he said, almost like a throwaway line, that struck a deep nerve with me. He described the way development institutions currently measure and conceive poverty as “inclusion in consumption, rather than inclusion in productivity”.

Inclusion in consumption means helping people acquire enough income to meet immediate needs, through cash transfers, food assistance, subsidies or small grants. These interventions can genuinely reduce suffering. A woman who receives working capital and earns a little more from selling akara may be better off than she was before.

Inclusion in productivity asks a different question — whether people are being incorporated into activities capable of generating sustained increases in output per worker, earnings and living standards — which depends on access to better capital, technology, infrastructure, skills and larger markets.

The distinction matters because an intervention can be presented as “enterprise development” while functioning mainly as consumption support. Giving someone a small amount of capital to enter a low-productivity occupation may simply let her earn a small daily income close to subsistence, rather than put her on a path to an expanding business. That is my main concern with the akara model of empowerment.

Microbusinesses Everywhere

Akara sellers, roasted-corn vendors, vegetable traders and producers of similar household goods are not missing from the Nigerian economy. They are ubiquitous, which should make us question whether financing more people to enter these sectors creates meaningful new economic activity.

These occupations are widespread because they require little capital, use commonly available techniques and have low barriers to entry. But low barriers to entry have a consequence. When many sellers offer nearly identical products to customers with limited purchasing power, competition pushes returns down. When one trader appears to earn more, new sellers enter, until the expected return falls to what workers could earn in their next-best occupation, which in an economy with scarce alternative employment may itself be close to a survival wage.

The trader may end each day with a cash surplus after paying for beans, oil and fuel. But that surplus still has to compensate her for her own labour, long hours, capital and risk. What looks like business profit may be little more than a precarious self-paid wage.

There is also a fallacy of composition at work in many microenterprise programmes. It may be true that one woman can improve her income by entering a particular market. It does not follow that thousands of women can improve their incomes when they are all financed to enter similar markets.

A programme evaluation that studies only the recipient may find that she earns more than before and call the intervention a success, missing the real question of whether total output increased, or an existing pool of demand was simply divided among more sellers. When thousands of people are directed towards the same saturated activities, empowerment may amount to redistributing poverty within the informal economy.

Activity is not productivity

Some have defended this idea by arguing that Nigerians should be engaged in some form of enterprise rather than remain idle. That sentiment is understandable, but it confuses economic activity with productivity, and productivity is what drives economic development. A person can work twelve hours a day and still produce very little value - statistically employed, but severely underemployed.

This is one of the oldest insights in development economics. Earlier economists called it disguised unemployment, or surplus labour, describing people who are working, but where adding another worker or trader to a saturated activity produces only a small increase in total output.

Financing another person to enter petty trade may therefore change the visible form of unemployment without solving the underlying problem. She moves from having no recognised occupation to operating a microenterprise, but her productivity and income remain extremely low.

Structural transformation works differently

The classic account of development traces how labour moves from low-productivity activities into more productive ones. Firms that expand combine workers with better capital, technology and organisation, produce at sufficient scale to invest and specialise, and pay higher wages. This is not limited to manufacturing. Commercial agriculture, food processing, logistics, construction and modern retail all exhibit this pattern. The essential feature is sustained growth in output per worker.

A policy that finances more entrants into already crowded petty-trading sectors moves in the opposite direction, accommodating people within the low-productivity economy and financing additional entry into precisely the kind of work too many Nigerians are already trapped in.

None of this is a commentary on the intelligence, dignity or industriousness of women who fry akara or sell vegetables. Their low earnings are not evidence of a personal failure to work hard. Productivity is not principally a measure of individual virtue. It depends on the economic system within which people work: access to electricity, transport, storage, credit, secure property rights and customers with sufficient purchasing power.

Providing a person with a small amount of working capital while these conditions remain absent will typically produce only a limited increase in output. A food vendor without refrigeration cannot reduce spoilage or expand production, no matter how much capital she receives. Productive capacity is systemic, and development cannot be reduced to distributing small sums to isolated individuals.

The irony is that roadside traders are often encouraged by one arm of government and harassed by another, receiving grants for activities the state has never provided secure space or infrastructure for. Government finances informal survival while failing to build the institutional environment that would let entrepreneurs create something more productive.

Social assistance is not the same as development

There is nevertheless a case for supporting poor households. A ₦50,000 grant may help a woman replenish her stock, avoid an expensive informal loan or maintain household consumption during a severe cost-of-living crisis, and that assistance should not be dismissed.

But the programme should be described honestly. If its main effect is to help recipients survive or consume slightly more, it is a social-protection intervention, and there is nothing wrong with that. The problem begins when limited livelihood support is presented as economic transformation.

Calling every grant “empowerment” obscures the difference between making poverty more bearable and enabling people to escape it. It lets the state claim developmental success because a recipient has crossed a very low income threshold, even though she remains in insecure work with no clear path to much higher productivity. A person can move from extreme destitution into precarious self-employment and still remain poor in every meaningful sense.

The appropriate standard is whether policy is building an economy in which ordinary Nigerians can participate in productive systems capable of supporting secure and substantially higher living standards.

What inclusion in productivity would require

A serious productive inclusion agenda would look very different. It would begin with reliable electricity, transport, water and secure commercial spaces, improve access to machinery and supply chains, and support firms capable of expanding and adopting better technologies.

It would also distinguish between subsistence enterprises and businesses with genuine potential for productivity growth, since not every microenterprise is destined to remain small. Some have specialised skills, differentiated products and access to growing markets, but supporting them means addressing real constraints to expansion, not distributing identical sums to politically visible beneficiaries and calling the result entrepreneurship.

For many subsistence traders, a better long-term intervention would be access to wage employment, vocational training, affordable transport, childcare or social insurance, rather than another grant to remain in petty trade. The goal should be an economy where people have a range of productive opportunities, including stable jobs in firms that can grow.

The danger of lowering ambition

Small empowerment grants are politically attractive. They are visible, easily announced and divisible among thousands of named beneficiaries, producing ceremonies and photographs. Building productive capacity is harder. It requires patient work on electricity, infrastructure, education, macroeconomic stability and firm capabilities, results that cannot always be displayed in a ceremony. The political danger is that governments substitute the first type of activity for the second.

As society gradually lowers its expectations, surviving through roadside trade becomes “empowerment.” A tiny grant becomes “capital.” A precarious daily income becomes “entrepreneurship,” and the absence of productive employment gets reinterpreted as evidence that citizens simply need to be more enterprising. The survival strategies generated by economic failure are then presented as the solution to economic failure.

Nigeria should certainly respect and support those who earn honest livelihoods from akara, kuli-kuli, roasted corn and petty trading. But respect for their work does not require pretending that mass entry into low-margin informal activities constitutes a development strategy.

The real test of economic inclusion is whether people are incorporated into productive systems that can continually raise what their labour produces and what their households can afford. Poverty reduction becomes development only when citizens end up producing much more. Consuming a larger share of what the economy already makes is not enough.