COLUMNS - 07 AUG 2015

Free Money for the Poor

Free Money for the Poor
Primary School pupils

As President Buhari approaches his first 100 days in office, many are closely watching to see whether he will live up to his manifesto. Which grand plans will be fulfilled, and which will be jettisoned like so many other campaign promises? Thanks to Vice-President Osinbajo, we now know at leads one item in the former category — the creation of a social welfare program that will give the poorest Nigerians ₦5000 each month upon demonstration of children's enrolment in school and evidence of immunisation. Beneficiaries will be those who earn ₦200 or less a day.

How much does ₦5,000 cost? 

According to the VP, the proposed programme will benefit 25 million Nigerians, but is likely to be phased in with batches of 5 million people each year. In the first year, this will amount to ₦300 billion (₦5000 x 5 million people x 12 months). Assuming that beneficiaries will receive money for more than one years, add 5 million more beneficiaries in year 2 (plus the original 5 million people) and you get ₦600 billion.

By this estimate, the programme will cost ₦900 billion in year 3, ₦1.2 trillion in year 4, and a total of ₦1.5 trillion in year 5. This means that over the course of five years, ₦4.5 trillion will be spent on this programme. At this point, all 25 million targeted beneficiaries will have been enrolled in the programme. If the scheme is continued after that, it will cost ₦1.5 trillion each subsequent year (assuming the amount isn’t increased to adjust for inflation, and no new beneficiaries are added). 

To start with, let’s focus on the ₦300 billion to be spent in the first year (assuming zero administrative costs — an unrealistic assumption). To put this in perspective, ₦300 billion is:

• About 0.37 percent of Nigeria’s 2013 GDP of ₦80.3 trillion.
• Nearly as large as the ₦392 billion allocated to Education in the 2015 budget
• Almost half of the ₦701 billion earmarked for capital expenditure this year
• Twice the amount allocated to the National Assembly each year
• Roughly ₦30 billion more than the SURE-P budget for 2014 

With these costs in mind, three issues immediately come up: Can ₦5000 change anyone’s life? Won’t the funds just be siphoned away? And wouldn’t this money be better spent on something else? Let’s start with the first one.

Little Drops of Cash

Conditional Cash Transfers (CCTs) work. They have a proven track record of helping to alleviate poverty, even if the numbers are small. This is because, firstly they provide a stable income for beneficiaries. One of the main problems that poor households face isn’t just a low level of income but the volatility of income. The flow of money is often unpredictable making it difficult to plan, save, or cope when an unexpected event happens. Knowing that your family is going to receive a steady ₦5000 a month introduces a new layer of stability that makes it easier to deal with shocks such as an illness in the family, to plan for the future, and to cultivate some long-term optimistic thinking (such as investing in or expanding a small business). 

Another benefit comes from the conditions attached to the cash transfers. The scheme proposed by Osinbajo includes conditions that the families will have to get their children immunised and enrol them in school. This could help to reduce the high rates of illiteracy and child mortality in the county. They are investments in human capital that ultimately improve society in the long run. 

Handouts for the Rich?

Now on to the second issue, the problem of funds being siphoned way. It stands to reason that, in a country like Nigeria, free money tends to be stolen. The image that readily comes to mind is some government official registering 10,000 fake beneficiaries and carting away ₦50 million every month. Or not-so-poor people getting enrolled in the programme. The truth is, conditional cash transfers are not any more prone to corruption than any other types of poverty reduction programme. If anything, as there are conditions attached, the households in question have to be targeted and monitored, meaning that it will be easy to detect if an enrolled beneficiary is not actually poor. 

Even when the monitoring isn't done very effectively, the payment amount is so low that, to make any substantial money by embezzling the funds, a person would need to falsify information for a large number of people month after month and still avoid detection. The effort required may just be enough of a deterrent. With CCTs, it's very likely that the intended recipients will actually receive the money. If there is to be any embezzlement, it’s more likely to happen with the administrative funds. And thanks to the nature of CCT programs, administrative costs are typically low (hence the earlier zero-cost assumption).   

Better Options

While on the topic of theft, let’s address the third question. Couldn’t the money be better spent on something else, say, power which the country is desperately in need of? Yes it could. But in reality, much larger amounts have been spent on the power sector without much to show for it. The Obasanjo administration allegedly spent $16 billion (about ₦3 trillion at the current exchange rate), President Yar'Adua authorised over $2 billion in spending on the same sector when he was in office, and by February this year, the federal, state and local governments had collectively spent $8.26 billion on the National Integrated Power Project (NIPP). Few would say that these amounts have done much to improve the generation and distribution of electricity in the country over the last 15 years. So, given the option of spending money on a programme that could actually yield results by changing the lives of up to 25 million Nigerians within a short period and without much misappropriation, it stands to reason that we could find some space in the budget for CCTs.

NAPEP 2.0 

All this talk of ₦5000, immunisations, and school enrolment may be giving you a terrible sense of déjà vu. Rightly so. A very short trip down memory lane will lead us directly to President Obasanjo's brainchild, the National Poverty Eradication Programme (NAPEP), whose lasting impression is the image of the motorized tricycle, the Keke-NAPEP, barreling down Nigerian roads. Only 2 years ago, NAPEP announced a scaling up of its Care of the People (COPE) programme to reach over 10,000 households all over the country. Beneficiary households would receive a monthly stipend of ₦5,000 in exchange for keeping their children in school and using free basic health care services. The programme came to an abrupt end when the federal government decided to shut down NAPEP in April last year.

Perhaps Buhari’s programme is a way of rebooting COPE; but to be successful, it needs to avoid the amnesia that our country’s policy-makers suffer from all too often — he should make an effort to learn from the past. One of the biggest critiques of COPE was that the number of people covered was far too low. From 2007 to 2011, the programme only reached 22,000 households. Buhari's plan to target 25 million people is much more ambitious and could yield a definite impact if followed through. And this should mean that the programme is sustained for a longer period. Under COPE, the families received the transfers over a period of one year, and then were expected to be completely self-sufficient after that. Unsurprisingly, one year was simply not enough to eradicate decades of inter-generational poverty.

Another significant hurdle is that although CCTs can increase school enrolment and the use of health care facilities, there’s not much benefit in terms of actual improvement in learning and health if the services provided by the available schools and health care centres are of poor quality. A CCT programme like the one Osinbajo is proposing will only work if there is a comparable level of commitment to improving the quality of basic education and health care available to most of the poor population (particularly the rural poor). This points to a larger truth about CCTs — they are not a substitute for good governance. The Buhari administration will also need to make a real effort to address institutional and infrastructural deficiencies for there to be any hope of reaping the full poverty alleviating potential of CCTs.

Success isn’t a SURE thing 

And let’s not forget about President Goodluck Jonathan's Subsidy Re-investment Programme (SURE-P). One component of the programme was a group of social safety net schemes including the Graduate Internship Scheme, Community Services Women and Youth Employment (CSWYE), and the intervention on Maternal and Child Health (MCH). Of these projects, the MCH included a CCT that paid new mothers up to ₦5,000 in instalments after ensuring that they and their children receive a series of health care services. So far, it has been reported that 36,515 women have been enrolled, with 17,135 of them completing the programme and receiving the full payout. However, with the SURE-P budgetary allocation cut to ₦21 billion this year, this scheme is likely to go the same way as COPE. 

Part of the reason is that the available data is not enough to convince anyone of the success of the programme. It is not just enough to tell us how much money was given to people, we also need to know the answers to questions like: what percentage increases have been observed in learning, health, nutrition or business growth/expansion due to the programme? If the Buhari administration is to implement its own CCT programme, it will need to do so by designing it in collaboration with independent researchers who will track the programme throughout its existence and conduct a thorough impact evaluation to measure not just the level of delivery, but the net effects on people’s lives. This can only be achieved by credible and careful data collection and analysis. CCTs are only successful if they are studied.

Who hits the jackpot? 

The biggest beneficiary from the programme is likely to be the president, not the poor. In addition to evidence that CCTs pull people out of poverty, there is equally strong evidence that they give a nice boost to the incumbent during elections. For our new president, the math is simple: if the programme succeeds in putting money in the hands of 15 million households before the next election cycle, there will be at least 15 million people chanting “Sai Buhari!” come 2019.

 

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Ebehi Iyoha

Ebehi Iyoha

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