Social assistance benefits the poor

By Rafiq Raji, PhD

Published by BusinessDay Nigeria Newspaper on 12 Jan 2016. See link viz. http://businessdayonline.com/2016/01/social-assistance-benefits-the-poor/

Social safety nets help reduce the number of people in poverty by 8 percent on average, a World Bank study shows. They involve the provision of regular and predictable support to poor and vulnerable people. Coverage and adequacy of benefits are crucial to success. For instance, Kenya’s social safety nets, which cover 20 percent of its population, have been found to reduce the poverty headcount by 1.7 percent. In Nigeria and Ghana where coverage is lower at 1-6 percent, the reduction rate is 0.1 percent. More positive outcomes are recorded when more of the money spent by the poor on basic needs are covered by welfare. Less than 2 percent of Nigeria’s population currently benefit from some form of government-sponsored assistance. In South Africa, such assistance is accessible and being provided to more than half of the population. Increasing agitations by the citizenry in Nigeria and across Africa have roots in poverty. There is thus an urgent necessity for African governments to ramp up safety nets targeted at the poorest.

Nigeria ranks among the bottom five of countries in Sub-Saharan Africa that provide some form of social assistance to its citizens. At 0.3 percent of the size of its economy in 2014, it falls short of the average 1.5-1.9 percent of gross domestic product (GDP) in resources devoted by poor and rich countries to social safety nets (SSNs). In his 2016 budget speech, Nigeria’s President Buhari announced 500 billion naira ($2.5 billion) would be spent on social interventions. Nigerian authorities have an opportunity to divert monies hitherto wasted on fuel subsidies into such initiatives. Studies show the rich benefit more from fuel subsidies than the poor. Social assistance would be a better use of scarce resources. If well communicated and implemented, the move could enjoy popular support. Labour unions – which oppose the removal of fuel subsidies – might also be better persuaded. A key part of the initiative is the payment of a monthly stipend of 5,000 naira ($25) to the country’s poorest, subject to conditions of immunization and school enrolment; a conditional cash transfer (CCT). Prior to this major proposal by the central government, the northwestern state of Kano already operated a similar initiative for girls’ education. As at 2014, it covered more than 16,000 girls, based on World Bank data.

There is a rich literature that supports the effectiveness of CCTs in alleviating poverty. The largest CCT programme by scale and perhaps the most successful is Brazil’s Bolsa Familia with 49 million beneficiaries (24% of the population). However, CCTs are just one of a bouquet of SSNs. African countries feature more prominently in the unconditional cash transfers (UCTs) category. UCTs do not require beneficiaries to fulfill conditions to remain eligible for cash distributions. For instance, South Africa provides child support to 11 million of its citizens. 5 million Ghanaians also get free uniforms and books, an unconditional in-kind transfer (UIT). The proposed Nigerian social interventions would include a homegrown school-feeding programme, grants for university graduates after their compulsory national youth service, and micro credit loans for eligible citizens. Nigerian authorities hope to create at least 1 million jobs – less than 1% of its population – from these initiatives in 2016. This would need to be scaled up rapidly to have the desired impact. However, even when there is scale, CCTs could be ineffective if they don’t cover a significant portion of the poor’s consumption basket. According to the World Bank, most CCTs cover just 10% of the consumption of the average poor person, inadequate by most measures. Half of the minimum wage ($90) might be a better benchmark. At a time of great financial strain for Nigerian authorities, a $25 monthly stipend is a good first step. Policy must envisage a need for this to be increased in the future.

For CCTs to succeed, monitoring and punishment for noncompliance with conditions are crucial. Effective monitoring depends on robust social and beneficiary registries. This is a potential bottleneck in the Nigerian case. Without a strong national identity card database, authorities are likely to be accused of dishing out patronage if the eligibility criteria are not rule-based. A fairer and less troublesome approach might be for authorities to only select those who already have national identity cards. As Nigerian authorities continue to grapple with terrorism and other security threats, an identity card requirement for potential beneficiaries would enable it document its poorest citizens who are the most vulnerable to being lured into terrorist acts. Coordination is also very important. In most jurisdictions, a federal ministry is assigned responsibility for managing SSNs. In the Nigerian case, the ministry of labour and employment might be more appropriate. In some countries, a coordinating commission under the presidency is set up. Either model would do well in the Nigerian context. For sustainability, institutionalization is key. Thus, the draft National Social Protection Policy Framework needs to be passed into law with dispatch as a matter of national priority.

Clearly, the planned social interventions by the Nigerian government would require a lot of technical expertise. Tremendous care would be needed to ensure the social assistance initiatives are designed and implemented properly. In doing this, the very complex nature of Nigeria’s polity must be taken into consideration. For instance, eligibility and selection criteria that are not transparent and rule-based could generate ethnic and religious bias perceptions. Rigorous targeting criteria and processes would be crucial to success. Corruption – ghost beneficiaries or outright stealing – and fiscal deterioration are also potential drawbacks. A multilateral institution with extensive experience and a robust governance culture might thus be in the best position to design and manage the initial phases of the planned social interventions. Sources at the World Bank confirm they are working with Nigerian authorities on the design of a new national social safety nets programme that includes targeted cash transfers to the poor. They also confirm a request for financing of the programme has been made by the Nigerian government.

Also published on my company’s website on 13 Jan 2016. See link viz. http://macroafricaintelligence.com/2016/01/13/thematic-social-assistance-benefits-the-poor/ 

 

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