Conditional cash transfer as motor park economics

A recent report that the Federal government has approached the World Bank for a fresh loan of $400m for a conditional cash transfer for supposedly 15 million households is raising serious concerns among many Nigerians. The new $400m loan will bring to $1.2bn the amount that the Federal Government is borrowing from the World Bank for its cash transfer programme aimed at cushioning the harsh impact of removing fuel subsidies and floating the Naira, having earlier secured a loan of $800m for the same purpose. The government claims that the Conditional Cash Transfer scheme, part of its National Social Investment Programme, will “transform the lives of millions of Nigerians living in extreme poverty, upgrade their standards of living and improve the economy”. The Government said it would commence the payment of N25, 000 monthly to the said 15 million households for three months, from October to December 2023. It further claims that the scheme, now rechristened “the Renewed Hope Conditional Cash Transfer for 15 million households”, will get to 62 million Nigerians.

There are several issues raised by the scheme – from its design to the likelihood of its effective implementation down to its broader implications for the Nigerian economy. Some of the areas of concern include:

One, is the scheme, as currently designed, capable of achieving the objectives attributed to it? It should be recalled that the government claims that under the ‘Renewed Hope Conditional Cash Transfer for 15 million households’ the sum of N25, 000 would be transferred to the beneficiaries on a monthly basis for three months, which amounts to N75, 000 for each of the beneficiaries. The Minister of Humanitarian Affairs Betta Edu was quoted by The Punch of 21 October 2023 as saying “the conditional cash transfer was a proven way to alleviate poverty, as it would give households the financial support to start micro and small enterprises, provide basic health care and food, keep their children in school and attend to the immediate needs of the households.” A cynic might justifiably ask: Did the Buhari government not tell us the same thing, in even more elegant language? For instance then Vice President Professor Yemi Osinbajo was quoted in January 2021, nearly three years ago, as declaring in the following words, with respect to the Buhari government’s version of the scheme: “Following the successful activation of the Economic Sustainability Plan’s (ESP) Cash Transfer scheme aimed at delivering financial support to at least 1 million urban-based households using technology, the Buhari administration’s vision of reducing extreme poverty by lifting at least 20 million Nigerians out of poverty in the next two years is now within reach.” Despite the scheme, figures from the Nigerian Bureau of Statistics showed that the number of people living in multidimensional poverty had ballooned to 133 million by 2022. In essence, even if there is any proven impact assessment of the previous programmes which suggests the need for its continuation, the fact that more Nigerians have fallen into the multidimensional poverty bracket despite the programme, would negate the conclusion of any of such reports – if they exist.

Two, it is important to underline that the scheme promises more than it can deliver. The scheme, a mere N25,000 Naira per month over three months, does not just promise to lift people out of poverty but also that it would give the beneficiaries “the financial support to start micro and small enterprises, provide basic health care and food, keep their children in school and attend to the immediate needs of the households.” Haba, Minister! In addition to this unrealistic objective, the scheme does not even get to up to half of those which the government’s own figures describe as being in multidimensional poverty. For instance while the NBS’ figures as published in November 2022 said 63% of Nigerians (or 133 million people) suffer from multidimensional poverty, the government claims that the 15 million household it is targeting covers 62 million Nigerians. This raises the question of what happens to the remaining 71 million Nigerians that were regarded as being in the multidimensional poverty bracket as at November 2022 – not to talk of the additional millions that must have slipped into that bracket since the removal of fuel subsidy and flotation of the Naira by the Tinubu government.

Three, there is equally a related question of what happens to the beneficiaries after the three months duration of the scheme have elapsed. Is the government suggesting that within three months it would have stabilized the economy enough that there would no longer be a need for this extra financial support or that the beneficiaries, from supposed savings from the cash transfers, would have been able to set up viable micro businesses that would sustain them? I feel that the conditional cash transfer scheme would actually increase rather than attenuate the misery of the recipients. For instance, let us assume that prior to the cash transfer the recipients were able to feed only once a day but that with the cash transfer, they would be able to eat twice a day or would start adding a piece of meat to their meals. My belief is that when the transfer is stopped and they have to revert to eating once a day or without meat, their sense of deprivation would actually increase and they would feel worse off than if they had not benefitted from any cash transfer at all. In essence, the conditional cash transfer is very unlikely to achieve its ascribed goal of alleviating poverty or even effectively cushioning the harsh effects of the current economic hardship exacerbated by the removal of fuel subsidy and flotation of the Naira.

Four, given the Nigerian factor and despite all the talks about improving the efficiency of delivery of the cash transfer and the debate about the authenticity or otherwise of the social cash register, chances are that many politicians and government agencies will see the huge sum borrowed for the scheme as just another opportunity for primitive accumulation. For many politicians, their ability to get their minions and constituents as beneficiaries of the scheme will count as part of their achievements. This means that administrators of this fund are likely to be an important locus of the struggle for state capture by politicians and other people of influence in the country.

Five, following from the above, is a question of the economic logic of borrowing for consumption. It is trite that when we borrow for consumption rather than for productive ventures, we will struggle to find means of repayment. I feel it is right for the government to continue the conversation started under the Buhari government on how to reduce the number of people in the extreme poverty bracket. I feel however that a better option is to start developing a social security programme especially given the weakening of our extended family system that in the past performed that function. The government can decide to start this with a known demographic (say people caring for the aged or terminally sick individuals who have no relatives to care for them) and then gradually add more demographics as it learns from practices and mistakes. But this should not be funded from borrowed funds.

Borrowing $1.2bn to fund the so-called cash transfer is, in my opinion, money just flushed down the drain. The money would have been better utilized if it is used to train, support and mentor about 100 young people from each of the 36 states of the federation and the Federal Capital, with each getting about N2m to help them take off effectively. Even if only 50% of beneficiaries succeed and go on to employ other staff, it would still be considered a success. It is certainly easier to monitor 100 beneficiaries of a scheme than to search for 15 million (mythical?) households that the government claims will benefit from its cash transfer scheme.

Six, is that the Conditional Cash Transfer scheme seems to be an opportunity for the Tinubu government to uncritically continue with the brand of economics practised by the Buhari government which was hinged on binging on debt and ingratiating itself to the Bretton Woods institutions (the IMF and the World Bank). For instance, the World Bank is Nigeria’s biggest multilateral creditor, with the country owing about $14.51bn as of June 30, 2023. The Debt Management Office recently said the country’s total public debt stood at N87.38tn at the end of the second quarter of this year, representing an increase of 75.29 per cent or N37.53tn compared to N49.85tn recorded at the end of March 2023. A major issue with this huge accumulation of debt is its sustainability and the country’s ability to repay. In its 2022 Debt Sustainability Analysis Report, the Debt Management Office (DMO) warned that the Federal Government’s projected revenue of N10tn for 2023 could not support fresh borrowings. Despite this warning, the Tinubu government seems intent on continuing with the Buhari government’s debt binge.

My feeling therefore is that the logic used to justify the conditional cash transfer scheme is at best derived from motor park economics.

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Jideofor Adibe is Professor of Political Science and International Relations at Nasarawa State

University, Keffi and Extraordinary Professor of Government Studies at North Western

University, Mafikeng South Africa. He is also the founder of Adonis & Abbey Publishers (www.adonis-abbey.com) and Publisher of the online newspaper, The News Chronicle (www.thenews-chronicle.com). He can be reached on 0705 807 8841 (Text or WhatsApp only).