Why N5,000 conditional cash transfer is urgently necessary in Nigeria by Kikiowo Ileowo

“It is quite true that man lives by bread alone — when there is no bread. But what happens to man’s desires when there is plenty of bread and when his belly is chronically filled?” (Maslow, 1943, p. 375).

So many pundits have advocated reasons why cash transfer to Nigeria’s desperately poor is unnecessary and counter-productive, however, they often fail to discuss the inherent benefits of this widely accepted social scheme. Many who are against this scheme are themselves rich, “well to do”, and can to a large extent, provide their psychological and safety needs for survival according to Maxlow’s law on hierarchy of needs five-stage model. What the pundits claim is that any type of conditional cash transfer will ultimately make the people lazy to work and subsequently poorer. They forget that the amount involved is too insignificant for anyone to PERMANENTLY rely on for survival.

I won’t bore you with regurgitated statistics, as we have all heard, as many as 112.47 million Nigerians live below the poverty line according to 2010 figures of the Nigerian Bureau of Statistics, 38.7 million of them are DESPERATELY poor.

Depending on whose statistics you believe, the World Bank claims 53.2 million Nigerians live in extreme poverty. In fact, of the one billion poor people that live in poverty around the world, 7% of them reside in Nigeria.

Nigeria is one of the top five countries with the largest number of poor, ranking third, with China and India, ranking second and first respectively.

Majority of Nigeria’s desperately poor never had the opportunity to attend a school, nor receive some form of education, whether formal or informal. We must understand that without education/skills to secure some form of income, it is nearly impossible for anyone to achieve the first stage of Physiological needs on Maxlow’s hierarchy of needs. While building desperately needed infrastructure is sacrosanct, we must not forget to take care of the suffering poor, who mostly dwell in rural areas and are UNBANKED.

According to one of John Maynard Kaynes theory, government spending can be used to increase aggregate demand, thus increasing economic activity, reducing unemployment and ultimately reducing poverty to the barest minimum. Conditional cash transfer is not new to the field of economics. In Nigeria, our psyche has been so bastardized, we feel we don’t deserve anything from the government, compared to a country like Finland that is proposing paying each citizens whether rich or poor, at least 800 Euros tax free every month. Polls conducted indicate a simple majority of citizens in Finland support the move, even though the country is heavily indebted.

Still on the necessity of the conditional cash transfer programme, a popular anonymous phrase on placards during the Occupy Nigeria protests in 2012, states “One day, the poor will have nothing left to eat but the rich.” If you think, conditional cash transfers are unnecessary then think again. There is a surging army of unemployed who are bursting at the very fabric of our societal seams.

The Buhari/Osinbajo administration rode to power on several promises. Chief amongst them being the conditional cash transfer of N5,000 monthly to 25 million desperately poor Nigerians, majority of whom cannot afford to live on a dollar a day. These are individuals who live on two dollar a week. i.e. About N1,000 ($8) monthly.

Hello, step back your thought process a bit, you are already thinking, ‘it’s impossible’; ‘people don’t live like that’, ‘blah blah blah’. But you will be surprised at the level of poverty in this land when you hear and witness the suffering in the lives of some, especially in rural areas.

During one of my numerous travels, I met an elderly woman who visited the local market, bought palm oil worth N20, Vegetable N50, One Maggi seasoning cube for N5 and some other ingredient I can’t recall, but the total amount of money she spent was N120 ie less than a dollar. Now, imagine what N5,000 would do in the life of such an individual. Most of those the conditional cash transfer policy will positively affect are those who find themselves in such circumstance. They did not purpose to live a life of penury, but opportunities for income are just not available in a country where graduate unemployment is 60% and around 70% in the wider population.

The Cost Of Nigeria’s Conditional Cash Transfer

I will focus here on only the financial cost

A simple mathematical analysis shows Nigeria can afford this project.

N5,000 multiplied by 25,000,000 is N125,000,000,000 monthly.

N125,000,000,000 X 12 months is N1,500,000,000,000 annually.

In simple terms, it will cost Nigeria 125billion ($500million) naira monthly and 1.5trillion ($6billion) naira annually to finance the conditional cash transfer of N5,000 ($20) monthly to 25million desperately poor citizens.

Source Of Financing

There are several ways Nigeria can source for these funds, but I will mention a few.

Keep in mind; Nigeria will reach at least, 700,000 people in each of the 36 states and federal capital territory in the country. Imagine almost half (41%) of Bayelsa State population receiving bailout from FG. This alone will set the Buhari/Oshinbajo administration on another pedestal.

In the 1930s, great economist, John Maynard Keynes, suggested one of the most practical ways of getting the economy such as ours out of downturn. He encouraged increase in government spending to improve demand and the gross domestic product. The 25 million Nigerians that will eventually get this cash transfer won’t SAVE it in the bank (most are unbanked anyway). They will SPEND it, thereby creating a new circle of economic empowerment and opportunities.

There are several ways of financing this type of social project, and for once, let us take our mind off the World Bank.
Financing a sustainable cash transfer policy can be achieved by tweaking the system, redistributing wealth from the rich and giving to the poor. The present administration can borrow a leaf from the UK, a country that has learnt to tax its citizens for the provisions of essential services. The country practice what economists called a progressives tax system. In other words, the higher your income, the higher your taxes. From taxing car users, alone, the United Kingdom generates 7% of its total revenue, using same to maintain critical infrastructure and provide other essential services.
The Buhari/Osinbajo government can also creatively look for a way to shove up our revenue base without straining our present source of revenue generation.

Also, the government can withdraw its subsidies on petrol (after proper consultations and ability to meet local demand of daily Premium Motor Spirit, PMS, need). Nigeria’s subsidy scheme on petroleum product is gulping almost the same projected amount needed for this conditional cash transfer programme. When Nigeria starts refining its crude, the amount per litre of PMS will not be up to this present subsidized N87 per litre.

Nigeria Not Alone

Countries like India, Brazil and Pakistan have some form of conditional cash transfer programme that is helping their poor citizens out of poverty. Injecting N125bn monthly into the hands of a spending population will in turn encourage economic growth. Small businesses like recharge card sales, barbing & hair dressing salon etc will be invested in by the beneficiaries to help generate sustainable income. This will in the long run REDUCE POVERTY.

I understand the pundit’s dislike for this idea, but they must realize it is not a perpetual solution. Having a Ten Years Programme of N15trn in conditional cash transfers will change our poverty dynamics and statistics by 2026. By 2027, Nigeria will be migrating from cash transfers to other forms of social security.

As the Buhari administration presents the 2016 budget, it is sacrosanct that a 10 year spending expenditure/income framework should be developed, with N125bn set aside for the conditional cash transfer on annual basis till 2026.

Kikiowo Ileowo is the Editor of The Paradigm, Chief Strategist at Revamp Media and tweets at www.twitter.com/ileowokikiowo