Tag: Fed Govt

It appears the Buhari APC federal government intends to do something, no matter how little, to provide some financial relief for some 25 million people considered to be the poorest of the poor in our country. Two weeks ago, the APC spokesman, Lai Mohammed, now the Federal Minister of Information, assured the nation that the APC would honour its electoral pledge to the nation and pay some 25 million people N5, 000.00 a month. This was in response to claims by the PDP opposition party that the APC had reneged on its electoral pledge to provide some financial relief to the poorest in our country.  Well, it is not yet official. The federal government has not yet confirmed that it would honour this pledge. We may have to wait for a while to confirm that it is committed to fulfilling this pledge. In any case, nothing can be done right now by the federal government about the pledge.  There is no provision for it in the current budget. It is also doubtful that it can be captured in budget 2016.  But there is no time limit for redeeming the pledge. It can be done later in the life of the current APC federal government when it finds it financially feasible. Right now, when the federal government is so badly pressed for funds, redeeming this electoral pledge cannot be its priority despite its mass and electoral appeal. Elections are not due for another four years.

The idea of providing some financial relief for the poorest in our country is commendable. It shows some compassion for the poor in our country who have wallowed for so long in abject poverty. We need to build a more compassionate society. Some might even consider the gesture too late and too little. For far too long, the existing vast income inequality has created social divisions and conflicts in our country. It erodes our moral values. It fuels crime in our cities, such as armed robberies, kidnappings, even religious insurgencies. Boko Haram thrives on the extreme and widespread poverty in the North East of Nigeria. In response to the challenge, the federal government has rightly introduced a sort of ‘Marshall Plan’ there to tackle the problem of poverty and end the insurgency there. If we fight poverty in the North Boko Haram will cease to have any appeal among the poor in the North.  Nigeria will be more peaceful and more prosperous.

But poverty in Nigeria, as in most underdeveloped countries, is really structural. It is man made. It does not exist because of lack of natural resources. It exists because of the colossal mismanagement of the national economy and the greed of the few who are in power and use that opportunity to enrich themselves. Recently, there have been shocking revelations about widespread corruption among some prominent politicians in our country. This is what creates mass poverty.  Less than one per cent of the population control over 70 per cent of total national financial assets. It is estimated that 70 per cent of our people are made to live on less than US$2 per day, defined by the UN as the minimum permissible. This means that more than 100 million Nigerians live below the poverty line. The N5, 000.00 that will be offered to the poorest is still very much below this threshold. It will not lift them out of poverty. It is only a palliative for a deep seated financial and economic maltase. We have to look more closely at the basic causes of poverty in our country. We can only tackle it effectively if we fully understand what is responsible for it.

Most poor Nigerians are poor because they are on the margins of the domestic economy. They neither have the education nor the skills to be fully integrated in a modern, competitive and productive economy. They live on the margins of the economy because they have no access to any kind of financial assistance from the state. Banks that are supposed to lend to the poor lend instead to the rich who, as we have seen in the recent banks’ disclosures on debtors, refuse to pay back the bank loans. In fact, the poor have a better record of repaying bank loans than the rich. Most of the bank loans taken by the rich are salted away to acquire choice properties abroad. It is invested abroad, not at home where jobs are badly needed. This is morally reprehensible. There can be no moral, even economic justification for this scandalous situation. Any nation that has so many of its citizens cut off so brutally from meaningful economic activities cannot optimize its economic growth. It cannot effectively fight poverty. Any responsible government must take prompt and adequate measures to redress this gross imbalance between the poor and the rich. It is in this light that we must view the apparent determination of the APC federal government to do something practical to alleviate the pitiable conditions of the poorest in our country. It is a right that the poor should demand from the government.

However, there are some practical difficulties that the financial authorities must consider in preparing for the implementation of the proposed N5,000.00 a month relief to the poorest. The programme is targeted at some 25 million poorest Nigerians who will get this relief. This translates to N1.5 trillion a year, or more than a third of the average annual N4 trillion budget of the federal government. When the existing fuel subsidy of over N500 billion is added to the proposed welfare relief fund the total subsidies involved is about N2 trillion, or half of the total annual federal budget. We must not forget that such a huge relief programme will create its own vast bureaucracy and additional costs.  It is doubtful that this is financially sustainable. Right now, due to the fall in oil prices, Nigeria has lost about 70 per cent of its total annual revenue.

Virtually all the governments of the federation, including the federal government, are running huge budget deficits to meet their financial obligations, including pensions and the salaries of workers. Where then will the funds for the proposed welfare programme come from? It cannot be met by additional borrowing. The Federal Government cannot continue to borrow indefinitely from the CBN. This will create an inflationary spiral that could damage and undermine the stability of public finance in Nigeria. Already the huge domestic debt of the governments of the federation is causing some concerns in the banking sector. Most of the banks cannot lend any longer because of the huge domestic debts. Subsidies are normally paid from budgetary surpluses, not from deficits which have to be paid back in due course of time. It is unlikely that Nigeria will have any budgetary surpluses in the short term to repay any budget deficits. Next year the budget will have to be reduced substantially. No welfare allowances can be paid to the poor, Even if there is a substantial reduction in the cost of governance, the savings will not be enough to pay out N1.5 trillion as welfare subsidy to the poorest.

But apart from these financial considerations, there will be political and administrative problems in the implementation of the programme too. Political squablling over the administration of the fund can undermine it. Who determines the 25 million poorest Nigerians being targeted in the programme? What are the criteria to be applied in identifying those who might qualify to receive the welfare benefit? Is the distribution going to be spatial or based on federal character? As most of the 25 million poorest Nigerians probably live in Northern Nigeria and should qualify for the largesse, will there not be some objections from other sections of the country. Will it be acceptable to other regions of Nigeria? There is already in existence a vast relief and rehabilitation programme funded by the federal government in the North East? Will this not lead to complaints from other regions of the country that the North is getting more than its fair share of our financial resources?

Given the huge size and population of the North special financial measures and investments are needed to enable it contribute more economically to the nation. The prevailing deep poverty there cannot be ignored. It is Nigeria’s Achilles heel. And there is also a special programme in the Delta region funded by the federal government. That is also justifiable in view of the ecological damage to the region from oil exploration. It is the major source of Nigeria’s oil revenue. It has to be taken care of to reduce social discontent and conflict in the region. But in view of the tribal structure of Nigerian politics a balance must be maintained between the North and South in the disbursement of this proposed welfare benefit. Otherwise, it will create political tension in the country.

There is yet another reason for expressing some reservations about the proposed welfare scheme. Similar programmes in the past have been high jerked by the political elite. Instead of the funds going to the poor for whom they are meant, they tend to end up in private pockets, with minor state and local government officials simply diverting such funds to their pockets. In public housing, houses developed for the poor are seized from them by the rich. If anyone has any serious doubts about this trend, they should be reminded that similar funds introduced by the states governments for poverty alleviation were diverted. Most of these funds never really got to the poor for whom they were meant. They ended up in the pockets of the officials managing the programme. Even pensioners are being deprived of their pensions by the greed of these petty and mean government officials who are supposed to manage the pensions. We also have the case of the fuel subsidy from which the rich have benefitted more than the poor. In the circumstances, there is no reason to believe that the programme can be more efficiently handled. It will be mired in massive corruption at both the federal and states levels. It will provide the rich with another opportunity to further enrich themselves at the expense of the poor.

So, what is the alternative to the proposed welfare programme that will achieve the objective of providing some relief for the poorest? It is the creation of jobs. And it is the state that can facilitate the creation of jobs by the private sector through the appropriate fiscal and financial incentives. The vast sum of N2 trillion being proposed for the programme can be more readily and efficiently used by investing more in the development of human capacity in Nigeria, still one of the lowest in the world. Most of the poor in Nigeria have little or no education. They cannot help themselves because of their lack of education and technical skills. There is a limit to what the state can do really to assist them. Since most of the poor are engaged in agriculture we must find a way of making agriculture more productive and financially rewarding. Even petty farmers can work their farms more profitably with the right technical support and other incentives. A good physical infrastructure will also make it easier for the poor farmers to earn more as they lose most of their produce due to poor roads and public transportation. As we have seen, when the structural adjustment programme was introduced in 1986 the farmers responded positively by increasing their farm output. The price of cocoa increased significantly and many farmers benefitted immensely from this development.

Another way of helping the poor is by increasing public spending on health and education, sectors that are of direct benefit to the poor. If we spend more in these social sectors more jobs will be created and more poor people will be empowered to make more contribution to the domestic economy. The economy will grow faster and the poverty level will be reduced thereby. All our African neighbours spend considerably more on improving their social sectors than Nigeria, which is far richer. In addition, the federal government can intervene directly in the improvement of physical infrastructure by making use of Nigeria’s vast and underutilized labour. The unemployed can be used to build roads and bridges, now falling apart in our country.

Instead of simply giving the poorest N5,000.00 naira monthly, a miserly amount that cannot even meet their basic needs, we will in effect achieve the same objective by investing more in the development of human capacity and skills of the poorest in Nigeria. Instead of waiting indefinitely for jobs that cannot be found, many young Nigerian University graduates are now self employed using the skills acquired in the course of their training to earn a decent living for themselves. This is a far better and more practical approach than the one being contemplated.