Nigeria Rolls Out $2 Billion Brazil-Like Social-Welfare Plan

LAGOS (Capital Markets in Africa) – Nigeria is rolling out its first national social-welfare program modeled partly on Brazil’s Bolsa Familia in a bid to boost a weak economy and curb poverty by giving cash to its poorest citizens and ensuring their children go to school.

The government of Africa’s most-populous nation is investing 500 billion naira ($1.5 billion) in the initiative this year and is talking to the World Bank about a $500 million loan, Minister of State for Budget and National Planning Zainab Ahmed said in an interview in the capital, Abuja. Launched in December, the program is initially targeting about 1 million households starting in eight of Nigeria’s 36 states. The government expects that reducing poverty will have a knock-on effect for the rest of the economy, she said.

“It increases money in the hands of people,” Ahmed said. “It means they are contributing towards consumption and an increase in consumption is desirable because it now encourages producers to produce more and as producers produce more it means they are able to employ more people.”

As in Brazil, Nigeria’s plan requires cash-transfer beneficiaries to fulfill two conditions: keep their children in school and immunize them. It also includes providing school meals, short-term job training for graduates, loans at below-market rates to 1.6 million potential entrepreneurs, grants for science and technology students and low-cost housing.

The state will use biometric systems to register beneficiaries, and will make transfers into bank accounts that are opened for families’ caregivers, Ahmed said.

President Muhammad Buhari’s administration seems committed to make it a success, said Esili Eigbe, the head of Nigerian equities at Exotix Capital.

“Other administrations tried to do this before, but not with the kind of determination of Buhari’s administration,” Eigbe said by phone from the commercial capital, Lagos. “The enormous political will and a strong partner in the World Bank shows their determination to do it.”

Economic Strain
The program is still in its infancy compared to similar projects in countries such as Brazil, which started Bolsa Familia in 2003 and will probably increase its social-security budget to 83.3 billion reais ($25 billion) this year, according to the Planning and Budget Ministry. South Africa, with a population about a third of Nigeria’s 180 million people, plans to spend about 180 billion rand ($13.8 billion) on social assistance.

Nigeria’s drive to set up a social-welfare program comes at a time of economic strain, and analysts such as Magnus Kpakol, director at Abuja-based consultancy Economic and Business Strategies, doubt whether the country can afford it now.

Tight Money
“I am afraid that a day will come, they will strand these people,” said Kpakol, who a decade ago led a welfare pilot program featuring the nation’s first conditional cash transfers. “They will just raise their hands and surrender and say we don’t have the money.”

The decline in production and price of oil, Nigeria’s biggest export, crippled West Africa’s largest economy, which shrank 1.6 percent in 2016, the first full-year contraction since 1991. Dollar shortages pushed the inflation rate to the highest in more than a decade in January.

The need for such a program is clearly stark. More than 65 percent of Nigerians live on less than $2 a day and as many as 12 million children are malnourished, according to the Budget and Planning Ministry.

The World Bank, which supports 30 sub-Saharan African countries that disburse money to fight extreme poverty, estimated in a May 2016 report that giving Nigeria’s poor households 60,000 naira annually would reduce poverty to 27.6 percent from 33 percent within a year, if 80 percent of the money was spent on consumption.

Nigeria’s target is to reach 5 million cash-transfer beneficiary households in five years from the 27,000 currently receiving 5,000 naira a month. The World Bank credits Brazil’s Bolsa Familia with lifting more than 28 million people out of poverty in a decade, increasing school enrolment and improving children’s health.

In 2013, 13.2 million children, mostly girls in the north, weren’t attending school, the World Bank said in Wednesday following approval of a $611 million loan to support education.

“The cash transfers are similar to Brazil’s in conditions and objectives, but it’s still early to tell how the results will compare,” Eigbe said. “The most important thing is making a whole lot of people employable by ensuring children get some education and are healthy.”