Conditional Cash Transfer as Economic Strategy
A comprehensive analysis of conditional cash transfer using local and global perspectives
Following a series of backlash by social media commentators on the recent publication by various news media of a $500bn World Bank loan to be disbursed to 12m Nigerians over a space of 6 months, I’d like to answer a few questions and respond to some of the fears expressed as regards the policy. I will do this in the form of FAQs.
As you read, please note that no policy is foolproof!
As a policy seeks to solve a problem, other problems will be created which were not intended when formulating such policies. The duty of governance is to balance these issues with the intended benefits of such policy.
1. Why cash transfers? Why should the government waste $500bn on cash transfers instead of spending on infrastructures which would benefit the citizens in the long run?
The proposed cash transfers are a government intervention aimed at alleviating and ameliorating the immediate impact of subsidy removal on the vulnerable population in Nigeria. These transfers are intended to ease economic hardships, improve social well-being, overcome credit constraints, and manage risks more effectively. It is essential to recognize that this initiative is not a long-term strategy but a palliative measure.
2. Who are the vulnerable population?
These include aged people, children, physically challenged, and poor people. If you can read this at the moment, it’s 99.59% likely that you will not be eligible for such intervention. It is crucial to understand that not everyone will be eligible for this intervention. We must focus on the bottom 12 million people in Nigeria and their genuine needs.
3. The money is too small and won’t do anything to change people’s lives.
While some may deem the amount insignificant, it can make a substantial difference in the lives of the bottom 12 million Nigerians. Yes, it is too small if you think of yourself and a few around you who will not be eligible. Think of those people chatting with you daily asking for an “urgent 5k”. Also, note that this is no income to them. They were surviving before this intervention came and this will only ameliorate the effects of the adverse economy on them. It is also for a period of 6 months only.
4. “I believe the money is better utilized for other purposes”.
In allocating its resources, every government provides for long and short-term needs. Cash transfers and developmental projects are not mutually exclusive. There are myriads of interventions ongoing to improve the economy. Governments worldwide recognize cash transfers as a critical immediate intervention for vulnerable populations. As a new immigrant in Canada, I enjoyed the GST cash transfers and other benefits until I am no longer eligible due to my income bracket.
5. The sums of money are subject to mismanagement and won’t get to those that need it. How do you identify the vulnerable population?
While no system is immune to inefficiencies, success rates can still be achieved despite minor issues. Mismanagement concerns exist globally, but they do not halt the implementation of such policies.
While I agree that the cash transfers may not get to 100% of the people intended, a success rate could still be recorded irrespective of the inefficiencies. This outcome is also not peculiar to Nigeria. Here in Canada, it is believed widely that people still get benefits fraudulently as they fail to declare their full income when filing taxes. Similar situation was seen recently in the United States during the COVID-19 palliatives program as a lot of people scammed the system. These people are in their thousands. Situations and leakages like these will not stop the implementation of such policies to help those that need it. Nigerians and indeed Africans are also people who have over the years lost trust in the government to do the right thing and that is well understood. The fears expressed are valid.
In identifying the vulnerable, monitoring mechanisms and the involvement of reputable organizations like the World Bank help ensure funds reach the intended recipients. You can expect a high degree of monitoring to ensure the funds get to the intended recipients.
6. Most of the intended recipients are unbanked. How do they get the funds since it will be via electronic transfers?
This can be easily resolved by ensuring the recipients are banked. The banks can be co-opted into the policy implementation which also helps to adequately verify the identity of the recipients. I think what makes the process foolproof is the electronic transfers which make audits easy.
In conclusion, let’s not be quick to shoot down a policy without taking a critical look. FAO research in 2016 showed from a critical mass of evidence from over 6 African countries that cash transfers, rather than being a disincentive to work, led to increased livelihood activities.
While the Federal Government of Nigeria has not made an official pronouncement to adopt the conditional cash transfer policy or not, I believe everyone should know that it is not a bad policy after all. In fact, it is an excellent policy that is in effect in even the most developed countries of the world. We should rather focus on the integrity of the process involved in the implementation of such policy than discard it entirely or castigate it ignorantly.
Dolapo Conteh CFA, FCCA, CPA is a banking professional and currently works as a Relationship Manager with a global bank in North America.
You may follow her on X.com at @deepeegbemi