Breeze Reporters

$322m Abacha Loot: Can Cash Transfers Help the Poor?

You’ve probably read that the federal government will share the sum of $322 million, part of the loot recovered from Late Gen. Sani Abacha, to 302,000 poor households in 17 states (states registered with the federal government social intervention programme). Each household will receive N5,000. But the plan has been knocked and vilified in some quarters.

“Spend the money on projects that Nigerians can see,” Sen. Shehu Sani (Kad Cent). Surely, a good idea. The human rights advocacy group, Socio-Economic Rights and Accountability Project (SERAP), bemoans, “the planned sharing could be subjected to abuse by state governors who might ensure that only their acolytes benefits.” That’s surely genuine concern. “It’s a hare-brain, populist policy,” wrote Cyril Austin, in an op-ed.

But we  should not  forget that these transfers are included in the 2018 budget. I find the argument that giving poor people money is waste, however,  a lame one. It isn’t backed by  any empirical evidence.

Let’s remember that the goal for social welfare interventions or charities are to assist the most vulnerable among us. In Nigeria, there are tens of millions that are in need of such welfare assistance. 87 million Nigerians are poor, according to the Brooking Institution, the Washington based nonprofit public policy organisation, in its World Poverty Clock Report. Going by that Report, Nigeria has the highest number of most extremely poor people in the world, a detestable position previously occupied by India.

Though, the government through the Minister of Planning has disputed the reported, but there’s no debate poverty is rampant in the country. And the numbers are stubbornly increasing.

Between 1969 and 1980, about 28.0 percent of Nigerians (21 million) were considered poor. By 1996, the number grew to 72 million (65 percent). That number has increased to embarrassing 87 million today.

So how do we empower the poor and vulnerable households in this country?

There are basically two ways to package welfare or charity. One is in-kind welfare support programmes like free feeding, free housing, free healthcare, fuel subsidy, etc. In-kind welfare programmes are expensive, complex, and less effective in reducing poverty.

The second is by cash transfer, a welfare system that gives cash directly to people without conditions. The federal government conditional cash transfer (CCT) falls in this category because recipients can use the money independently.

Giving people money has its drawbacks, but  available studies shows it is more effective in reducing poverty than in-kind.

A 2013 survey by Sarah Bailey for the Canadian Foodgrains Bank—involving Zimbabwe, Ecuador, Malawi, and Yemen, among other countries—found that cash transfers usually led to far greater increases in “food consumption score.”

Cash transfers also have a larger multiplier effect as concluded in a 2010 study in Zimbabwe by Cormac Staunton of Concern Worldwide and Micheal Collins of Trinity College Dublin. They  compared food transfers to cash transfers, and estimated that each dollar provided by cash transfers circulated 2.59 times around the local economy before being spent on goods and services from elsewhere.

Cash transfers also lead to productive investments. GiveDirectly, a charity organisation that transfers cash from rich people in the West directly to poor people in Africa using mobile-phone payments. In the  randomized evaluation conducted in 2011, in Kenya and focused on one-off, unconditional payments to families that ranged from $404 to $1,520. cash transfers were associated with people working longer hours and making more money thanks to investments in assets including livestock.

Also, in India, a pilot program between 2011 and 2012 transferred $4 to $6 for adults, and half that amount per child once a month to every household in select villages in the state of Madhya Pradesh. In the evaluations conducted 2014 by India’s Self Employed Women’s Association, households in recipient villages proved more likely than those in non-recipient villages to have modern toilets and to use public taps or hand pumps for water rather than wells. They also used cooking fuels that produced less indoor air pollution, which is linked with poor respiratory health.

People are afraid such transfers will be used for undesired consumptions like tobacco and alcohol. But a study of a similar cash transfer programme in Mexico shows spending on alcohol and tobacco did not rise after the transfer.

The examples above suggest cash transfers aren’t just a safety net—they increase physical and human capital in poor households. That conclusion is corroborated by a study done by Chris Blattman and his colleagues of  Columbia University in Uganda.  A $150 cash grant to poor women in the northern part of the country doubled their earnings within a year, while one-off $382 transfers to 16- to 35-year-olds were associated with 40-percent higher earnings four years later.

By all evidence, direct cash transfers to the poorest is more effective way of  poverty reduction. To eradicate poverty in Nigeria, a sustainable cash transfer might be the answer.

Rommel Miebara writes from Kaduna

Twitter: @emiebararommel

Staff Writer

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