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You’ve Heard of Herman Cain’s 9-9-9. Here’s Nigeria’s 20-20-20 (And This One Might Fly)
February 15, 2012
Lately I’ve been thinking Nigeria should be a little bit more like, of all places, Iran. Yes, Iran. And maybe Alaska. Here’s how.
Africa’s most populous nation has been a massive underperformer since independence. It’s earned hundreds of billions of dollars from petroleum exports, but the average Nigerian has little to show for it. At least three decades were lost; average incomes in the mid-2000s were the same as in the mid-1970s. More recently, the economic data has been brighter. And there is always hope that the country has finally turned a corner.
But Nigeria has had a rough start to 2012. Boko Haram has emerged as a serious domestic terrorist threat. The government’s attempt to remove regressive and budget-busting fuel subsidies was a debacle. And now this week, new statistics show that, despite high economic growth rates, the poverty rate actually climbed from 55% in 2004 to 61% in 2010. Yes, Nigeria lately has been earning some $50 billion per year from oil, but the number of Nigerians living hand-to-mouth on less than $1 a day has climbed to nearly 100 million. Yikes.
I’m still optimistic on Nigeria. In fact, the problems it faces today—inexcusable poverty, budget waste, and a desperate need for national unity—could all be alleviated by doing something like a 20-20-20 National Dividend, based on the following:
- 20% of government revenues sequestered into a special fund
- Every Nigerian up to age 20 would receive regular payments
- At a maximum of US$0.20/day or 20% of the poverty line (a similar level used for transfer programs in Latin America)
Based on these 20-20-20 parameters, some 90 million Nigerians would be eligible for payments totaling $50-75 per year at a cost of US$4.5bn-$6.8bn per year. The 20% of total revenue now equals nearly US$9 billion and would more than cover this level of benefit. Any excess funds could go into a savings pot for future years.
Sound implausible? India and Iran also ended fuel subsidies, but did so concurrently with the introduction of regular cash payments to poor families. Iran was especially clever about sequencing it, creating some 61 million bank accounts, depositing the cash, but also freezing the money until the subsidies were officially lifted. As a result, Iranians were clamoring for subsidy removal! (Read a fascinating account of it here.) In Nigeria, by contrast, the sudden policy move led to violent protests, strikes, and a partial government climb-down.
A National Dividend would be a highly visible and tangible benefit for citizens. It would also be an efficient investment: cash transfers are already showing to be highly effective at increasing schooling, nutrition, and other development outcomes (see terrific DFID meta-study here.) Mexico and Brazil are the most famous, but cash transfers are increasingly being tried in Africa too. Where implemented, they become hugely popular programs (ask Lula!), so it’s only a matter of time before African politicians get on board.
In a country with conflict in the Niger Delta, rising sectarian violence, and a history of division, a universal national dividend could also go a long way toward promoting national unity and equity. It could even go a long way toward creating incentives to deal with Nigeria’s notorious governance problems. A national dividend would likely create additional public demand for accountability of revenues and raise public expectations. Alaska’s permanent fund dividend, which has distributed the state’s sovereign wealth fund profits since 1982, was launched by Governor Jay Hammond primarily as a check on wasteful public spending.
We can think of many reasons a national dividend would be difficult. Yes, Nigeria desperately needs infrastructure. But the country’s investment record is abysmal (Ajaokuta Steel, anyone?) and it’s hard to convince average Nigerians that, after 50 years, the government really will do better this time—the subsidy riots are proof the government is going to need to do more than promises. Moreover 20% leaves plenty of fiscal space.
The biggest barrier is overcoming the political system built on doling out oil money rather than popular support. What Nigerian politician would just give money to citizens? Some rumblings from the highly respected central bank governor Lamido Sanusi, specifically citing Iran’s experience with subsidy removal, give some hope that this idea could be gaining traction. Arvind Subramanian and Xavier Sala-i-Martin floated this idea almost a decade ago, but the country wasn’t yet ready. Now may be just the right time to for a well-designed national dividend to help Nigeria repeal subsidies, deliver tangible development results, and even—the grand prize—build incentives for accountable government.
Possibly Related Posts
- Nigerians Demand Cheap Gas, But Fuel Subsidies Are NOT Pro-Poor
- Nigeria, SWFs, and the Resource Curse? Two New Papers
- On the Hill: Moss Says Nigeria Should Try Cash Transfers (and U.S. Should Support Multilateral Development Banks)
5 Responses to “You’ve Heard of Herman Cain’s 9-9-9. Here’s Nigeria’s 20-20-20 (And This One Might Fly)”
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February 15th, 2012 at 2:58 pm
Some of the elements of this plan is not entirely new because during the recent subsidy removal crises (it was not violent, as you suggest here), one of the proposals that the government made and which was rejected by civil society organisations was to set up a special account for monies saved from the removal of the subsidy to be used for infrastructure and various anti-poverty schemes.
Such schemes runs the risk of turning into black holes for funds to disappear, because of the lack of accountability in governance in Nigeria. This is evidenced by the various special accounts to harness oil windfalls that have previously been set-up in Nigeria since the 70′s, for which there has been no accountability of how monies from these accounts were spent or disbursed.
I also think transferring money to whole populations without rigorous selection for participation (in terms of socio-economic status) or attaching a conditionality, as you seem to suggest here will not be effective, as the more successful cash transfers that impacted poverty in Mexico or Brazil took such factors into consideration.
As a Nigerian though, its always great to see innovative plans such as this which creates avenues for debate on improving governance and reducing poverty in the country.
February 18th, 2012 at 9:20 pm
On this I entirely agree with Mr.Todd Moss in principle.The concept of National Dividends and tangible benefits for poor citizens will enhance social security and justice. The challenge will be the modality will ensure it reaches. Otherwise the dead Horse theory of Governance in Nigeria will come to play.
The tribal wisdom of the Red Indians, passed on from generation to generation, says, “When you discover that you are riding a dead horse, the best strategy is to dismount.”
However, the Nigerian government prone to copying anything that is from the Americas and World Bank imported the wisdom and advanced the strategies the Indians employed in dealing with a dead horse to the next level, such as:
1. Buying a stronger whip for the dead horse.
2. Changing the riders of the dead horse.
3. Appointing a committee to study the dead horse.
4. Appointing another committee to study the cause of death of the horse.
5. Appointing a third committee to study the reports on the dead horse; the cause of dead and advise government accordingly.
6. Hiring Consultants to advise government on what to do with dead horses in future and or how to stop horses from dying.
7. Arranging to visit other countries to see how other cultures ride dead horses.
8. Lowering the standards so that dead horses can be included in monetary allowances for being dead.
9. Reclassifying the dead horse as living-impaired and ascribing it a National Emergency Status.
10. Visiting the six geopolitical regions in Nigeria in order to see whether each region has a dead horse, so that there is Federal Character of dead horses.
11. President Goodluck Jonathan will go on national Television and his face-book page to tell Nigerian that as a patriotic and transparent leader, he knows exactly what to do with dead horses in the interest of Nigerians and that the future will be bright for dead horses.
12. Hiring outside contractors to ride the dead horse.
13. Harnessing several dead horses together to increase speed.
14. Providing additional funding and/or training to increase the dead horse’s performance.
15. Doing a productivity study to see if lighter riders would improve the dead horse’s performance.
16. Declaring that as the dead horse does not have to be fed, it is less costly, carries lower overhead and therefore contributes substantially more to the bottom line of the economy than do some other horses.
17. Rewriting the expected performance requirements for all horses, dead or alive
18. Promoting the dead horse to a supervisory position.
19. The Nigerian sycophants and ‘eye service people’ will hail government’s trans-formative agenda for dead horses to be the best thing that will happen to Nigerians, lastly
20. PDP, the ruling party in Nigeria and of course some gullible Nigerians will come out strongly against opposition parties as CPC, ACN or anyone that offers suggestion contrary to position of government on dealing with a dead horse, as detractors and lacking credibility to question all the foregoing laudable achievements of President Goodluck’s transformation agenda for a dead horse.
What a Country? So much Ado about a dead horse. CRY, MY BELOVED NIGERIA!Make no mistake about it, that is how the National Dividend concept will be treated by the Nigerian Government – Applying The Dead Horse Theory!
February 21st, 2012 at 8:07 pm
Hi Todd,
Fascinating post.
One thing worth considering is that implementing such a transfer in a country like Nigeria would be much, much more difficult than in Iran. The difficulty of implementing such a scheme depends a lot on the penetration of the banking sector and on whether there is a reliable system of identification for individuals or households. The penetration of the banking system in Nigeria is about 1/4 that of Iran. (I don’t know anything about the presence or lack of a good ID in Nigeria.)
This is not to say that your proposal is unworkable — just that if this is a policy goal it would make sense for Nigeria (and other countries) to take steps to ensure that the banking sector can reliably identify individuals (or households) and deliver cash to them. As I’m sure you’re aware, your colleague Alan Gelb has some interesting thoughts on this.
Lastly, why target only those under 20 though? Even if this the age group with the highest contration of poverty I doubt this would fly with Nigerians. (I imagine they would see a policy in which the elderly are targeted as more fair.)
February 21st, 2012 at 10:57 pm
I agree that the people of Nigeria need help, but unlike, Mr. Moss, I am not optimistic. Simply providing subsidies will not erase poor political decision-making or government corruption. It is obvious that the Nigerian political leadership has failed the people; the people have been left behind. Government waste and political corruption must be addressed. To have the reported high economic growth rates while the people face poverty is deplorable.
March 23rd, 2012 at 9:57 am
While I think your theory on how to uplift the large numbers of Nigerians living in poverty is interesting I don’t believe you’ve adequately addressed how to fix over 50 plus years of government corruption and waste.
If your 20-20-20 plan is adopted by the national government what institutions will play the role of watchdog to ensure that the money is properly given out to those who qualify for it? It appears that the citizens demand for accountability from their government hasn’t worked well in the past.