The Cattle Rearer Chronicles — The Remaking Of Nigeria As A Welfare State

Nigeria has never been a homogenous entity, not even when we started off as an independent nation almost 60 years ago. Back then, we were made up of 3 regions and each one had their areas of focus, largely driven by views of their leaders. The West was big on Education and had socialist leanings. The East was big on Trade and you could say decidedly more free market leaning. The North was big on religion, Islam to be precise and not as open to western norms. The North had Statist leanings, given its predominantly feudal culture.

Given the country had been colonized by the British, who obviously favored the North for their ability to keep the rank and file under check far better than their Southern counterparts, there had to be some middle ground. That’s how Nigeria started out with a mixed economy, with government involved in certain activities but leaving enough room for private enterprise. Each region retained their focus at the start and all went well until 6 years in, the rest is history.

 

Now, this wasn’t meant to be a historical piece. The opening was just meant to give some context to the journey we have undergone. Between 1966 and 1999 Nigeria was ruled by the Military, with only a brief 4 year period of civilian rule between 1979 and 1983. The Military governments, led mostly by leaders of northern extraction, largely had statist views and ran the economy along those lines, mostly for enrichment of self and cronies. They compounded this by breaking the country into states which were mostly being fed by the central purse (with Lagos the exception to some degree). By the time civilian rule returned in 1999, Nigeria was heavily indebted and had an inefficient economy with moribund state enterprises such as NITEL and NEPA. Something had to give.

The Obasanjo administration decided to go full on Liberalization of certain sectors of the economy(Telecoms, Oil and Gas, Power), with Privatization of certain State Owned Enterprises (SOEs). The idea was based on taking the country back to a mixed economy with more private than government participation. To enable that, the Banking Sector was restructured through a major recapitalization drive. Efforts were made to deepen the debt and equity markets to encourage foreign investment. The focus was on addressing poverty, but through the expansion of the economy so that more opportunities would be created. It led to a resurgence of the middle class which coincided with economic boom engendered by rise in oil prices.

After the Obasanjo administration came the Yar’Adua government, which stalled some of the progress made while grappling with the onset of the Global Financial Crisis. President Yar’Adua clearly had Socialist leanings and was a populist, given to making people friendly gestures such as reducing fuel prices as soon as he came into office……unheard of. He put plans in motion for a minimum wage review and also set up the Amnesty program that brought peace to the Niger Delta. He however canceled sale of the refineries (for good reason) and held up the power sector reforms. These would stall the progress made toward moving Nigeria further away from the big government of the past. As fate would have it, President Yar’Adua passed away in 2010 and his Vice President, Goodluck Jonathan took over.

Under President Jonathan, it was all about the economy. The focus was on baking a bigger pie which would in turn lead to a massive creation of jobs and more opportunities for everyone. There was a big focus on private sector led development and a push to channel government spending toward creating an enabling environment by focusing on infrastructure development — power and rail transportation. Economic policies were private sector focused and government interventions were targeted and effective e.g. the e-Wallet program for farmers that worked to great effect under the leadership of Dr. Akinwunmi Adesina, the erstwhile Minister for Agriculture now President of the Africa Development Bank (AFDB), see details here. Another such intervention was the YouWin program that gave grants to more than 1,100 entrepreneurs that were selected through a rigorous Business Plan competition. The program was largely successful as demonstrated by a World Bank review published in 2015, see here. It was clear that Nigeria was on the path to being a free market economy, only slowed down by the inability to remove fuel subsidies and fully deregulate the oil and gas sector as well as the significant investment required in power sector, that was making progress not as quick as needed.

In May 2015, President Muhammadu Buhari came into office. There were concerns that his statist leanings (evident from his first stint as Military Ruler in the mid 1980s) would derail the progress made by the previous administration. In no time, this would prove to be the case with big government coming to play and economic decisions leading to negative consequences. The Naira lost significant value, there was high inflation and the nation fell into a recession that lasted 5 quarters. Between Q4 2015 and Q3 2017, the number of unemployed persons had increased by almost 10 million people (more than the population of Togo), see here. Meanwhile, the national debt has ballooned significantly, growing by almost 100% within the first 3 years of this administration. Things have become so dire that Nigeria recently became the poverty capital of the world, see here.

It is against this backdrop that one considers the proliferation of social welfare programs being undertaken by the Buhari administration, spearheaded by his Vice President, Yemi Osinbajo. The VP is from the western part of Nigeria, with links to the family of Chief Obafemi Awolowo, leader of the Western Region at independence and inspiration behind the region’s focus on Education and social-welfarism. Osinbajo is driving so many social welfare programs that its hard to keep up. Some are as follows:

  • N-Power — a youth training scheme to help make them employable. While on the scheme they get paid a monthly stipend of N30,000, program lasts for 2 years with no guarantee of employment thereafter. So far 200,000 have been enrolled and will graduate to make way for another 300,000.
  • National Home Grown School feeding Program — a program designed to provide one balanced nutritious meal per day to public primary school children in classes 1 to 3. About 8.6m children are currently being fed across 24 states.
  • The National Cash Transfer Program — monthly cash transfers of N5,000 to poor and vulnerable households. Slightly less than 300,000 beneficiaries are on the scheme across 20 states.
  • Government Enterprise and Empowerment Program “Market Moni” — this provides access to finance for small business owners at the bottom of the pyramid. A key feature is that they must be members of cooperative or trade association. The loans are interest and collateral free.

And the list goes on. More details on the National Social Investment Programs can be found here.

In the last 3 years, Nigeria has gone from one of the stars of the Emerging Markets fraternity, Africa’s top investment destination, to an economy that is stagnant and struggling to find its feet…..and the government’s response has been to turn the country into a welfare state…..into a nation of people that live on handouts. Rather than change policies that are destroying businesses, policies that are hampering growth and creation of jobs, the Buhari government is doubling down on creating a nation wholly dependent on the state. For good measure, Vice President Osinbajo recently announced a new loan program called “Trader Moni”, that will ensure those that can’t access the “Market Moni” program, can have access to micro finance under similar terms. The entry point will be N10,000 and if repaid in 6 months, beneficiary can move to a higher amount and so on, see details here. These loans are meant for traders and artisans to start or expand their business. The plan is to have 2 million beneficiaries before end of 2018.

N10,000 business loans for to 2 million people at the bottom of the pyramid. Its an incredible undertaking, especially as they intend to do this in 5 months. With elections just around the corner, it is hard to look at this with anything but cynicism…..on my twitter timeline I called it “next level vote buying”, cue the recriminations from the administration’s ardent supporters. This administration is failing Nigerians through its decimation of the economy but more troubling, through the entrenchment of a handout culture. Nigerians are hardworking and enterprising people who know how to get by, provided government provides infrastructure and gets out of the way. It is unconscionable that a government that can’t fix the roads in Apapa, that make getting in and out of the ports problematic, thereby making it difficult for ordinary blue collar workers to make a living, is then turning around to offer handouts disguised as loans.

With 87m people in extreme poverty, Nigeria does not have the resources to sustain these social investment programs. While it is important to have programs for the very poor and vulnerable which focus on education and healthcare, it is much more important to ensure they can find a way to pull themselves up. No N10,000 loan will accomplish this as amount is too small to create something meaningful and the people are too poor with so much deprivation, that the money will probably end up funding consumption. This report from the World Economic Forum corroborates this. What people need are jobs that guarantee regular income and allows them to build up a saving culture that will pull them out of poverty. Nigeria cannot afford to embed a culture of dependence that gets passed on to future generations. With a projected population of over 400 million people by 2050, that would be a very scary proposition.

As elections beckon, Nigerians will need to decide the country they want for themselves and their children. It is quite easy to fall into the trap of enjoying the handouts today, in return for an uncertain future. However, it is better to learn to fish than to be given a fish all the time. Nigerians will do well to reject this unprofitable state of affairs and look to a new leadership capable of baking a bigger pie, to ensure there are enough pieces that each person can make theirs.

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