RRR: Can Monthly N5000 For 6 Months Lift Nigerians Out Of Poverty?

The President Muhammadu Buhari-led Federal Government launched the Enhancing Financial Innovation and Access programme (EFInA) on  January 19. It is one of the administration’s technology-based financial inclusion strategies. The program features the transfer of cash to recipients.

During the virtual flag-off of the initiative named Rapid Response Register (RRR), Vice President Yemi Osinbajo described the move as a step in lifting people out of poverty in the next two years.

“Our government launched the National Social Protection Policy (NSPP) in 2017 to provide the framework for institutionalizing the work we started since 2016 on reducing extreme poverty in Nigeria, based on our administration’s vision to create a comprehensive social security programme for the poor and vulnerable and thereafter the pledge to lift 100 million Nigerians out of poverty in ten years,” he said.

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“The groundbreaking success of the RRR, now emboldens us, to achieve our aspiration of a social security programme for a minimum of twenty million Nigerians in the next two years.” 

He said the program is the largest evidence-based effort by any administration on poverty reduction and its impact on the lives of the poor is huge.

”By way of improving the livelihoods of the beneficiaries through enhanced household purchasing power; smoothing consumption; increasing savings and acquisition of household assets, and improving the local economy” Osinbajo added. ”

The Rapid Response Register, an emergency intervention database for urban or semi-urban poor Nigerians engaged in the informal sector of the economy who lost their means of livelihood due to the impact of the COVID-19 pandemic on businesses and jobs, these Include; small businesses owners, street vendors, petty traders, Small and Medium Enterprises (SMEs), service providers, daily wage-based labourers, urban poor and destitute (persons with disabilities), and vulnerable families in slum areas.

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These urban poor households made poorer by the pandemic are to receive a sum of N5000 for a period of six months but will these lift them out of poverty? And will they have the means to increase savings, enhance household purchasing power or acquire household assets?

Pinpointing Poverty

World Bank uses $1.90 per day for feeding ONLY as the threshold of the International Poverty line which is equivalent to N723.42. This means that for an individual to live above the poverty line in a month, the individual must have fed on a total of $57 (N21,702.75) for the month.

The N5000 cash transfer which is $13.13 at the current conversion rate of $1 = N380.75 can only make an individual feed above the poverty line for roughly 7days and the total of N30,000 ($78.79) which will be collected over the range of six months will make an individual feed above poverty line conveniently for 41 days (one month and 11 days) if one spends it without investing.

Since the beneficiaries are expected to restart their businesses affected by the COVID-19 pandemic, or perhaps start a fresh one, Allnews looked at businesses that can be done to achieve the Federal Government’s vision.

Below is an analysis of three urban businesses commonly ventured into by individuals targeted with the fund.

1. Sachet water business: 

 

For Lydia fondly called Iya Tawa and Tunde Alade who hawk sachet water on the roadside at Ketu and Berger,  Lagos, it usually takes up to three days to sell up to  10 bags of sachet water. In a month, they have an average of 100 bags sold. Using the N5000 as the capital, Lydia and Tunde would have to turn the money over almost three times in a month before getting a profit of N8000. This profit made in one month is below the N21,702.75, the threshold of the International Poverty line in a month.

Our survey shows that an average of five packs are sold at different motor parks in Lagos per day by one vendor. Such vendors will comfortably feed above the poverty line and will be able to save right from the first month of collection of the cash transfer scheme.

2. Roadside Snacks (Puff Puff, Fried yam and Potato)

Having a small venture like this with basic things that cut across them can still make an individual live above the poverty line.  Felicia Adesanya who runs a space like this at Iyana Ipaja gave the breakdown of her running cost of NGN 5000 and how she generates a profit of NGN1500 per day. 

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3. Roadside cooked noodles

Mallam Musa Thanni and Abdullah Umar who runs noodles business at Abule Egba spoke to All News and gave a breakdown of their running cost on an NGN 5000 capital. A plate of noodles and egg sold at N200 naira will generate NGN 8000 sales and a profit of NGN 3000. They sell out a carton every 2 days. By month’s end, on average, they make NGN 45,000 profit.

The N5,000 monthly for a duration of six months will conveniently lift Urban poor people who have no dependents out of poverty gradually and their savings will continue to increase right from the very first month with effective monitoring from the government.

With just an individual making a profit of N30,000 to N45,000 monthly, the beneficiary of the Rapid Response Register can get to save roughly 8000 to 23,000 naira monthly while feeding just on the threshold of the international poverty line of $1.90.

However, the stipend is for a household and not just an individual. The smallest unit of a household is two. Can two individuals who jointly collected 5000 be lifted out of poverty? With business generating a profit of N30,000 per month. It will take approximately three months before both individuals can be feeding above the poverty line.

The assumption here is that the profit made is used for feeding only and it does not cover electricity bills, water bills or even rent. 

Personal Finance Coach, Economics and Business Consultant, Kingsley Ndimele, who spoke to AllNews held that it is a waste of resources giving out NGN 5000 monthly to alleviate poverty because, at the end of the six months, the recipients are very likely to be back to being poor. 

"There is Inflation, the economy is in a recession(at the time the story was been compiled), the best shot to lift Nigerians out of poverty is not by giving out cash but a wealth creation program that will provide jobs," Ndimele said.

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“Rather than dishing out N5000 to each household, the money allocated for the 20 million households should be used for a wealth creation program and these households should be the beneficiaries.”

Conclusion

While it may serve as a stop-gap, the government requires more than a handout of N5000 per month for six months to lift Nigerians out of poverty. A multifaceted approach that includes wealth creation, education and properly functioning infrastructure would be required to achieve this.