NPRGS: A Test of Buhari’s Readiness to Reduce Poverty –Afrinvest
Investment banking experts at Afrinvest have seen the implementation of the National Poverty Reduction with Growth Strategy (NPRGS) recommendations as a test of President Muhammadu Buhari’s resolve, and readiness to reduce poverty among the people.
Recently, the Presidential Economic Advisory Council (PEAC) set up by President Buhari presented the NPRGS document to the government with several lofty initiatives to drive an ambitious poverty reduction agenda.
Investment bankers at Afrinvest recalled that after his victory at the 2019 general polls, President Buhari during his Democracy Day speech on June 12, 2019, expressed the commitment of his administration of lifting 100 million Nigerians out of poverty in the next 10-years.
“This audacious promise prompted the president to replace the then Economic Management Team (EMT) headed by the vice-president, Yemi Osinbajo, with a team of 8-technocrats led by Dr. Doyin Salami as Presidential Economic Advisory Council (PEAC) with the mandate of coming up with initiatives that can drive poverty reduction”.
After months of deliberations and analysis of Nigeria’s macroeconomic data, general structure, and fiscal capacity, the committee in March 2021 came up with the strategy document titled NPRGS to serve as the framework for achieving the poverty reduction objective”.
According to Afrinvest, this strategic framework is predicated on four pillars of economic programmes namely – Macroeconomic stabilization, Industrialization, trade & growth, Redistributive programmes, and Structural and institutional reforms are expected to lift about 11.2 million people out of poverty annually.
The target is to lift 80% of self-employed, 20% of wage-paying jobs from poverty, with GDP growth printing between 2.3% – 4.4% in the first 5 years, and a minimum of 6.0% in the remaining 5 years.
To successfully fund this initiative, the committee also recommends the establishment of a Nigeria Investment & Growth Fund (NIG-Fund), a Private Equity (PE) fund structure that will be leveraged to attract funding from domestic and external accredited investors.
“This became necessary due to the lack of fiscal headroom for the government, as the project is estimated to cost about $1.6 trillion or ₦656 trillion using N410/$1 rate over the 10-year period”, Afrinvest said.
Based on the 2019 national data projected in the report, an estimated 40.1% or over 80 million of Nigeria’s population are said to be poor, living below the National Poverty Line (NPL) of ₦137,430/per annum salary.
“We believe this number would have increased by at least 1.5% in 2020, due to the general economic downturn that accompanied the COVID-19 pandemic,” Afrinvest said.
Of this figure (over 80m), more than 50% are said to be multi-dimensionally poor, with limited access to education, health, electricity, and other basic services.
In terms of distribution of the estimated poor Nigerians, 72.0% were found to be in the Northern parts of the country, while the remaining 28% are in the Southern states.
Afrinvest stated that this partly explains one of the drivers of the high level of insecurity currently being experienced in the North. Given the proven nexus between poverty and insecurity ꟷ this formed the key theme of its 2020 Nigerian Banking Sector Report – The Insecurity Challenges of Poverty”, it added.
Analysts said although there are notable examples of Frontier and Emerging Economies that have driven similar initiatives through PE structured funds in recent years, Afrinvest believes the political will of this current administration and transparency of purpose will go a long way in deciding whether the strategy document will be implemented or kept in the shelf.
It cited that Ethiopia, India are among frontier and emerging economies that have driven similar models to reduce poverty, however, experts fear that the report may end up on a shelf like the report of the 2014 National Confab which cost the nation an estimated ₦7.0 billion, or failed like previous similar initiatives such as the National Poverty Eradication Programme.
Despite its pro-people stance, Nigerians have suffered a massive economic setback on record in the last six years as the misery index widened. Key macroeconomic indices have become scary while middle class economy heads for total collapse.
Naira devaluation has turned into a joke in the largest economy in Africa with $462 billion in the balance sheet as of 2020, less than $35 billion in external reserves position, and total public debt of about N33 trillion.
Inflation rate in Nigeria peaked at 18.17% in March before it slides 5 basis points a month after at the time when 33.3% of the nation’s workforce are jobless.
The outbreak of the pandemic however handed a veritable alibi to the government for non-performance amidst a high level of insecurity in the nation. The federal government has indicated a plan to borrow $6.18 billion which would automatically raise total public debt by more than N2.5 trillion.
While resolve to spend on capital projects is noted, strategy to diversify revenue sources is lacking in Nigeria amidst International Energy Agency (IEA) recent call for net-zero emission. With a low investment requests in fossil fuel, and a possible reduction in oil demand, Nigeria is open to a big risk. Some pundits still believe Nigeria can do double-digit GDP growth.
NPRGS: A Test of Buhari’s Readiness to Reduce Poverty –Afrinvest
