SOCIAL PROTECTION EXPENDITURE AND BUDGET MANAGEMENT IN NIGERIA Contents Overview ....................................................................................................................................................... 2 1. Nigeria is amongst the lowest spending countries on social protection globally................................. 3 2. Budget execution rates at the federal and state levels are low and volatile ....................................... 7 3. Most federal social protection expenditure is channeled through the NSIP in recent years ............... 8 Overview of key National Social Investment Programs .......................................................................... 10 4. State budgeting and implementation is fragmented.......................................................................... 13 5. External financing plays important role in social protection expenditures in Nigeria ....................... 15 6. Policy recommendations .................................................................................................................... 16 References .................................................................................................................................................. 18 List of Figures Figure 1: Nigeria’s public expenditure in Social Protection is one of the lowest in the world ..................... 4 Figure 2: Social Protection expenditures by the states are also very low .................................................... 6 Figure 3: Social Protection Budget Execution Rates are low and volatile .................................................... 7 Figure 4: Federal Social Protection Budget is concentrated among a few agencies .................................... 8 Figure 5: Federal Social Protection Budget categories ................................................................................. 9 Figure 6: Expenditures and Beneficiaries of key programs under the NSIO ............................................... 11 Figure 7: Budgeting and implementation is fragmented at the state level ................................................ 14 Figure 8: Official Development Assistance on social protection is comparable to federal expenditures .. 15 1 Overview Over 40 percent, or some 83 million people, were living in extreme poverty in 2019 (World Bank 2022b). The poverty rate, and consequently, the number of people living in extreme poverty is expected to have increased since due to a string of macroeconomic crises including high inflation and currency devaluation. A large number of people – over 20 percent of the total population– live just above the poverty line, making them vulnerable to falling into poverty with small economic shocks. Unfortunately, the poor and vulnerable also tend to face multiple concurrent shocks (Chapter 1). The magnitude of poverty and vulnerability necessitates a strong social protection system . Recognizing the deep issue of poverty in Nigeria, the government has an ambitious goal to lift over 100 million people out of poverty by 2030. Accomplishing this goal requires, among others, redistributing resources towards the poor and vulnerable. Social protection programs and systems accomplish exactly that. The government has also recognized the role of social protection systems and programs in achieving its poverty eradication goal, as reflected in the National Social Protection Policy Framework. The framework, now approved by the National Economic Council and the Federal Executive Council, has informed the drafting of a bill that will institutionalize social protection in Nigeria. The framework seeks to provide broad social protection coverage, including a minimum floor of social protection coverage to everyone. Against this background, this chapter delves into the fiscal expenditures on social protection in Nigeria. It primarily uses data from the harmonized federal and state level budget and expenditure data compiled by the (World Bank 2022a).1 The data is supplemented by data collected by the World Bank team through its operational engagement as well as through some dedicated data collection effort.2 Box 1 describes the key datasets used in this chapter and their limitations. BOX 1: Key datasets and limitations The analysis in this chapter primarily uses the harmonized federal and state level budget and expenditure data compiled by the World Bank (World Bank 2022a). Box 2 describes this data source in more detail along with the relevant definitions. There are a few shortcomings to the data and analysis in this chapter: 1. Timeframe of available data. The harmonized federal data are only available for years 2015 to 2021. The harmonized state government budget data is available for all 36 states for the years 2021 and 2022. Recent data are being processed by the government and are not expected to be available in time for this analysis. The data set availability limits the scope of any trend analysis of the combined expenditure data. 2. Level of data availability. The expenditure data are at the level of a budget line. Most programs do not have a budget line of their own which creates issues related to the classification of expenditures. Often, budget lines are at the level of agencies and not necessarily at the level of individual programs. In those cases, social protection programs that do not have their own budget line but are implemented by an agency that typically implements other sectoral programs (such as education or health) may not be counted under social protection expenditures. It is not possible to correct such potential errors due to the lack of program specific administrative data on expenditures. 3. Program level administrative data on expenditures . Program level administrative data were not available for the study, except for the case of World Bank financed projects. Even for the programs under 1 Since the data has not yet been harmonized yet for recent years, all analyses are based on data from 2021 or before. Only federal level data is available for prior years, which limits the analysis of time trends to only federal level expenditures. 2 Full set of datasets used for this analysis is present in the Annex 1. 2 the NSIO, which account for a large share of federal public expenditure on social protection, program specific budget and expenditure data are not available. The study builds on some publicly available information and interactions with relevant program officials. 4. Other data methods used but not reported (or partially reported). Recognizing potential shortcomings related to data availability, the study attempted to collect/compile additional data, but they also had shortcomings which limits their use for analysis: i. States reported data during NG-CARES project preparation. As a part of preparation for the NG- CARES program, the states reported aggregate expenditure on social protection to the World Bank. But data were not available for all the states in a harmonized manner to do a systematic and comprehensive analysis. ii. Dedicated data collection exercise at federal and state level. As a part of this study, a field exercise was undertaken to collect federal and state level administrative data on social protection programs. The field exercise visited Abuja and seven states: Abia, Adamawa, Delta, Kano, Kogi, Kwara, and Ogun. This exercise intended to collect program administrator data on the budgeting, expenditure, beneficiary eligibility and targeting criteria, number of beneficiaries, duration of support, and institutional arrangement of various social protection programs. The data collection template is presented in Annex 2. This exercise also failed to collect harmonized data from the states and the federal level that could be used for a systematic analysis. Systematic data from only a few states and programs were collected. Most of this can be attributed to poor budget and expenditure management practices, poor or non-existent data and information management system of social protection programs. Weak institutional arrangements also contributed to the difficulty in data collection. The following key messages summarizes the analysis of this study: 1. Nigeria is amongst the lowest spending countries on social protection globally Nigeria spent 0.14 percent of its GDP on social protection in 2021. In 2021, the Nigerian government spent a total of NGN 254 billion, or 0.14 percent its GDP, across all social protection programs (see Box 2 for the definition used for this analysis). Four-fifths of this expenditure was from the federal government and the rest from the state governments. The total expenditure by the federal government is 1.7 percent of the total government expenditure for the year.3 BOX 2: Definition of social protection for the analysis of budget and expenditures The analysis in this chapter uses the harmonized federal and state level budget and expenditure data compiled by the World Bank (World Bank 2022a). The federal budget and expenditures data is based on the published data from the Office of the Accountant General of the Federation (OAGF). The data uses the National Chart of Accounts (NCOA) toolkit which provides a classification for each budget line item based on administrative classification, economic classification, and functional classification. The NCOA is a toolkit for all Ministries, Department, and Agencies (MDAs) of the government to be used in planning, budgeting, accounting, and reporting. The functional classifications is 3 For comparison, total federal government expenditure in education is 7.9 percent, in health is 4.2 percent, and in general public services is 11.5 percent. 3 expected to be consistent with the Classification of the Functions of Government (COFOG) coding structure developed by the OECD (OECD 2021). This analysis defines social protection budget/expenditures as those classified under the first-level functional classification of “social protection�. Consistent with the COFOG, the NCOA includes further subclassifications of social protection into the following sub-groups: sickness and disability, old age, survivors, family and children, unemployment, housing, other social exclusion programs, research and development (R&D) related to social protection, and other social protection programs not elsewhere classified. In particular, the contributory pensions schemes are not included under social protection whereas non-contributory old age transfer programs are considered as social protection. The federal data are available for years 2015 to 2021. More recent data are being processed by the government but are not expected to be available in time for this analysis. The state budget and expenditure data are from the harmonization exercise to implement the NCOA toolkit to the budget and expenditure figures for all 36 states. The standardization of the States Chart of Accounts (COA) with the NCOA is a part of the overall effort towards attaining minimum reporting requirement in line with international best practices and is a key result area supported by the World Bank financed States Fiscal Transparency, Accountability, and Sustainability (SFTAS) program for results. The NCOA-aligned state government budget data is available for all 36 states for the years 2021 and 2022. Recent data are being processed by the government and are not expected to be available in time for this analysis. In principle, externally financed projects are not expected to be a part of the federal or state government budget and expenditure reporting. However, this distinction is not strictly applied, especially when the funds flow through the government structures. There is some confusion on which externally financed programs and projects are included and which ones are not. Programs implemented through the communities should be represented in this database as long as the source of the budget is the federal or the state government. Programs run using community’s own resources will not be represented in these databases; nor will programs financed using external resources. This chapter separately analyzes externally financed social protection programs as they are an important source of financing for the sector in Nigeria. Nigeria’s expenditure on social protection is one of the lowest in the world. Nigeria’s social protection expenditure level is close to the bottom of any comparator countries or groups of countries (Figure 1.A). It is in the bottom 15 percentile of all low and lower middle-income countries. On average, countries across the world spend 1.5 percent of their GDP on social protection. While the expenditure levels are slightly lower for countries with lower income, Nigeria’s expenditure far below the expected level of expenditures given its income (Figure 1.B). Sub-Saharan African countries, on average, spend 1.1 percent of their GDP on social protection; low and lower-middle income countries spend 0.8 percent and 1.2 percent respectively. FIGURE 1: NIGERIA’S PUBLIC EXPENDITURE IN SOCIAL PROTECTION IS ONE OF THE LOWEST IN THE WORLD A. IT LAGS EXPENDITURE LEVELS AMONG PEERS AND COMPARATOR COUNTRIES 4 B. IT IS WELL BELOW THE EXPECTED EXPENDITURE LEVEL FOR COUNTRIES WITH SIMILAR INCOMES Source: World Bank staff calculations based on the expenditure data from ASPIRE: the Atlas of Social Protection Indicators of Resilience and Equity database (World Bank 2023a) and GDP data from (World Bank 2023b). Data for Nigeria comes from the harmonized federal and state level expenditure data compiled by the World Bank (World Bank 2022a). 5 State level expenditures on social protection are even lower. States in Nigeria typically spend less than the federal government on social protection programs. In 2021, less than a fifth of the total public expenditures on social protection were incurred by the states. This is also reflected in the low proportion of social protection expenditures relative to the Gross State Product (GSP) for the states (Figure 2).4 There are only six states where the social protection expenditures exceeds 0.1 percent of GSP: Ekiti, Gombe, Lagos, Niger, Ogun and Zamfara. For the remaining states, total expenditure in 2021 was below 4 billion NGN and less than 0.1 percent of GSP. At this level of expenditure, the funding from the state governments is well below the levels required to plug the gaps left by low federal level expenditure on social protection. FIGURE 2: SOCIAL PROTECTION EXPENDITURES BY THE STATES ARE ALSO VERY LOW Source: World Bank staff calculations based on administrative data collected at the time of NG-CARES project preparation. The expenditure levels were even lower in previous years. Even the low levels of expenditures on social protection discussed above represents an increase relative to the previous years. Federal expenditures rose steadily from NGN 2.2 billion in 2015 to NGN 16 billion in 2019, but still representing a minuscule 0.01 percent of the GDP and 0.16 percent of the federal budget.5 With the COVID-19 pandemic, allocations and expenditures on social protection programs increased over nine-fold between 2019 and 2020. The expenditures are expected to have increased after 2021 owing to the expansion of beneficiaries under the National Social Safety Nets Program (NASSP) and the introduction of some large-scale programs like the Nigeria COVID-19 Action Recovery and Economic Stimulus (NG-CARES). The NG-CARES program, in particular, is expected to have boosted expenditures at the state level due to the specific financing nature of this program which reimburses the states based on achievements of results by the states at their own expense. By December 2023, over 1.4 million additional individuals benefited from the safety nets support provided under this program. 4 State level expenditures on social protection were only available for 22 out of 36 states in Nigeria. Data Federal Capital Territory in not reported separately and is included in the federal budget and expenditures. 5 Comparable numbers are not available for expenditures at the state level. 6 2. Budget execution rates at the federal and state levels are low and volatile The low level of expenditures in social protection is compounded by the inefficiencies in government budget planning and execution. Between 2015 and 2021, only the third of allocated federal budget to social protection were spent (Figure 3.A). The lowest execution rate was in 2016 where only 23 percent of the allocated budget was spent; the highest was in 2015 at 51 percent. For instance, the NGN 205 billion federal expenditure in 2021 is against an allocation of NGN 515 billion. In the face of the critically low levels of budget allocation, this inefficiency remains poignant. The inefficiency in budget execution is not unique to social protection in Nigeria. The execution rate of social protection spending remains comparable to the overall federal government spending. There are different reasons underpinning the low and volatile budget execution rate, but the major ones are: (i) delays in budget releases and (ii) systemic revenue shortfalls against budget targets (World Bank 2022a). The federal budget frequently faces considerable delays during the review process at the National Assembly. Between 2015 and 2019, the federal government faced an average delay of 5 months per fiscal year between budget submission and enactment. Such delays result in late budget implementation – particularly for capital expenditures which account for over 61 percent of social protection expenditures between 2015 and 2021. Systemic revenue shortfalls are due to revenue forecasting and actualization challenges for both oil and non-oil revenues. The non-oil revenue underperformance is attributable to increased revenue target without corresponding tax policy or administration reforms to increase actual collections. Likewise, the oil revenue underperformance is due to low production relative to budget targets and discretionary deductions and underpayments by the Nigeria National Petroleum Corporation (see (World Bank 2022a) for more details). The volatility in the budget execution rate makes it difficult for the executing agencies to program expenditure and adequately serve a growing number of poor and vulnerable across the country. The low capacity of some of the agencies implementing programs also adds to the low budget execution rate. FIGURE 3: SOCIAL PROTECTION BUDGET EXECUTION RATES ARE LOW AND VOLATILE A. AT THE FEDERAL LEVEL B. … AND AT THE STATE LEVEL Source: World Bank staff calculations based on harmonized federal budget and expenditure data compiled by the World Bank (World Bank 2022a) for panel A. World Bank staff calculations based data collected from the respective states for panel B. 7 At the state level as well, budget execution rates are low, variable, and volatile. For certain states, such as Abia, budget execution rates on social protection expenditure have always been low averaging just 2.4 percent from 2017 to 2020 (Figure 3.B). This low budget execution rate was partly due to some of the same factors as at the federal level (such as delays in passing budgets, volatility in revenue projections), but also partly due to a complex set of small and fragmented programs in social protection. For other states, notably Bauchi and Zamfara, budget execution rates for social protection expenditure have frequently exceeded those at the federal level. Within states, execution rate varies across the years. For instance, budget execution rate in Rivers state ranged from 10 percent to 38 percent between 2017 and 2020. 3. Most federal social protection expenditure is channeled through the NSIP in recent years Since 2020, the vast majority of Nigeria’s social protection expenditure has been executed through the National Social Investment Office. The NSIO provides oversight function for all of the National Social Investment Programs (NSIP) and covers the expenditures under the National Home-Grown School Feeding Programme (NHGSFP), conditional cash transfer programs, N-Power, and the Government Enterprise and Empowerment Program (GEEP). The NSIO accounted for 88 percent of all federal social protection expenditure in 2020 and 87 percent in 2021 (Figure 4.A). Likewise, NSIO accounted for 46 percent of all federal social expenditure in 2020 and 80 percent 2021. While detailed and harmonized budget data is not available for the recent years, the NSIO has continued to receive sizable allocations in recent years with NGN 410 billion in 2022 and NGN 534 billion in 2024.6 Outside the NSIO, the National Commission of Refugees and the North-East Development Commission are the federal agencies with largest social protection budget allocation. Between 2015 and 2019, the National Commission of Refugees received between 40 to 86 percent of all federal social protection budget (Figure 4.B). After the inception of the North-East Development Commission in 2020, it became the largest federal agency other than the NSIO to receive federal social protection budget. It was allocated 6 percent of all federal social protection financing in 2020 and 2021 (46 to 48 percent outside the NSIO). FIGURE 4: FEDERAL SOCIAL PROTECTION BUDGET IS CONCENTRATED AMONG A FEW AGENCIES A. DOMINATED BY THE NSIP IN THE RECENT YEARS B. … AND BY NEW AGENCIES OTHER THAN THE NSIP 6 Based on budget documents available from: https://www.budgetoffice.gov.ng/index.php/resources/internal- resources/budget-documents. For 2024, the allocation is earmarked for ‘social development and poverty reduction programs’ and not necessarily just the NSIO programs. Detailed breakdown is not yet available. 8 Source: World Bank staff calculations based on harmonized federal budget and expenditure data compiled by the World Bank (World Bank 2022a). Most of the federal social protection budgetary allocations towards the NSIO are programmatic whereas towards non-NSIO are towards recurrent expenditures. In 2021, 38 percent of the budgetary allocation of the NSIO was on allowances – presumably for the conditional cash transfer programs as wells as allowances provided through the N-POWER and GEEP (Figure 5.A). Another 31 percent was allocated to school meals (presumably) for the NHGFSP. Whereas for non-NSIO allocations, over half was budgeted for salaries of staff and 20 percent for construction (Figure 5.B). In both sets of allocations, research and development receives 16 to 18 percent of the allocation and monitoring receives 1 percent or less of the budgetary allocations. FIGURE 5: FEDERAL SOCIAL PROTECTION BUDGET CATEGORIES A. PROGRAM EXPENDITURE CATEGORIES RECEIVE THE B. STAFF SALARY IS THE LARGEST CATEGORY OF BUDGET LARGEST BUDGET ALLOCATION IN THE NSIO ALLOCATION OUTSIDE THE NSIO Source: World Bank staff calculations based on harmonized federal budget and expenditure data compiled by the World Bank (World Bank 2022a). 9 Since the NSIO accounts for the overwhelming majority of the federal social protection expenditures, the remainder of this section delve deeper into the key programs under the NSIO. Overview of key National Social Investment Programs7 As seen above, programs under the NSIO – also known as the National Social Investment Programs (NSIPs) – are the key platform to channel federal public expenditures on social protection.8 The NSIO was established in 2016 under the Vice President’s office and was moved to the Ministry of Humanitarian Affairs, Disaster Management, and Social Development (currently the Ministry of Humanitarian Affairs and Poverty Alleviation) after the ministry establishment in August 2019. The key programs under the NSIO are the conditional cash transfer programs (which includes the household uplifting program and the economic shock responsive cash transfers financed primarily through external sources as well as the grants to vulnerable women), the national home-grown school feeding program, the N-Power program, and the government enterprise and empowerment program. However, programmatic data on the coverage, beneficiaries, and expenditures are not available publicly although a total of NGN 1.34 trillion has supposedly been spent on these programs between 2016 and 2022.9 One of the central issues that plague these programs, and hence the ability of this report to do in-depth analysis, is their weak management and information systems.10 Systematic data and information on the budget allocation, expenditure, and utilization of resources as well as on the coverage, targeting, and selection of beneficiaries are not available publicly.11 Within the NSIO, there does not appear to be a centralized mechanism to track and coordinate expenditures and activities. For instance, each of these programs seem to have developed a separate database to collect information for potential beneficiaries and only a small fraction of them were eventually supported through the programs. Instead, it would have been more cost effective to utilize the available national social registry to identify eligible beneficiaries for these programs. Likewise, information on the conditional cash transfer programs beyond the World Bank financed household uplifting program and the economic shock response cash transfer were not available and have been omitted from the description below. The Household Uplifting Program The Household Uplifting Program, also known as the National Cash Transfer Program, is the largest cash transfer program in Nigeria. The HUP was supported through the US$500 million World Bank financed Nigeria National Social Safety Nets Program (NASSP) between 2016 and 2022.12 The core program 7 A detailed list of social protection programs is presented in Annex 3 and a description of a fuller set of social protection programs is presented in Annex 4. 8 Recently, the NSIO has been changed to the National Social Investment Program Agency (NSIPA). The programs under NSIPA, however, remain the same. 9 Based on newspaper reports: https://guardian.ng/news/n1-358tr-invested-in-nsip-in-six-years-says-humanitarian- minister/ 10 The exception to this are the World Bank financed household uplifting program and economic shock responsive cash transfer program under the National Social Safety Nets Program and the follow-on National Social Safety Nets Program – Scale up respectively. 11 The description of these programs below is based on information available through news reports and those garnered through the interaction with program officials by the World Bank team. 12 The NASSP pooled resources from the International Development Agency (IDA) as well as the Abacha Restituted Funds towards the HUP. 10 provided NGN 5,000 per month for poor and vulnerable households selected from the National Social Register.13 The program expected to support the households for a period of at least three years. As seen in chapter 1, this program is quite effective in targeting support to poor and vulnerable households. The HUP supported nearly 2 million households over the course of the NASSP project. The number of beneficiary households supported by the HUP rose steadily from 0.27 million households in 2018 to 1.94 million households in 2022 (Figure 6.A). The expenditures rose commensurately, from NGN 6.7 billion in 2018 to NGN 104 billion in 2021.14 However, support stopped in 2023 after the World Bank financing ended in 2022. As the World Bank financing ended in 2022, the expenditure dropped to NGN 40 billion in 2022. Further, there was no expenditure under the program to the beneficiaries in 2023 in the absence of government financing. Follow on World Bank financing, the National Social Safety Nets Program – Scale Up (NASSP-SU), is expected to provide benefits to the beneficiaries in 2024, so that the initial set of beneficiaries under the HUP receive at least two years of support across the NASSP and NASSP-SU programs. This illustrates the risk of relying on external financing for the nation’s flagship social assistance (cash transfers) program. FIGURE 6: EXPENDITURES AND BENEFICIARIES OF KEY PROGRAMS UNDER THE NSIO A. NATIONAL CASH TRANSFER PROGRAM B. NATIONAL HOME-GROWN SCHOOL FEEDING PROGRAM Source: Based on data collected by the World Bank team from the programs. The numbers for 2023 for the NHGSFP are tentative. Economic shock responsive cash transfers 15 Launched in 2023, in response to the price hikes caused partly by the removal of fuel subsidies, the economic shock responsive cash transfers (ESR-CT) provides short-term cash transfer support to the poor and vulnerable households in Nigeria. This program is expected to be financed partly by the government and partly through World Bank financed NASSP-SU.16 The program seeks to support 15 million households 13 As a part of NASSP, a set of more intensive safety net interventions were piloted at small scale. The pilots included interventions such as top-up conditional cash transfers, and livelihood training and grants. 14 The expenditures reported here only include the amount of cash transferred to the beneficiaries and the associated direct cost of transfer. 15 Launched by the government as “The Renewed Hope Conditional Cash Transfer Programme� 16 The government has appropriated NGN 500 billion towards this program as of January 2024. The World Bank financing under NASSP-SU amounts to US$ 800 million, out of which US$ 600 million is earmarked for the ESR-CT. 11 with NGN 25,000 per month for a period of three months.17 In 2023, the program provided support to 2.06 million households and incurred total expenditure of NGN 51.6 billion on cash transfers and associated fees. National Home-Grown School Feeding Program (NHGSFP) The National Home-Grown School Feeding Program (NHGSFP) was launched in 2016 with the aim of ensuring one solid quality meal a day for children. In addition to providing school meals to incentivize schooling and improving nutrition, the program also seeks to create jobs for community members as cooks and to stimulate local agricultural production. The program provides one meal per day per child enrolled in grades 1 to 3 in participating public schools across all states in the country.18 The NHGSFP initially covered 34 states and the FCT, whilst Kwara and Bayelsa signed the MOU and officially joined in 2022 and 2023 respectively meaning it now provides full coverage for all states. The NHGFSP is the largest social assistance program in terms of its coverage. Its coverage increased steadily from 8.7 million schoolchildren in 2019 to about 10 million schoolchildren by 2022 (Figure 6.B). By 2022, this program had covered over 57,000 schools across all states of the country and provided employment to 127,000 cooks. Whilst the coverage of this program is extensive, it is still only covering a small proportion of the overall number of schools that would hope to opt into the program. The benefit levels are also low at NGN 70 per child per meal for hundred days in a school year. This program also receives the largest allocation among all NSIPs. In 2021, the NHGSFP received an allocation of NGN 139 billion and spent NGN 53 billion. The detailed breakdown of allocations and expenditures are not available for recent years. In aggregate, the total program expenditure from its inception till 2022 is supposedly NGN 201 billion.19 N-Power N-Power is a job creation and employment program that targets young Nigerians between the ages of 18 and 35. Launched in 2016, this program seeks to deploy unemployed youths, particularly graduates, in the communities towards public service delivery in education, healthcare, agriculture, and civic engagement. It also seeks to develop skills of unemployed youth (graduates and non-graduates) in key sectors including innovation and technology. Beneficiaries receive a monthly stipend of NGN 30,000 during the course of their deployment and could include material assistance such as computers depending on the nature of the beneficiary assignments. The exact duration of the assignment has fluctuated across schemes and over time. The N-Power has six specific schemes organized under the graduate and non-graduate streams. Under the graduate stream, N-Power Teach deploys beneficiaries as teaching assistants in primary schools; N- Power Agro deploys beneficiaries as agricultural extension workers providing advisory services to farmers; N-Power Health beneficiaries work towards improving preventative healthcare in their communities; N- Power VAIDS beneficiaries function as community tax liaison officers and encourage businesses and 17 The original design of NASSP-SU targets to reach 8.2 million households through the ESR-CT with monthly transfers of NGN 5,000 per month for a period of six months. 18 The intention of this program was that the states would finance the school feeding of children in grades 4 to 6 in the selected public schools. But state financing has not yet materialized in any of the states. 19 Based on newspaper reports: https://guardian.ng/news/n1-358tr-invested-in-nsip-in-six-years-says-humanitarian- minister/ 12 individuals in their communities to declare and pay taxes. The graduate schemes give priority to graduates with training in specific areas (e.g., healthcare for N-Power Health). Under the non-graduate stream, N- Power Knowledge beneficiaries receive training to be freelancers and entrepreneurs in technology and innovation sectors; N-Power Build beneficiaries receive accelerated vocational training and certification in specific sectors such as building services, utilities, construction, automotive, built environment services, and aluminum and gas. While comprehensive and consistent data is not available, the program is supposed to have benefited millions of beneficiaries. Between 2016 and 2022, the program is supposed to have benefited 1.4 million youths with a total expenditure of over NGN 890 billion.20 Government Enterprise and Empowerment Program (GEEP) The Government Enterprise and Empowerment Program (GEEP), targets micro, small, and medium enterprises (MSMEs), and provides zero-collateral soft loans to beneficiaries to expand their enterprises. The loan amounts differ by beneficiary groups but typically range from NGN 50,000 to NGN 300,000 for the duration of 9 months to 12 months. The GEEP has three schemes for micro loan provision. The TraderMoni targets petty traders and artisanal youths (ages 18 to 40 years) from underprivileged and marginalized groups; the MarketMoni targets women-led SMEs within established market association clusters (such as tailoring, fashion, jewelry trading); the FarmerMoni targets farmers belonging to aggregator farming groups. While authoritative data on number of beneficiaries and expenditures are not available, the reach of the program seems to have declined in recent years. Between 2016 and 2019, the program supposedly reached 2.4 million beneficiaries. After the introduction of GEEP 2.0 in 2020, the program has supposedly reached about 175,000 beneficiaries by early-2023 across its three schemes and had spent around NGN 17.6 billion.21 4. State budgeting and implementation is fragmented While social protection budgeting at the federal level is concentrated, budgeting at the state level is fragmented. At the state level, social protection budgeting is spread across various ministries, departments, and agencies (MDAs). In 2022, a total of 276 MDAs across the 36 states received a budgetary allocation under social protection (Figure 7.A). The median state had 10 MDAs receiving social protection budgets. Edo had the highest with 23 MDAs receiving social protection projects; Osun had the lowest only 1 MDAs receiving social protection budget allocation. While data on a comprehensive set of programs and 20 Based on newspaper reports: https://guardian.ng/news/n1-358tr-invested-in-nsip-in-six-years-says-humanitarian- minister/. Recent numbers on the government's review suggest the total expenditure for this program to be NGN 1.44 trillion as of May 2023 and benefiting 1.5 million beneficiaries. Detailed beneficiary breakdown information is not available, but (unverified) reports from program officials indicate over 900,000 deployed under N-Power Teach, over 150,000 deployed under N-Power Health, and over 300,000 deployed under N-Power Agro. Furthermore, over 32,000 were trained under the N-Power Knowledge stream. Detailed numbers are not available for other non- graduate schemes. 21 Based on newspaper reports: https://guardian.ng/news/n1-358tr-invested-in-nsip-in-six-years-says-humanitarian- minister/. 13 implementing MDAs are not available, a snapshot of such programs collected through the data collection exercise under this study is presented in Annex 3. This fragmentation is reflected at state level implementation too. At the local level, agencies related to social investment, youth development, community and social development, planning, environmental protection, cash transfers, women affairs, and emergency management cover about half of the state-level social protection expenditures.22 The rest are implemented by a plethora of organizations scattered across various MDAs. FIGURE 7: BUDGETING AND IMPLEMENTATION IS FRAGMENTED AT THE STATE LEVEL A. LARGE NUMBERS OF MDAS RECEIVE SAFETY NETS B. … BUT KEY PROGRAM OBJECTIVES ARE SIMILAR BUDGET ALLOCATIONS ACROSS STATES Source: World Bank estimates based on data state level budget allocation for 2022. A few themes dominate social protection programs at the state level. Programs supporting family and children and the unemployed account for more than half of the state-level expenditures on social protection (Figure 7.B). Other key themes are addressing exclusion, housing support, support for the sick and the disabled, and support for survivors of conflict. The thematic similarity together with fragmented budgeting and implementation suggest scope for thematic, programmatic, and institutional consolidation at the state level to deliver the safety nets program. Consolidation can improve efficiency by reducing fixed costs such as personnel and operational cost across institutions. For instance, there are at least ten separate CCT programs being implemented at the state levels.23 Whilst some of these condition on specific areas (disability services in Jigawa and school attendance in Kebbi, for example), there are many that have overlap in terms of their target beneficiaries and conditionalities. For public works there are eleven separate programs being implemented at the state level. Many of these are small-scale and face high costs for the procurement of materials and equipment as inputs for micro- projects. They maintain eleven separate administrative units overseeing their implementation, which significantly impacts the efficiency of these programs. 22 Based on data collected by the World Bank team during the preparation and implementation of NG-CARES program. 23 Based on the listing exercise undertaken as part of the preparation for the NG-CARES Project and updated for this study. The list is presented in Annex 3, and a description of the selected set of key programs is presented in Annex 4. 14 The fragmentation makes monitoring of programs and expenditures very difficult. In addition to the higher fixed costs, fragmentation of budgeting and implementation makes it difficult to monitor expenditure and track results of social protection programs in the states and at the local levels. The fragmentation has also led to an absence of coordination across programs. Each program has its own, at best weak and more often nonexistent, management information system and program monitoring and evaluation systems.24 5. External financing plays important role in social protection expenditures in Nigeria The total Official Development Assistance (ODA) flows to Nigeria earmarked for social protection are sizable compared to federal expenditures on social protection. Between 2010 and 2017, the average annual ODA flows towards social protection were approximately USD 16.7 million representing mostly small-scale projects (Figure 8).25,26 Between 2018 to 2022, the average annual ODA flow increased drastically to USD 147 million as disbursements under a few large-scale programs (such as the World Bank financed NASSP) began. ODA flows towards social protection were typically larger than the federal expenditures prior to 2018. Federal expenditures increased drastically in 2020 and 2021, largely owing to the NSIO programs as discussed above. Between 2015 and 2021, ODA flows on social protection were about 60 percent of the federal expenditures.27 However, the ODA flows earmarked for social protection expenditure still remain relatively small compared to other sectors. Whilst the social protection sector attracted some USD 873 million between 2010 and 2022, this ranked as one of the least funded sectors for ODA financing. Social protection financing was only 2.2 percent of the total ODA flow of USD 39 billion over this period. For comparison, education received 7.0 percent, health received 19.9 percent, water and sanitation services received 4.3 percent, and humanitarian aid received 11.4 percent. FIGURE 8: OFFICIAL DEVELOPMENT ASSISTANCE ON SOCIAL PROTECTION IS COMPARABLE TO FEDERAL EXPENDITURES 24 For instance, when the World Bank team visited eight states across the country to collect data on social protection programs and their expenditures, it was impossible to collect reliable data across the states in a uniform fashion. The source of information was often hard to find, and even in cases where data and information exist, they are present in a haphazard and ad-hoc manner. 25 The Creditor Reporting System of the development finance data, from which these numbers are derived, define social protection as: Social protection or social security strategies, legislation and administration; institution capacity building and advice; social security and other social schemes; support programs, cash benefits, pensions and special programs for older persons, orphans, persons with disabilities, children, mothers with newborns, those living in poverty, without jobs and other vulnerable groups; social dimensions of structural adjustment . 26 The flows in the context of this data represent disbursements. While disbursement is not the same as actual expenditure on the programs, it is a close proxy – especially when looking at patterns across the years. 27 One caveat to this comparison is how the NASSP program expenditures, which are also part of the NSIO programs as discussed above, is coded in the federal budget and expenditure numbers. If NASSP cash transfer expenditures were included in the federal expenditure numbers, ODA flows on social protection would be about the same size as the federal expenditures between 2015 and 2021. Since program specific budget and expenditure data on the NSIO programs are not available, it is not possible to confirm which is the correct comparison. 15 Source: World Bank staff calculations based on development finance data (OECD 2024)28 and harmonized federal budget and expenditure data compiled by the World Bank (World Bank 2022a). The World Bank is an overwhelmingly large source of ODA flows to Nigeria for the social protection sector. Between 2010 and 2022, the World Bank accounted for over 92 percent of the ODA inflows to Nigeria and social protection. This is primarily due to programs like the Community and Social Development Program (CSDP), the National FADAMA Development Project, the Youth Employment & Social Support Operation (YESSO), the NASSP, and the NG-CARES. Reliance on external financing represents a significant fiscal vulnerability for the protection of the poor and vulnerable. For instance, when the World Bank financing through NASSP had ended in 2022 and the follow-on NASSP SU had not begun disbursement till late 2023, existing program beneficiaries were not able to receive any support for a period of over a year. 6. Policy recommendations As one of the lowest spending countries globally on social protection, there is significant room for Nigeria to improve both its existing expenditure and budget management practices. Some of the core policy priorities over the short to medium-term may include: 1. Increasing federal and state level government financing for the social protection sector . At current levels of expenditure, there is no alternative to increasing total fiscal envelope dedicated to the social protection sector. Additional spending will ensure that the government can reach to more poor people to help them escape poverty and ensure sustained financing for those being supported. A mind-shift is required to view safety nets expenditures as an investment on Nigeria’s people. Safety nets are not a handout, nor a palliative that only tends to the surface of the problem. Evidence from 28 Data accessed on February 23, 2024 through the Query Wizard For International Development Statistics (QWIDS) online portal: https://stats.oecd.org/qwids. 16 around the world, and those coming from Nigeria as well, demonstrate that safety nets can make significant dent in the fight against poverty. 2. Strengthening the management of social protection expenditure. Consistency in budget management will improve beneficiary outcomes across all of Nigeria’s social protection programs. The uncertainty around budgeted allocations for SP and corresponding volatility in budget execution rates impacts the ability of Nigeria’s SP system to have a meaningful impact on poverty and vulnerability outcomes. Whilst the challenges associated with budget management are not strictly confined to the SP sector, they do have material impacts on the sector’s performance. Reforms at the federal level to improve the accuracy of revenue projections and avoid delays in passing budgets will create flow-on benefits for the SP sector. There are significant discrepancies between budget allocations and execution rates for the social protection sector. All of the core government financed social protection programs should be shown explicitly in the budget, particularly those covered under the NSIP. The relevant implementing ministries and agencies should work with the MoF to ensure that all social protection programs are explicitly present in the budget, including their recurrent expenditures, transfer or payments, and corresponding financing sources. This would provide the grounds for keeping track of the amount of resources being allocated to the sector, the composition of spending, and sources of financing. It would also serve the purpose of improving the coordination, monitoring, and auditing arrangements for social sector expenditures. Likewise, building strong program data management and accountability systems – enabled by technology – can further improve efficiency. Strengthening program data and information management systems, by leveraging technology can improve budget and expenditure management to hold programs and agencies accountable for the results and allow for a more efficient allocation of resources. 3. Exploring scope for channeling additional ODA flows towards social protection sector. Whilst Nigeria receives significant ODA flows (some $US66 billion between 2010 – 2020), only 2.1 percent of that was earmarked for the social protection expenditure. Given the significant needs and coverage gaps that exist, coupled with the challenges in carving out sufficient fiscal space for additional tax financed expenditure, there could be a case for increasing the portion of ODA flows that are channeled towards the social protection sector. 4. Exploring the potential for channeling humanitarian cash and voucher assistance (CVA) funding flows through Government’s social protection system. The total humanitarian financing flows directed towards Nigeria currently outsize federal social protection expenditure. As the Government invests additional funding in building out the National Social Registry, as well as other aspects of its social protection delivery system (MIS, payment systems etc.), there may be efficiency gains in channeling some of the current CVA expenditure from the humanitarian sector through government systems. 17 References OECD. 2021. “Classification of the Functions of Government (COFOG).� https://www.oecd- ilibrary.org/content/component/95603f6f-en. ———. 2024. “International Development Statistics Online Database.� https://stats.oecd.org/qwids. World Bank. 2022a. “Nigeria Public Finance Review: Fiscal Adjustment for Better and Sustainable Results.� Washington, D.C.: The World Bank Group. http://documents.worldbank.org/curated/en/099615211172222358/P1750950fbd29d0200842 9007d1ed499d61. ———. 2022b. Nigeria Poverty Assessment 2022: A Better Future for All Nigerians. World Bank. https://doi.org/10.1596/37295. ———. 2023a. “ASPIRE: The Atlas of Social Protection Indicators of Resilience and Equity.� https://www.worldbank.org/en/data/datatopics/aspire. ———. 2023b. “World Development Indicators.� World Bank. 18