The immediate costs of the coronavirus (COVID-19) pandemic on education in Nigeria are evident. With school closures that have persisted for ten weeks, students - especially the most vulnerable, are missing out on learning. The government and individual schools are adapting by switching mediums and delivering learning through digital platforms. However, the stark digital divide (in terms of both infrastructure and knowledge) that plagues the country is resulting in an exacerbation of pre-existing educational inequalities. The cost of recovery will be high, but the sector will inevitably be confronted with a costlier issue: between the effects of the pandemic and crashing oil prices, the fiscal space to fund basic education will shrink significantly. 

Revised Budget - Fall in revenue from the dual shock of COVID-19 and crashing oil prices

The prolonged disruption in economic activity due to the pandemic, combined with the collapse of oil prices and the reduction in demand for Nigeria’s oil products are severely impacting Nigeria’s fiscal position. The International Monetary Fund projects that the economy will contract by 3.4 percent in 2020, a fall from the previously anticipated 2 percent growth. The total budget, which was set at N10.59 trillion is in the process of being revised downward by about 15 percent. Oil and gas exports, which make up around 76.1 percent of Nigeria’s total exports and more than half of revenue, are predicted to fall drastically, with oil revenue being revised downward to N924 billion from N2.64 trillion. Non-oil revenue targets have also been revised downward by 10 percent, as industries across all sectors continue to grapple with the effects of the pandemic-induced disruption in economic activity. In sum, total revenue has been adjusted downward by 34 percent.

With regard to actual performance, the projected numbers are close to performance as at the end of Q1. The reported gross and net oil and gas revenues were short by over 28 percent and 31 percent respectively, and non-oil tax revenue was N269.41 billion, representing a shortfall of about 40 percent of the predicted amount for Q1.

Dissecting the effect on education financing

While we don’t know the full extent of the economic crisis on education spending, we attempted to make a prediction by looking at education spending during and after the most recent oil crisis in 2014, and factoring in accessible education expenditure information at both the federal and state levels. This section is divided into two: what we know (information that is readily available), and what we don’t know (unavailable information).

What we know: Looking at a past oil crisis and the Federal Budget

• Looking at a past oil crisis - a decline in education prioritization

We analysed GDP and education spending during the 2014 oil price crash, where a fall in crude oil prices from $100/barrel to $52.65 led to a decline in total budgetary allocation from N4.694 trillion to N4.493 trillion in 2014. The fall in crude oil prices negatively affected total allocation to education, as it declined from N496.783 billion to N484.26 billion, but the share of education budget was maintained, increasing slightly to 10.7 percent. 

In 2016, crude oil prices further declined to $43.73, but total budgetary allocation grew to N6.06 trillion. At the time, the government was able to increase the budget (by increasing debt), however given the country’s current debt burden and the global nature of the pandemic, borrowing conditions could be unfriendly, and borrowing could further worsen the country’s fiscal crisis. Despite this increase, the budget for the education sector was reduced to N480.278 billion in 2016. The increase in budget and the decline in education spending led to a decline in education budget by 3 percentage points in 2016. Since 2016, and before the current oil crisis, oil prices have been recovering slowly, and both the total budget and allocation to the education sector have increased consistently. However, the education sector budget, as a share of total budget allocation, has steadily declined since, reaching its lowest level of 6 percent in 2020. 

This trend is revealing. The value placed on education in Nigeria by the current administration can be gleaned by the drop in the share of education expenditure in the national budget, despite yearly increases in the budget. While both the national budget and the nominal amount allocated to education have increased, the share of education has been in a steady decline. Given that research has linked funding to education quality, to the extent that this decline persists, our education system will remain stagnated. 

• Federal budget

Nigerian budgets have tended to neglect the education sector in the past. In general, government spending is relatively small when compared with other African countries [see figure 2]. Prior to the current economic crisis, the education financing budget wavered around 9 - 10 percent of public expenditure {between 2008 and 2014: see figure 1}, against the recommended 15 percent to 20 percent.  Despite an increase in the total budget by over 255 percent between 2008 and 2020 {see figure 3}, the education expenditure as a share of total budget has fallen from 9.64 percent to 6.32 percent within the same period. Public spending on education as a share of GDP has remained below 1 percent since 2010 against the recommended 4 percent to 6 percent, and has decreased steadily since 2011, from 0.67 percent to 0.44 percent in 2020 {see figure 4}. 

Figure 1: Total Budget (Naira) and Education Budget (% of Total Budget)

Figure 2: Education Budget (% of GDP) and (% of government Expenditure)                                       

Figure 3: Total Budgetary Allocation (Naira)                        

Figure 4: Education Expenditure as a Share of GDP (Percent)

The current economic crisis signifies that there will be a reduction in total budgetary allocation to the education sector, which would further dent the already neglected sector. The original education allocation for 2020 was N653  billion, roughly 6 percent of the total budget expenditure. Of this, N111.789 billion is the statutory transfer from the Federal Government (FG) to the Universal Basic Education (UBE) fund, which covers the FG’s contribution to basic education in Nigeria. The UBE fund is the main tool the government uses to influence spending on basic education at the state level. The remainder covers recurrent and capital expenditure for all education expenditure that fall within the purview of the FG. 

Given the proposed cut in the budget,  dataphyte, an open data organisation, reports that the FG has proposed a reduction in its budgetary allocation to education by almost 55 percent. This reduction is reflected in the government’s statutory transfer to the UBE Fund. Outside of the UBE fund contribution, funding of basic education is wholly within the purview of the state governments. Other than the proposed UBE cut, we don’t yet know how the total education budget will be impacted by the proposed budget cut; however, if the proportion of education spending were to remain the same (6 percent), and the budget was cut by 15 percent, the federal education budget is expected to be around 541 billion. This means that there could be a further reduction in education spending by N51 billion, which will affect other aspects of education spending outside of basic education. 

Further, a quick back-of-the-envelope calculation that accounts for Nigeria’s revised growth projection, current education spending as a percent of total budget reveals that education spending could fall as low as N500 billion this year. 

What we don’t know - State funding and availability of aid.

• State Funding

Provision of basic education (9 years between primary school and junior secondary school) is in the purview of state governments. Unfortunately, there is a dearth of information on state budget and spending on education across all states, which makes it difficult to infer the potential impact of the present economic crisis on state education expenditure. However, we do know two things that shed light on both the states’ ability to spend, and their current economic situations. 

First, available state funding for basic education is limited for many states. The UBE funds available to the states can only be accessed upon meeting certain conditions, one of which is the provision of   a 50 percent counterpart funding to match the FG’s contribution (which is why the UBE Fund is called a matching grant). Unfortunately, many states are unable to meet this condition; as of February 2020, over N73 Billion is yet to be accessed by several states. Their inability to match the FG grant is reflective of the fact that their education budgets are small, inadvertently affecting basic education in their states - a fact that is evident in the poor quality of both infrastructure and learning at the basic education levels. 

Secondly, given the fact the lockdown measures and restriction on movements across states have taken a massive toll on the country’s economy, it is inevitable that this would result in budgetary shortfalls across all states in the country due to decreased tax revenue from all revenue streams. In 2019, the majority of state revenue was accrued through two sources: The Federation Accounts Allocation Committee (FAAC) (N2.47 trillion or 65 percent) and Internally Generated Revenue (IGR) (N1.33 trillion or 35 percent). The FAAC is a function of revenue derived through oil, which we know has been revised down by 35 percent. Of the IGR, 83.4 percent of IGR generated are from taxes while 16.6 percent are generated from state Ministries, Agencies and Departments (MDAs). Tax revenue through the IGR is also expected to decline given the reduction in sales, job losses and income cuts induced by lockdown measures and the slow down in the economy. Compounded by the need to increase public health spending across states in order to combat the virus, state budgets will also be adversely affected. 

Given that we don’t know how much is being spent on education at the state levels, we cannot make a confident projection of how much state education budgets will fall by. But what we know is this: public (basic) education will suffer both during and after the pandemic. 

• Education Aid - Can it plug the gap? 

Measuring the contribution of aid to education spending in Nigeria is tasking. First, aid to the sector is highly decentralised, with donations focusing primarily on specific projects within individual states, and secondly, in general, there is paucity of data with regards to incoming funds into the sector. However, a report on the effect of aid on education financing in Nigeria found that external aid only contributed marginally to public expenditure of basic education in Nigeria. The report suggested that even a substantial increase in aid would do little to bridge the gap in the current level of funding and the amount required to achieve education goals. It found that between 1999 and 2009, education aid only contributed to 1.5 percent of total domestic expenditure (on primary education alone). Additionally, recent data from USAID reveals that in 2019, education aid to Nigeria was at its lowest after a peak in 2015 (at $84 million), falling 78.6 percent between 2015 and 2019.

Given this, and the global nature of the pandemic-induced economic crisis, it is unlikely that aid to the education sector will fill the education finance void. At best, education aid will remain at the same level, or at worst case, it will reduce. Though international organisations, the World Bank for example, have committed to boosting aid to support developing countries in their recovery, it will be difficult to extrapolate how much of this total aid will reach education sectors around the world. 

Recommendations

Nigeria continues to lag behind in terms of education financing, and with the current national and global economic outlook, the prospects for increased financing in the immediate future are bleak. Given this, the government will need to make difficult decisions about how and where to channel scarce resources available at both the national and sectoral levels. With this in mind, there are a few key things to consider:

National level

• Prioritizing education funding: While there are a lot of moving parts involved in improving the access to quality education and inadvertently education outcomes, one key thing remains significant: money matters. 

Empirical evidence suggests that lack of equitable and adequate funding is a key driver of unrealized education goals. Researchers have found that adjusting school spending by 10 percent leads to a reduction in test scores by around 7.8 standard deviation (10 percent cut), and increase in test scores by 0.05 to 0.09 standard deviations (10 percent increase). Access to financing has been attributed as one of the reasons why Nigeria did not achieve its Millennium Development Goal (MDGs) targets for Universal Primary Education and Education for All, and is probably an underlying factor behind the fact that no state in Nigeria is on track to meet the SDG Goal 4 target - ensuring inclusive and equitable education for all. 

Money is a necessary underlying condition for achieving education goals. Increased access to financial resources provides the scope to achieve non-finance related education targets {indicators}. Education at all levels has suffered as a result of the pandemic, and by all estimates, students are lagging behind. We are at a critical juncture; ideally, the government would need to channel more resources into the sector to catch up, however, in a best case realistic situation, it will be important to at least maintain the pre-pandemic levels of financing. 

Sector level

• Immediate - Supporting evidence-informed decision making: Money matters, but how money is spent is critical too. Given the scarcity of resources, it is important to monitor how resources are being allocated, and to determine if resources are achieving expected results/outcomes in order to maximize scarce resources for maximum impact. The government must channel resources and efforts toward creating a culture of learning through results-based monitoring and evaluation. All resource allocation decisions made within the sector should be augmented by three activities: tracking use of funds, measuring its outcomes/impacts against expected results, and making necessary adjustments based on findings. This should be supplemented by incorporating a results-based financing approach that removes the current arbitrary nature of funding, and directly links funding decisions to achieved results.
• Long-Term - Develop a strong National Education Account: There is paucity of readily accessible data on state level education financing and education aid across the country, making it difficult to determine how much is being spent on education financing across Nigeria. Additionally, data about private financing/household spending on education is also limited. Collating this data is important because it allows us to glean vital information, such as whether our problem is inadequate funding, or improper use of available funding. A solution to this is to build a strong and holistic National Education Account (NEA). An NEA provides a framework for comprehensive data collection and analysis that covers all sources of funding at all levels of education and across all types of education providers. A holistic NEA will allow us to see not just how much money is spent on education across Nigeria, but it will allow us to determine who is spending money, and what money is being spent on. Developing an NEA will be difficult, but UNESCO offers a step by step guideline to help countries in developing NEAs. 

To conclude, increasing education financing, and improving data collection, tracking and impact of financing is no panacea for all of Nigeria’s education ills, but it offers a step in the right direction. Monitoring the flow of money through the system and ensuring effective use, provides a necessary condition for improving all other factors that matter for equitable access to quality education and improved outcomes. 

Due to the COVID-19 pandemic, over 250 million primary and secondary children are out of school in Africa. If schools only reopen when normalcy returns, which is estimated to be in 2021 at the earliest, an inclusive learning approach that leaves no child behind, especially in Africa, is essential.

According to the World Bank, 87 percent of children in sub-Saharan Africa are learning poor and lack functional skills in a dynamic labor market. While the shutdown only creates a temporary out-of-school problem, prolonged closure can make being out of school permanent for some children, especially older ones that might be more easily lured into precarious job markets. This will add to the millions of children that were already out of school prior to the pandemic. Additionally, ancillary school services like school meals, sanitary pads, and immunization are disrupted while schools are closed.

The various stopgap measures to continue learning are not suitable for Africa and could in some instances amplify learning inequalities. Remote learning platforms require internet and hardware that are inaccessible to rural and poor households. In fact, a recent Brooking report estimated that less than 25 percent of low-income countries provided remote learning opportunities compared to about a 90 percent adoption rate in high-income countries.

Widely accessible mediums like radio and television are centered around mass education and will be difficult to target to children that are not learning under normal school settings. Sierra Leone’s experience with Ebola is instructive and points to the possible trajectory for other African countries with prolonged school closures. After eight months of closed schools, most children returned unable to recall material pre-Ebola, despite the use of radio and television mediums.

Based on what is known about COVID-19 and the effectiveness of social distancing in reducing its spread, a partial reopening of school can be implemented at no cost or disruption to flattening the curve. The optimal approach for reopening will be context specific, but here is a simple approach that illustrates the basic idea.

Let us imagine the most disadvantaged location with no access to digital platforms for personalized learning, which is reflective of many African regions. The approach is to open the school but replace face-to-face student-teacher interaction and regular school activities with contactless exchange of learning materials and progress.

Teachers will prepare the reading lists and assignments, while children simply pick up the daily task and submit the assignment from the previous day; school will serve as exchange, rather than meeting point. Based on grade, children might be allotted different times to avoid overcrowding and improve social distancing while ensuring more targeted learning. This simple cycle can be improved based on the reality on the ground. For example, targeted lessons can be given for children lagging behind.

The priority can be given to core academic subjects, such as mathematics and language, while other subject teachers in the interim act as assistants. The government can also recruit volunteers to assist teachers in implementing the plan, and the education workforce should be declared essential. Children can temporarily attend the school closest to their homes, and other costless adjustments should be considered.

This approach does not in any way preclude use of digital platforms, when and where available. With this arrangement, children can access other ancillary school services amid the pandemic.

MULTISTAKEHOLDER SUPPORT CAN MAKE THE APPROACH WORK

The government will be crucial to the successful implementation of this approach. Effective information sharing, investment, and purchase of learning materials are required, as is adequate sanitation of school premises. With appropriate copyright negotiation, learning materials can be mass produced using local resources. Mobilization of private sector resources and other innovative solutions is also needed. In all of this, peer learning about what works both within and outside a locality is essential.

Community and civil society also have a role to play. Through mobilizing local resources, they can help fill the likely financing gap for education, given the recent shock to government revenue. Their role in monitoring and evaluating both government support and school management and teachers’ activities could help drive success of the partial reopening. Community support will drive parents’ confidence in sending children to school.

The COVID-19 pandemic has made an already difficult task of providing inclusive and quality education for all even harder. The economic impact will be ephemeral as normalcy returns and economies grow again. However, the impact on education can be lifelong and irreversible for children who lose learning opportunities or completely drop out. For a continent with an enormous human capital deficit, learning cannot wait for complete normalcy to return and a partial reopening of schools will help in this regard.

This article was first published on Brookings

The rise of Boko Haram has plunged North Eastern Nigeria, and particularly Borno State, deeper into educational crisis. While rebuilding infrastructure is already underway, and is certainly a good step, ensuring that the region is in a condition to recover must involve a much more careful and all-encompassing drive to ensure the state’s youth are given the opportunities every child needs and deserves.

The name ‘Boko Haram’—roughly translated as ‘Western/formal Education is sinful’—alone tells the story of the group’s position on formal education. While the numbers are tentative at best—Nigeria lacks sufficient disaggregated data for adequate appraisals of local situations—UNICEF estimated 1.8 million Borno State children remained out of school in 2016, largely owed to the presence of Boko Haram. The numbers are likely to have reduced since then, but the lack of reliable data makes the current damage difficult to estimate. Furthermore, the net-intake rate in Borno State—that is the number of children entering first grade at an age considered to be appropriate—stands at a measly 19%, and is amongst the lowest in the country.

Access to education according to the World Bank, “is a basic human right, and is central to unlocking human capabilities.” The current attack on educational opportunities in the North is certain to have long lasting ramifications on the prospects of the region’s development. Out-of-school children not only “face a higher risk of recruitment by armed groups, child marriage, early pregnancy and other forms of exploitation and abuse,” but also remain fundamentally ill-equipped to productively contribute to a post-conflict economy—further enhancing the malcontent that fuels tensions in the first place.

However, poor attendance is far from being the only problem facing the education sector in Nigeria, and more specifically in the North East. Learning poverty, a concept introduced by the World Bank to measure not just ‘quantity’ but also the quality of learning in developing countries, is rampant and damages the prospects of children irrespective of whether they succeed in attending school. For example, only 23% of the children in the North East that have attended formal school could read and comprehend a simple sentence either in English or local languages, highlighting how being in school, on its own, is not an automatic precursor to learning and human capital development.

The learning deficit experienced in the North-Eastern Region is placing its population at a severe disadvantage. Irrespective of whether children are able to attend school, without foundational learning of skills like reading and writing they will often fail to flourish later in life, whether in more advanced stages of their schooling or when they join the workforce. They thus fail to acquire the necessary human capital to have access to productive activities that can allow them to provide for their families, as well as engage as citizens in their communities. High learning poverty, therefore, is a structural obstacle to Nigeria’s progress towards achieving the Sustainable Development Goals given the integral nature of job creation, structural transformation, sustained growth and poverty reduction to Agenda 2030.

The Boko Haram Effect

While the causes of learning deficit in North Eastern Nigeria are undoubtedly diverse, the growth of Boko Haram over the last decade has given rise to a number of interrelated effects that are severely deleterious to the prospects of education for local youth, and underlie the damning statistics of learning paucity and regional inequality described above. A severe lack of access to schooling from violence and infrastructure destruction; poor teaching numbers and quality; insufficient managerial capacity to ensure the observance of standards; and an ill-conceived educational approach, are all exacerbated by the insecure climate in the states, and combine to create to learning crisis as witnessed in recent times.

It is estimated that Boko Haram has destroyed more than 5000 classrooms and school buildings in Borno State alone, systematically depleting the infrastructure required to extend education to communities particularly in rural, sparsely populated areas. To this end, the government’s drive to build “mega-schools” in the state to replace the lost infrastructure is certainly commendable.

Yet Boko Haram’s attack on schooling opportunities for Borno children goes beyond the destruction of infrastructure, and includes the creation of a climate of fear that shrouds the mere act of going to school in a veil of deep insecurity. Boko Haram’s abduction of 276 schoolgirls in the town of Chibok in Borno State was merely the most extreme and widely-reported symptom of a broader, often underappreciated threat: the methodical attack on schoolteachers and students to undermine the very institution of formal education. As of the end of 2018, more than 2300 teachers had been killed, aggravating the lack of avenues available to extend education to children across the region.

The killing of teachers is inextricably linked to the issue of learning poverty, and compounds with other factors to severely limit the effectiveness of teaching and education even when children are able to attend school. Not only has Boko Haram turned teaching into a dangerous profession, but it has also damaged the societal reputation of the profession. Fear of violence, and decreased reputational benefits of the job make hiring teachers committed to the betterment of the lives of their students increasingly difficult, which has led to a severe scarcity of teachers. The dearth of teachers, in turn, has led to a teacher-to-pupil ratio well below national guidelines thus damaging the classroom experience of children, so crucial in ensuring attendance translates into learning.

Malnutrition making children unable to learn; poor stimulation making them unwilling; poor teachers’ qualifications; lack of learning materials such as textbooks; unprofessional school management; and the lack of administrative capacity in education bureaucracies added to the low teacher numbers. These factor complement each other in determining poor learning outcomes, and must all be considered in addition to policies aimed at increasing attendance.

There is yet one more problem, however, that distinguishes youth development in conflict zones from other underdeveloped regions, and poses a challenge that extends much deeper than the all-too-common issues of low attendance and learning poverty. Children growing up surrounded by conflict are far more likely to develop psychological responses to trauma that greatly hinder their comprehension, ability to produce work, engagement in learning, and trust—all absolutely necessary in the education of a child. Without active focus on addressing the peculiarities of children exposed to violence, these children are far less likely to grow up to be positive, productive individuals in their society, oppositely exposing them to a life of criminality and compensatory violence.

Where we go from here

The multidimensional attack on education prospects of children in North Eastern Region requires a multi-pronged response. Again, the current government emphasis on rebuilding infrastructure, although necessary, is wholly insufficient if the ultimate target is to provide children with the opportunities required to grow up healthy, productive, and safe. The re-establishment of schooling facilities, therefore, must be complemented with a rigorous effort to end learning poverty, and ensure that children complete and leave school having learned the basic skills they will require. This will necessitate a drive to hire more qualified teachers which, again, may potentially be problematic given the adverse effects of the crisis on the motivation for teaching labour force. Hence, a concerted and well-thought out strategy—including perhaps financial incentives—to help make teaching a sufficiently attractive occupation will have to be developed. Furthermore, teachers are too often found to be insufficiently interested in the education of their pupils. Their lack of interest is exacerbated by an institutional lack of supervisory capacity, which therefore leave teachers unaccountable. Ensuring quality instruction requires effective supervision that will have to be part of the restructuring of education in affected region.

Improving numbers and commitment of teachers should be part of a more holistic attempt to improve  the classroom experience, which is a prime determinant of children’s learning. A wider focus to ensure children are well fed, healthy, and committed to education, and that the facilities at their disposal act as a conduit, not an obstacle, to their development cannot be taken for granted or relegated as secondary issues. The success of any education project must be measured in terms of learning outcomes, whose sufficiency can only be achieved in environments suited to learning. Concerns, pecuniary of otherwise, leading to a lack of focus on classroom experiences in favour of the mere access to schools must take into consideration that attendance alone does very little in guaranteeing the requisite education outcomes.

Above and beyond education policies suitable to any environment where schooling access and quality are lacking, children in North East Nigeria require a strong initiative that is tailored to the needs of the children of conflict. This must begin with a re-education of teachers in the skills needed to help pupils coming from traumatic experiences, which should be compounded with greater access to guidance counsellors trained in trauma recuperation. Building positive relationships, fostering positive emotions through positive priming, and teaching character strength have all been shown to be paramount to the recuperation of children who have suffered. Education system must go beyond teaching their students to read (in itself not so easy, as highlighted above), but must be well-suited to develop the types of relationships that “children of conflict” require.

While the physical interactions with teachers are the most important aspect in helping children exposed to trauma, the effort to ensure this focus must begin at the policymaking level. Affected states in the North Eastern Nigeria, as well as the relevant Federal Government agencies like the Ministry of Humanitarian Affairs and the North East Development Commission must first acknowledge the need for special education initiatives, and subsequently seek creative solutions. Creating an inclusive partnership with local and international partners as well as with education policy experts with the aim of training teachers, and designing appropriate curriculums, will be vital for the children in the Northern Nigeria.

While Boko Haram continues to wreak havoc in Northern Nigeria, the local population, and children in particular, will inevitably be denied access to an environment secure enough to permit their thriving. While some efforts to re-establish a semblance of educational normality have been made, the only hope for the region is a concerted and radical restructuring of the paradigm guiding the education of the youth. Only then will children be afforded the opportunities they need and deserve to build themselves a life befitting of their needs and the suited to a positive societal contribution.

The past few weeks have ushered in a range of government-sanctioned and structure-shifting risk-control directives across Nigeria and the Globe, in an attempt to curtail the spread of the novel coronavirus disease- COVID-19. From international airport closures, to a nationwide closure of all schools, and now, a two-week lockdown of three major states - Lagos, Abuja and Ogun, the ramifications from the slowdown/shutdown of economic activity are poised to be severe for Nigeria. It is especially critical, because in the backdrop of COVID-19, the global economic crisis and the recent slump in oil prices are further expected to intensify the impending economic crises, and create sharp shocks that will reshape the economy in the near term. 

For some sectors, the immediate ramifications are evident. One of such sector is the basic education sector, the impact of which has been largely felt by students. The nationwide school closures have disrupted learning and access to vital school-provided services for a record number of students in Nigeria. According to UNESCO, almost 40 million learners have been affected by the nationwide school closures in Nigeria, of which over 91 percent are primary and secondary school learners. In a short time, COVID-19 has disrupted the landscape of learning in Nigeria by limiting how students can access learning across the country.

As the world grapples with the COVID-19 pandemic, countries are putting in place significant fiscal policy measures to counteract the sudden stop in economic activities. These spending plans aim to minimise disruptions to liquidity and ensure the solvency of sectors, businesses and households that are most affected by the pandemic. Understandably, low-income countries with smaller fiscal room would not be in a position to deploy robust spending plans to mitigate the shock. The data from the IMF’s Policy Responses to COVID-19 Tracker supports this hypothesis. So far, the spending plans of countries in sub-Saharan Africa is 0.26% of GDP on average, which is considerably lower than the average of countries in Europe and Central Asia, and North America at 9% and 11.5% of GDP, respectively.

On 2 April, Africa’s Ministers of Finance solicited for debt relief from bilateral, multilateral and commercial creditors in order to improve their fiscal position. Similarly, a group of senior Africans have called for immediate debt relief for African countries in order to create the fiscal room required for governments to combat the pandemic. It is, however, noteworthy that African countries were offered about USD 99 billion in debt relief under the Heavily Indebted Poor Countries (HIPC) initiative and Multilateral Debt Relief Initiative (MDRI) in 1996 and 2005 respectively. However, coronavirus debt relief will not only be provided to countries with unsustainable debt burdens, as was the case previously, but to the entire continent. 

This article attempts to make a case for African countries, particularly those in sub-Saharan Africa, to have recourse to debt relief in the face of the COVID-19 pandemic while assessing the practicability based on the experiences from previous efforts.

Current levels of debt and debt servicing

Several African countries stepped into the pandemic under a high debt burden which offers them limited room for fiscal manoeuvre. For sub-Saharan Africa, government debt as a share of GDP has grown from 31.7% between 2010-2015 to 50.4% in 2020 with countries like Cape Verde, Mozambique and Angola recording debt levels as high as 118.9%, 106.8% and 90% of GDP respectively. 

"Out of the world’s 28 poorest countries, 27 are in sub-Saharan Africa with the region’s poverty rate standing at 42.3%."

Since 2010, more of these countries have gained access to the international capital market and as such, commercial creditors have become key players in providing credit to the continent. The change in the creditor composition will have severe implications for the request for debt relief given the historically low participation of commercial creditors in providing relief under the HIPC initiative.

The growth in debt has also led to rising debt servicing costs as debt service payments for several countries are higher or on par with national investments in key human capital sectors. 

In Nigeria, the 2020 budget allocates NGN 2.43 trillion to debt servicing, while NGN 706 billion and NGN 464 billion have been allocated to the education and health sectors respectively. Similarly, in 2020, Ghana has earmarked GHC 13.9 billion to debt servicing, while spending GHC 10.68 billion and GHC 4.24 billion on education and health respectively. South Africa has also allocated similar amounts for debt servicing, basic education and health - at ZAR 229 billion, ZAR 265 billion and ZAR 229.7 billion respectively.

Why Africa needs debt alleviation 

Beyond debt, Africa has the weakest health infrastructure in the world. In a global review of health systems across 191 WHO member states, most of the countries that ranked within the bottom percentile are African. Specifically, out of the bottom 50 countries, 34 are in sub-Saharan Africa. As such, the health systems are not adequately prepared to respond to the needs of the population during the health crisis and will require significant finance.

Another reason why Africa should be considered for debt alleviation is that most of the continent (nine out of ten African countries) is commodity-dependent and, as such, is suffering from the recent demand shock associated with the pandemic. Where 41% of countries in sub-Saharan Africa are commodity-dependent, in Latin America and the Caribbean, East Asia and the Pacific, the Middle East and North Africa, and Europe and Central Asia, the share is just 17%, 16%, 13% and 12% respectively. The reduction in revenue has, therefore, put pressure on the budgets of governments across the continent with spillover effects to the rest of the economy.

"In Nigeria, which has a population of 195.9 million people, less than 500 ventilators are available."

Moreover, due to structural issues, larger than normal fiscal spending is now required on the continent. According to the International Labour Organisation, 66% of total employment in sub-Saharan Africa is in the informal sector which is characterised by low wages. 

Poverty is another issue. Out of the world’s 28 poorest countries, 27 are in sub-Saharan Africa with the region’s poverty rate standing at 42.3%. Considering that a large share of the population does not earn a certain threshold of income sufficient enough to meet their needs, the continent will require large safety nets for its citizens as the pandemic spreads. 

Furthermore, given the low investment in manufacturing in Africa, many countries have limited access to the medical supplies and associated equipment required to combat the pandemic. In Nigeria, which has a population of 195.9 million people, less than 500 ventilators are reportedly available. Others are in a worse situation: Zimbabwe, which has a population of 14.4 million people, has around 20 ventilators in public hospitals across the country while the Central African Republic, with a population of 4.6 million people, has only three ventilators. Significant financial resources will also be required to address the shortfall in personal protective equipment for health workers over the coming weeks and months. 

What kinds of debt relief should be made available

A standstill for debt servicing for an agreed-upon time will immediately free up resources for African countries to combat the pandemic. Considering that governments spend a considerable share of their budget on repaying the principal and interest payments of their debt, providing the latitude to hold off on these payments in the short term will offer the flexibility required to focus on the crisis. In addition, grants and concessional loans with low-interest rates and long grace and maturity periods should be made available to the continent. Multilateral and bilateral creditors alike can play a more proactive role in this area to make such funds available.

While the creditor community has evolved to include a larger group of commercial creditors, multilateral and bilateral creditors continue to provide considerable amounts of credit to the continent. Judging from the experience of the HIPC and MDRI, these creditors are likely to participate in a coronavirus debt relief programme. Indeed, multilateral development organisations, including the World Bank and International Monetary Fund as well as bilateral development partners, such as the G-20, have already stated their commitment towards providing support to developing countries.

Despite the urgent need for finance, African governments can also achieve quick wins without waiting on the international community. In this regard, the following policy actions are recommended:

• The use of a mix of timely and targeted policies such as temporary tax relief is recommended considering the shortfall in public finance for cash transfers. Payments on personal and corporate income tax should be waivered during the crisis to ensure that households and businesses are financially secure.
• Now more than ever, African governments need to reprioritise their revenue and spending objectives. The focus should be placed on key human capital sectors, such as health, as well as import-substitution policies focused on manufacturing to build the capacity to weather the effects of the pandemic.
• The government and private sector should cooperate to locally manufacture the medical supplies and equipment required to tackle the pandemic. This is crucial given the already high global demand for supplies for which Africa will now have to compete. While governments can provide the means, the technical know-how and corporate philanthropy offered by the private sector should be leveraged to deliver such goods.

The COVID-19 pandemic has required that people, businesses and governments across the world pool resources to tackle the problem. Cuban doctors flew to Italy to provide support as the country became overwhelmed. Jack Ma, the co-Founder of Alibaba, has provided free medical supplies to all African countries. In the spirit of goodwill and global partnership, Africa should be provided debt relief to assist its governments in adequately combating the pandemic. 

This is especially important considering that COVID-19 is a social collective ill: until all countries are free of the virus, no single country is truly free.

The opinions expressed in this interview are those of the author(s) and do not necessarily reflect the views of SAIIA or CIGI.

This article was first published on Africa portal