Drivers of Disparity: How Policy Responses to COVID-19 Can Increase Inequalities

This policy brief examines how COVID-19 macroeconomic responses in Nigeria and Uganda have inadvertently increased inequalities. It finds that cash transfers are underfunded and poorly targeted, excluding the urban poor; monetary easing has not lowered commercial loan rates for high-risk borrowers; and budget restructuring has prioritized formal sectors and government suppliers over health, education, and social protection. The brief recommends using electronic platforms for cash distribution and promoting renewable energy investments for low-income households.

• Cash transfer programmes in Nigeria and Uganda suffer from inadequate funding and poor targeting, leaving a vast majority of the poor without support. In Nigeria, approximately 81% of poor people are excluded from the National Social Register, while in Uganda, only 1.5 million people benefited from the Urban Cash for Work Programme despite 10 million people living in poverty.
• The design of social safety nets often overlooks the 'newly poor' in urban areas. Nigeria's targeting of the poorest 30% of households in high-poverty states primarily benefits rural agrarian communities, excluding urban SME owners, drivers, and cleaners who are highly susceptible to pandemic-induced income shocks.
• Macroeconomic relief measures such as tax relief, debt moratoriums, and loan restructuring primarily benefit the formal sector, excluding the informal sector which employs 80% of the labour force in both Nigeria and Uganda. This disproportionately affects women, who make up 74% of non-agricultural informal workers in sub-Saharan Africa, and agricultural workers.
• Reductions in central bank policy rates (from 13.5% to 11.5% in Nigeria and 9% to 7% in Uganda) have not translated into lower commercial lending rates. High-risk and low-income borrowers, including youth, women, and small-scale farmers, continue to face high interest rates due to a lack of collateral and perceived risks like price volatility.
• In Nigeria, the devaluation of the naira—with the official exchange rate moving from NGN 307/$1 to NGN 380/$1—has increased the cost of imports. This negatively impacts the manufacturing sector's access to raw materials and reduces the purchasing power of poor citizens through rising domestic inflation.
• The removal of fuel and electricity subsidies in Nigeria disproportionately affects the middle class and wealthy, as poor households often lack access to these services. For example, 43% of Nigerians, mainly in rural areas, do not have electricity access.
• Budgetary restructuring in Uganda and Nigeria has failed to prioritize the most vulnerable. Uganda's supplementary budget primarily benefited SMEs via the Uganda Development Bank and government suppliers, while Nigeria's 2020 budget saw spending reductions in health (11%), education (16%), and humanitarian affairs (12%).

APA

South African Institute of International Affairs (2020). Drivers of Disparity: How Policy Responses to COVID-19 Can Increase Inequalities. https://saiia.org.za/research/drivers-of-disparity-how-policy-responses-to-covid-19-can-increase-inequalities/

Chicago

South African Institute of International Affairs. Drivers of Disparity: How Policy Responses to COVID-19 Can Increase Inequalities. 2020. https://saiia.org.za/research/drivers-of-disparity-how-policy-responses-to-covid-19-can-increase-inequalities/.

Wikipedia

{{cite report |author=South African Institute of International Affairs |title=Drivers of Disparity: How Policy Responses to COVID-19 Can Increase Inequalities |date=17 December 2020 |url=https://saiia.org.za/research/drivers-of-disparity-how-policy-responses-to-covid-19-can-increase-inequalities/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{southafricaninstituteofinternationalaffairs2020drivers, author = {{South African Institute of International Affairs}}, title = {{Drivers of Disparity: How Policy Responses to COVID-19 Can Increase Inequalities}}, institution = {South African Institute of International Affairs}, year = {2020}, month = dec, url = {https://saiia.org.za/research/drivers-of-disparity-how-policy-responses-to-covid-19-can-increase-inequalities/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }