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

The document argues that 'neutral' macroeconomic policies in Nigeria and Uganda have exacerbated inequalities by primarily benefiting the formal sector while excluding the urban poor, women, youth, and informal workers. It highlights failures in cash transfer coverage, the lack of impact of monetary easing on high-risk borrowers, and the regressive nature of budget restructuring. The brief recommends leveraging electronic platforms for aid distribution, improving tax capacity, and promoting renewable energy for low-income households to ensure a more inclusive recovery.

• Cash transfer programmes in Nigeria and Uganda suffer from extremely low GDP expenditure and poor targeting, leaving the majority of the poor excluded. 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 urban poor and 'newly poor' are specifically disadvantaged by current targeting strategies. In Nigeria, the focus on the poorest 30% of households in high-poverty states prioritizes rural agrarian communities, neglecting urban SME owners, drivers, and cleaners who are highly susceptible to pandemic-induced income shocks.
• Relief policies 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.
• Monetary policy easing has not translated into lower lending rates for high-risk or low-income borrowers. Despite the Central Bank of Nigeria reducing its rate from 13.5% to 11.5% and the Bank of Uganda reducing its rate from 9% to 7%, commercial bank interest rates remain high for youth, women, SME owners, and small-scale farmers.
• In Nigeria, exchange rate adjustments and the devaluation of the naira have increased the cost of imports, which negatively impacts the manufacturing sector and reduces the purchasing power of poor citizens through rising domestic inflation.
• The removal of fuel and electricity subsidies in Nigeria primarily reduces the disposable income of the middle class and rich, as poor households—including the 43% of Nigerians without electricity access—were not the main beneficiaries.
• Budget restructuring in Uganda has failed to support the poor, with supplementary funds primarily benefiting the Uganda Development Bank and government suppliers. Similarly, Nigeria's 2020 budget saw reductions in allocations for 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} }