Martins Hile, Editor, Financial Nigeria magazine

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  • Social Development

How Covid-19 has exposed pre-existing structural inequality 22 Jun 2020

Covid-19 has affected more than 210 countries and territories around the world. At face value, this would suggest the new coronavirus is an equal-opportunity disease. But the disease presents more risk to some countries than others in terms of their ability to respond to the economic ravages caused by the pandemic. The infection and mortality risks of Covid-19 for individuals are also not equally distributed.
There are certain underlying factors that drive the amplification of the risks across countries and among individuals. These factors, before now, have sustained the gulf between wealthy and poor nations and fostered the unequal distribution of incomes and opportunities between different groups of people. However, Covid-19 has further laid bare the structural manifestations and drivers of inequality.

First and perhaps foremost among the factors driving structural inequality is access to debt finance. The 16 countries with GDP of $1 trillion and above – who accounted for 76.3% of global output in 2018 – also had some of the world’s highest ratios of debt-to-GDP. At 238 per cent, the world’s third-largest economy, Japan, had the highest debt as a share of GDP.

But despite their already high debt levels, the richest countries were still able to dole out $7.7 trillion in Covid-19 economic response packages by increasing their fiscal deficits. Last month, Japan announced the world's biggest Covid-19 fiscal stimulus (as a share of GDP), to support businesses and boost economic growth.

Meanwhile, majority of developing countries, despite their more pressing situations, cannot borrow and spend close to their richer counterparts. In the debt market, all fingers are not equal. Rich and poor nations don't borrow on the same terms. Rich countries are more trusted by lenders to pay their debts.

This is the reality Nigeria has had to face as it tries to achieve its borrowing plans during this pandemic. As Covid-19 heightened volatility in international markets, the conditions for external borrowing were no longer favourable for the country, leading the government to tap domestic markets to source the N850 billion that was earlier approved as external borrowing to part-finance the deficit in the 2020 budget. But as the pandemic created more funding gaps, the government had to look at external borrowing again. This time around looking to the multilateral financial institutions, including the World Bank and the IMF.

Second, many of the people who have died from the Covid-19 are from demographics that already had poor access to health care, a situation that had already debilitated their pre-existing conditions. Such demographics include racial minority groups in the U.S., as a report by the Centers for Disease Control and Prevention (CDC) showed in April. Minorities, especially blacks, accounted for a disproportionate number of Covid-19 cases and fatalities. In the UK, the Office for National Statistics (ONS) reported that black people are more than four times at risk of dying from Covid-19, compared to white people. The difference in the impact of the pandemic is due to disparities in wealth, health and living conditions of the racial groups, according to an analysis of the report by The Guardian.

The countries who contribute the most to global output are also at the forefront of Covid-19 vaccine research and development. This means there would be preferential access to approved vaccines for not just the rich countries but also the citizens at the top of the income distribution.

Third, education is another area of pervasive structural inequality. People who have access to quality education – the more advanced the degrees acquired the better – have better economic opportunities than those without such access. Like elsewhere in the world, Nigerian kids from well-off families are those who can afford to attend private schools and receive the attendant superior quality of education. During the mandated shutdown of schools in the country, kids in private primary and secondary schools have continued to attend classes and do their homework virtually.

Meanwhile, for children in poor homes, there has been little to no schooling. The public schools they attend have effectively suspended classes pending the reopening of schools. Even if the Academic Staff Union of Universities (ASUU) were not obstinately still on strike, it’s hard to see how Nigerian public universities would have organised online lectures as the private universities have been doing amid the pandemic. By curtailing the education of underprivileged kids, Covid-19 has further undercut these kids’ ability to compete for future economic opportunities with their compatriots who have continued to learn regardless of the lockdown.     

Last, but by no means the least, ownership of assets (such as property and others) is what ultimately sets the rich apart from the poor. The wage income relied upon by the majority of people is only certain as long as they have a job that pays. Meanwhile, profit earned from assets, including liquid assets, by the rich will always dwarf wage income.

Covid-19 has made people realise the importance of liquid assets like cash. For people who had been dependent on daily incomes, they have a binary choice of either obeying stay-at-home orders to avoid dying from Covid-19, meaning they would die from hunger; or disobeying the orders becomes the only way they can stay alive.

Meanwhile, Nigeria's richest man, Aliko Dangote, is estimated to have enough money that if he were to stop earning any income from May 31, 2020, and he was spending $1 million (or N360 million) per day, it would take him 38 years to exhaust his fortune of $14 billion. He has such enormous wealth in a country where 82.9 million people are living below the national poverty line of N376.52 per day.

While the discussion has ensued about repositioning the world to prevent the occurrence of another pandemic; there needs to be a serious conversation about eradicating inequality between and within countries. Governments must promote equitable access to affordable and quality health and education for all. The world needs a sustainable economic system that provides for everyone – not just a few – access to tools and opportunities to prosper. Such a system is not socialist and would not spell the death of economic progress. We need economies where people don't have to make a choice between living or dying when there is the need to seek safety first.