Planet Money - Nigeria, You Win! (Update)

Episode Date: March 10, 2021

Nigerians heard a radio ad offering millions of dollars for people with business proposals. They thought it was a scam. It wasn't. | Subscribe to our weekly newsletter here.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. In 2011, Lariat Alhassan had a paint business in Abuja, Nigeria. She sold house paint, she sold industrial paint, she sold textured paint, she sold paint that fills in the cracks in your wall. The paint company was called Lark Lux Paint, and it was really, really small. The employee I had was just me. I was the production manager. I was the marketer.

I was the delivery person. I was everything except the security. That was the whole company, her and a security guard. And being so small was a problem because customers would try out her paint and they would say, this seems great. I want to place a big order. How about I come down to your office and we'll sign the papers? Which is where things would get awkward because she didn't have an office. And I kept telling them, no, no, no, you call me whenever you want. I will just be there. I will be there.

She just had her car. And when clients would see that, they would say, I'm sorry. And that's when they would back out. She needed the office to keep the clients, but she needed the clients to be able to afford the office. She felt trapped, stuck. And then one day she was at home listening to a little music. helping me a lot. So I had this little radio in my room then that I would always listen to to help me get over my emotions. It was at my bedside. So I was listening to it and there was this announcement. This ad comes on and it was like the radio was talking right to her. It was an ad for what seemed to be some sort of program to help small businesses grow bigger. It may be small today, but it won't be after you win. The Youth Enterprise and Innovation Competition, You Win, is a nationwide jobs creation project organized by the federal government to empower young Nigerians. The government was having a

nationwide contest where it would be giving away millions of dollars to people trying to start businesses. No experience necessary. No strings attached. Just go to the website and sign up. Larry had heard this ad and she knew immediately what it was. A scam. Hello and welcome to Planet Money. I'm Alex Goldmark. And I'm Noelle King. Today on the show, the story of that ad and what was behind it. It was part of a plan to try and solve one of the biggest puzzles in economics, how to get lots of tiny businesses to turn into big businesses. This episode originally aired in 2016, and the economist that we meet right after the break,

there is some news about her. Her name is Dr. Ngozi Okonjo-Iweala. And a couple of weeks ago, she became the head of the World Trade Organization, one of the most powerful institutions for the global economy. She will be the first woman and the first African to run it. We've got an update on the program she launched and on Lariat at the end of the episode. Okay, so that ad, not a scam. I met the person behind it. My name is Ngozi Okonjo-Iweala.

She goes by Dr. Ngozi, and she was the finance minister for Nigeria at the time. And she looked out, and she was facing this big problem, unemployment. There are 8 million young people in Nigeria who need jobs. That's like a quarter of all youth. But the thing about those young people is they are super go-getters, right? What you need to know about Nigeria is that it has this culture just filled with people like Lariat, selling paint out of their cars or sewing old clothes into new styles. Yeah, they're very entrepreneurial.

Everybody wants to run something, start their own business, be their own boss. We've got a country that is so entrepreneurial. But the people, the entrepreneurs often operate in an informal way. A lot of them are young people and they want to expand their businesses. Some want to create new businesses but don't know how. They're hitting this wall. Money. They need more of it. But the thing is, it's really hard to get a small business loan in Nigeria. Maybe you go to a bank and you try. But think about it from the point of view of the bank. Most of these businesses are one person. They're really small. And it's hard for a bank to tell a good one person paint company from a bad one person paint company. They all look really risky. So banks either charge

high interest rates or they just don't give out the loans at all. And that one person business ends up stuck at one person. Breaking this logjam is a big economic puzzle. If you can figure out how to get a small business to become a medium business that can then become a large business, it means you can help solve a lot of other problems, like Dr. Ngozi's big problem. We had a large unemployment problem, especially with young graduates. And these are people who are ripe to be encouraged as entrepreneurs. She had this idea. She thought, since what these entrepreneurs need is money, why don't we just give them money? Just find tiny businesses and then hand them piles of cash. What if you gave Lariat, the woman who sells paint,

$50,000? That's a lot of money. That's about 10 times what Lariat would normally make in a year. So Dr. Ongozi takes this idea and she starts shopping it around within the Nigerian government. And right away, some questions come up. How will we monitor these people? How will we make sure they don't fall by the wayside? They just get the money and divert it to some other use. If banks have a tough time handing out the money to small businesses, how is the government going to decide which are the right people to hand it out to?

Dr. Ngozi says, don't worry, don't worry. Here's how we're going to do it. We're going to have a contest, a massive nationwide contest. Anyone who wants to can submit a business plan, a few sheets of paper with an idea, a budget, a chart or two. And we'll read them. We'll pick out the best ones and we'll hand out those piles of cash. The president of Nigeria, good luck Jonathan, he liked the idea and he said, go figure it out. There were a lot of challenges. First off,

this is a country where the government has a hard time even keeping the electricity on. And now they're going to vet tens of thousands of business plans? Even people within the Nigerian government were thinking, how are we going to pull this off? There was a really strong debate. First of all, was these people have never written business plans. Are we really going, how are we going to manage to have large numbers of people to do this at scale? It's one thing if you say you're going to invite 40 people, 50, but we're talking of thousands of companies. How will we ever succeed? The logistics were going to be one problem, but then there was this other problem, corruption. Corruption is not unheard of in Nigeria. So how do you make sure that the officials running the

contest don't just give the money to their connections, to their friends and family? That only people who are connected get a chance and ordinary people will not. That was the even bigger skepticism. They had to figure out a fair way to give out the money and a way that looked fair too. They found judges outside of the government and outside of Nigeria to do the grading and they decided also to take the names off of the application so the judges wouldn't know who was who. But that still left the question, how do you predict which business will succeed? Who do you give the money to? And this is where they brought in David McKenzie.

My job, I work in the research group at the World Bank, and so I typically come in when people have got an idea and they want to know, does it work? McKenzie had an interesting idea for how to pick the winners. Just do it randomly. Sure, he said, you can look at their business plans, maybe pick out the few that seem great, throw out the terrible ones. But after that, just pick at random. Don't waste time trying to rank them all.

I likened it when I was discussing it with them to, I used to be a professor at Stanford and I said, I was on graduate admissions committees there, and you would have 800 people apply. There'd be 400 people. You'd say, no way, we don't want those in our program. Maybe 10 people would really stand out. But then the next sort of 200 or 300 people, and it's very hard to tell them apart. And I think it's very much like this with businesses, with people with potential ideas. Maybe you get one or two that really stand out. You get a lot that just seems, you know, nonsensical. But then there's just a lot where, you know, they all seem reasonably

strong on paper. You know, how do you choose amongst them? So he's arguing just don't choose. Right. We're picking at random. But that's like the opposite of what a contest is supposed to do, right? A contest is supposed to pick winners. Like you can't even call it a contest. It's like a, it's like a something else. Like it's like a, like a contest lottery. It's like a clottery, you know, or like a lawn test. But maybe that's the best way to help people, or at least it's efficient because that big massive clump in the middle, there's like no difference in between them. Right, exactly.

Exactly. Plus, Mackenzie's real plan here is if you do it randomly, you can actually measure it like a medical trial and we'll know if this whole thing works. So, okay, they decide they're going to pick

a lot of the winners at random. They gave the contest a name, the You Win Competition. You Win! And they started to get the word out with ads. They blanketed the country with radio and TV ads.

I'm like most entrepreneurs. I dream big, big, but reality, reality. But you know what? The youth enterprise with innovation in Nigeria, you win, changed my story. So those ads are all over the country. And Lariat Al-Hassan, that woman we met earlier who was selling paint out of her car, she's listening to the radio, she's in her bedroom, and she is hearing those ads over and over and over again. I heard it for the first time. I ignored it. I heard it the second time. I ignored it.

But the third time, something in me said, Lariat, why don't you pick up this opportunity? Try. Try and see. It could work out for you. She took out her old laptop, she plugged in her modem, and she went online, and she applied. So did 24,000 other people. And Lariat, she made the first cut. So she and 6,000 other people, they get invited to the next phase.

This is where she would have to write that real proper business plan. Laureate got some help with this part. The government called all of the semifinalists together and they put them through these business trainings. Laureate says hers was like this big packed concert hall. There were all kinds of applicants. There was a baker who didn't have the right kind of equipment. A chicken farmer who said he wanted to expand into catfish and snail farming. There was a guy running a computer school.

There were musicians, dentists, all kinds of people with ideas for all kinds of businesses. Boy, it was intense from morning till evening. So it's a big seminar, four days. Yes. But you do get lunch. Yes. And breakfast. Breakfast and lunch.

Afterward, Lariat went home. She drafted a budget. She made some sales projections. This was a full, comprehensive business plan, just like she learned in the training. By the time she was done, it was more than 10 pages long. And then she submitted it, and she just waited. And yep, she's the likable character at the start of her show. You knew it had to be coming. She won. I felt I couldn't even control my emotions and I went jumping on my bed until my sister would say, what's wrong with you? Have you won? Have you won a lottery? And I said,

yes, yes, yes. Lariat got 10 million naira. That is about $65,000. And this is a huge amount of money. It's like more than 10 times what she would earn in a year. She used it to hire some people. She got some salespeople. She got some marketing people. She got those people a car so they could get around town and get the word out. She got a delivery truck so it wasn't just out of her trunk anymore. And she rented a proper showroom. She tricked it out with some furniture she was really proud of. No doubt about it, this changed her business.

Yes, yes, because I can confidently say now, please come to my office. Oh, we are in such a place. Oh, you can come here. Oh, what time? Oh, yes. I'll be ready for you. Oh, I'll be waiting for you. Now, you can look at this and say, of course she was able to do this. She was given $65,000. Not even a loan. Just gave her a pot of money.

The real question is, how is her business doing a year from now, two years from now? How do all the others do? The dentist and the chicken farmer who wants to expand into catfish. And the World Bank looked at this. Because some of the winners had been chosen randomly, they could evaluate it like a real experiment. They could compare people who got the money to people who didn't. The results were published this past year, and they're pretty remarkable. Chris Blattman is an economist at Columbia University

who studies how to get people out of poverty in the developing world. I remember reading it and my eyes kind of popping out of my head and then reading it a little bit more in depth because I thought, no, no, no, this isn't possibly true. And getting into the details and getting so excited, I just shot off a blog post right away. That's how he deals with unexpected joy. Here's what the report said. It looked at Lariat and the 1,200 other winners of the You Win competition, and it found they had created 7,000 jobs, real jobs that stuck around for years. So the whole thing cost $60 million, and that, do the math, comes out to a cost of $8,500 per job

created, which may mean nothing to anybody else, but to people who look at these things and study them, like Chris Blattman, he says that is really impressive. And that is why he picked this as the title of his blog post. Is this the most effective development program in history? Question mark. Blattman said the thing that stood out to him is that the winners, as a group, used the money pretty well, even though a lot of them were these one-person businesses, and they got more money than they'd probably ever seen in their whole life. Even though a lot of them were picked kind of at random, he just expected that a lot more of them would fail. I guess I have this idea that entrepreneurship is a little bit more rare. And

yes, they screen people for business plan competitions, and there were all these stages. But even so, there wasn't this magical X factor that is really, really rare. It might be something that's a lot more common. So it just struck me that this could apply in a lot of places possibly. That you could do this kind of program somewhere else. Right. Nigeria has kept the UN competition up and running. In fact, it's expanding it.

It is still just a few thousand jobs, and this is a country of 170 million people. But Chris Blattman, other economists who follow these things, are really excited to see who else might copy it. That was in 2016. Coming up after the break, a quick update on the most effective development program in history, question mark, and also how Laureate is doing. Nigeria kept the program going for three more rounds, and David McKenzie from the World Bank kept following up on that first group of

tiny businesses. He says after five years, the impact was still holding up. Most of the jobs created were still there. He says this is even more evidence that just giving money to small businesses kind of randomly is a good bang for the buck. Copies of the program launched in Kenya and in Senegal, but in Nigeria, there is no more U-Win competition. The new president, Mohamedou Buhari, launched his own programs, but he did adapt some of the lessons from U-Win. As for Lariat Alhassan, she sent us an update. Blacklock Springs, we are still here.

We're thriving and we're still growing. She says she has more than 10 permanent staff and over 100 casual staff, and she just bought land, and she's getting ready to build a new factory. We look forward to becoming one of the biggest paints manufacturing company in Nigeria and in Africa as a whole. And she remembers that it all started with a radio ad. I feel very, very emotional because that's changed my life. It changed my life from where I was.

That was the stepping stone. Thank you. Email us your economic questions, planetmoney at npr.org. And yes, we know about NFTs. Stay tuned. I'm Noelle King. I'm Alex Goldmark. This is Planet Money from NPR. Thanks for listening. Neuroscientist Kimberly Noble wants to know, if a family gets more money, does it directly impact children's cognitive development?

Ideas about the brain. That's on the TED Radio Hour from NPR. And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.