Huge cost of governance stimulating nation’s drift towards bankruptcy
Except strategic intervention occurs, Nigeria may be heading to bankruptcy as a result of the huge cost of governance.
Consider the strain exerted on the country’s finances by simply settling the bills and perks of office of the president and his vice; 44 ministers; 36 state governors and their deputies; 469 members of the National Assembly; thousands of members of 36 states houses of assembly; chairmen of 774 local councils, and thousands of councilors at the local councils.
In addition to this, a cocktail of special assistants/personal assistants, and special advisers that are involved in servicing the entire bureaucracy, and which their emoluments and sundry allowances add to the nation’s financial burden.
Before coming on board in 2015, President Muhammadu Buhari, who had severally deplored wastages in government promised to make a change in this direction and vowed to run a lean government.
He tried to do that in his first term. But rather than consolidate on that in his second term in office, he increased the membership of his cabinet by 22.22 percent by unbundling some ministries and creating new ones.
Now, even the Vice President, Prof. Yemi Osinbajo agrees with experts, including immediate past Emir of Kano, Sanusi Lamido Sanusi that Nigeria is set up for bankruptcy with its current structure of governance.
Even though not many would agree with him, Osinbajo says the country needs a national debate to examine issues around the size and cost of governance, which has often been described as expensive and unsustainable. According to him, it could be difficult for the government to do something about its cost by itself.
While fielding questions by a former Governor of the Central Bank of Nigeria Sanusi Lamido Sanusi, during a webinar at the behest of Emmanuel Chapel, with the theme, “Economic Stability Beyond COVID-19,” said: “There is no question that we are dealing with a large and expensive government, but as you know, given the current constitutional structure, those who would have to vote to reduce (the size of) government, especially to become part-time legislators, are the very legislators themselves. So, you can imagine that we may not get very much traction if they are asked to vote themselves, as it were, out of their current relatively decent circumstances.
“So, I think there is a need for a national debate on this question and there is a need for us to ensure that we are not wasting the kind of resources that we ought to use for development on overheads. At the moment, our overheads are almost 70 percent of revenues, so there is no question at all that we must reduce the size of government
“Part of what you would see in the Economic Sustainability Plan also and several of the other initiatives is trying to go, to some extent, to what was recommended in the (Steve) Oronsaye Report, to collapse a few of the agencies to become a bit more efficient and make government much more efficient with whatever it has,” Osinbajo said.
Without a doubt, the country’s economy has been on something close to a life-support machine, and the recent increment of the Value Added Tax (VAT) on goods from five percent to 7.5 percent, and the reintroduction of toll gates on major highways, which plans are in advanced stage all point to the fact that the government is currently running from pillar to post to shore up revenue.
This perhaps explains why Sanusi, who has repeatedly warned of the debilitating effects of the current structure of governance, which he described as unsustainable, at the same event, warned that it was high time something was done to cut the cost of running the government.
“Now, I’m sure that with the shortfall in revenues and where the oil price is, after debt servicing, we probably have to borrow to pay salaries. We have got to look at that structure,” he said.
“If you have a company and you have extremely high overheads and you need a high contribution margin to break even, you would be looking at how to reduce cost. So, we have a constitution that says we should have a president and a vice-president, we must have a minister from every state of the federation, whether or not it’s 36 ministries; we should have 109 senators and 360 members of the House of Representatives.”
At the event, which was attended by other panellists, and moderated by a Senior Advocate of Nigeria (SAN), Prof. Konyinsola Ajayi, and Dr. Chinny Ogunro, the former CBN governor added: “It also said we should have 36 governors, 36 deputy governors, each state with its house of assembly and comprising many legislators, 774 local government chairmen, councillors, the personal assistants and special assistants (at all levels), staff members and vehicles. With these, you are already set up to be bankrupt. This is something I have been talking about for years. We need to ask ourselves; the structure that we have, does it leave us any option rather than to remain unsustainable over time? This is the kind of conversation we need to have as a country.
“Do we need a bicameral legislature; do we need close to 500 legislators in Abuja; do we need the hundreds of state legislators; what are they doing; do we need all these local government chairmen and councillors, or do we need to look at that structure?” Sanusi asked.
Equally perplexed by Nigeria’s penchant to continually live dangerously despite its dire financial disposition is an expert in political theory and political economy, Prof. Eme Ekekwe, who said that with the decline in the price of crude oil internationally, the country should ideally be thinking of how to ramp up investments. That is, presupposing that it has an investible surplus.
“But you cannot have an investible surplus when your recurrent expenditure is high; overhead has reminded constantly high; salaries of state officials are killing the country, while the ruling class constitutes a threat from both political and economic standpoints, especially because the huge salaries that they are earning is not being invested in the economy, but rather spent on consumption and that consumption is not even taking place at the local level.”
Ekekwe cautioned that if the cost of governance was not drastically reduced and the state becomes incapable of providing infrastructure and social services, citizens are bound to become angrier and this could fuel further instability. “And if instability increases, you will spend more trying to restore law and order. And the money you are putting into law and order is the money that should have gone into productive investment.”
He observed that the reason the government has resorted to borrowing to fund infrastructure was that internally generated revenue is expended on the running of government. To this end, he called for the restructuring of the federal system of government.
“You can keep the number of states, but release the states so that each of them will increasingly depend on internally generated revenue. The Federal Government should release the ownership of our resources to individual states because including in the constitution that the resources like oil and gas belong to the Federal Government is not done anywhere in the world. The military did that when they were in power because they wanted to take resources from the South to invest in other parts of the country. And it is not as though the northern states are poor. If we create incentives for mobilising capital and revenue internally for each of the states, then the responsibility of the Federal Government will reduce.”
But as far as Prof. Willy Okowa, an economic development expert is concerned, political restructuring remains the fundamental panacea for the nation’s travails.
He regretted that as the country was grappling with challenges of economic development and the huge cost of governance, vast natural resources in all parts of the country are untapped because states believe more in sharing free oil money in Abuja than harness their endowments, a development he said has impacted on the consciousness of the average Nigerian.
He argued that for the country to make remarkable economic progress, it must embark on political restructuring, which would allow each state to compete with each other because the competition is the fuel that drives the capitalist engine.
“The North is dying over oil when it is supposed to be the headquarter of the textile industry, and worth over $700b. If northern states, including Kaduna and Kano, were to invest massively in cotton, they would each get 10 percent of $700b, that is, $70b. That is enough to employ everybody in the North and far more than what the entire country gets from crude oil.”
Okowa said the proliferation of states, local councils, and agencies of government have been largely responsible for the humongous cost of governance, especially in a bid by sections of the country to grab more of oil revenue for themselves, to the detriment of development. He alleged that these contending interests have instigated opposition to the restructuring of the country.
“The foundation and the basis for all these things is the sharing mentality, which we must stop in the country. We must realise that in a capitalist system, you produce and you earn a living based on your production. When you create a political system where you acquire political power and with that power, you can share free oil money, then everybody wants to acquire power and take part in the sharing.”
He averred that the current political economy of the country was programmed to fail because the government has continued to lay claim to ownership of land, which is a true capitalist system, ought to be privately owned.
According to him, the government has despoiled production function in the country thereby making it possible for anyone in possession of political power to control the levers of wealth.
Okowa observed that the over-dependence on oil revenue has been responsible for the country having one of lowest tax rates in the world, which is between four and five percent of the GDP compared to Ghana, which is about 19 percent or more. In Europe, it’s about 30 percent and in Scandinavia it is 43 percent.
“If we have up to 20 percent tax rigidity ratio, then this country will have more than N30t as government revenue, which would have funded our budget, fix our roads without needing one kobo loan from China. People are not paying taxes because the mentality is to share. That is our fundamental problem,” Okowa explained.
The President, Coalition of South-South Chambers of Commerce, Industry, Mines and Agriculture, Billy Gillis-Harry, is of the view that the sheer size of government was impacting negatively on several fronts, including infrastructural development.
He insisted that an urgent review of the salaries of political office holders should be carried out.
“We have a president, vice president, and their retinue of aides. But what is the real value of the offices occupied by these aides, which also gets replicated in the states and local councils. I think that those offices that are not productively engaged should be removed from the salary structure of the federation because most of these people are appointed and not elected. For those who are appointed, we can make that decision today and reduce the cost of governance right away.”
Despite the mounting impression that Buhari has eaten his words regarding running a lean government, a Professor of Economics and Public Policy, University of Uyo, Akwa Ibom State, Akpan H. Ekpo, says: “The president has tried to keep his promise of running a lean and efficient administration. However, we can only verify that through data. There are still lags in the implementation of government policy. In the executive branch, it seems the number of political appointments has been reduced. There is still a need for more transparency and accountability in the conduct of government business. There is no doubt that the president must have given directives, but has it filtered down to other layers of leadership?
“The twin shocks (COVID-19 and the decline in oil revenue) have resulted in a revision of the 2020 budget to avoid a recession. The president must also be commended for setting up an economic team headed by his vice to provide sustainable economic solutions to the crisis,” he stated, just as he regretted the reduction of the amount earmarked for capital expenditure. “This component is essential for the growth and development of the economy.
On his impression of what many describe as a nebulous government structure run by Buhari, he said: “I do not know what you mean by nebulous government structure. The people decide the type of government they get. The presidential system is expensive, but Nigerians voted for it. The present structure of government is no doubt expensive, and may not be sustainable. I would have preferred a parliamentary system, which is less expensive than the presidential system. Let me state that we have made the presidential system too expensive. For example, all the aides, personal assistants, special assistant of members of the Houses of Assembly are they necessary? What about the emoluments and allowances of members of parliament? Are they in tandem with the country’s resources?
On Osinbajo’s claim that a national debate was needed to trash things out, he said: “If citizens seriously demand a debate on the cost of governance, then they will get it. The citizens must organise themselves and not agonise. I prefer the term expenditure switching, that is, moving expenditures from non-priority areas to where they are most needed. Civil servants can be retrained to be more effective and efficient.”
The university teacher added that he supports the implementation of the Steve Oronsaye report, adding that the tendency would be to ensure efficiency and efficacy and not just to reduce cost.
On calls for a part-time parliament to save cost, he said, “the matter is not necessarily that of part-time parliament, but ensuring that members are there to serve the people. Furthermore, are the members sufficiently tested and competent? If the people decide to have part-time parliamentarians, then the modus operandi must be defined.”
A London-based public affairs analyst, Mr. Kingsley Ogbonda, blames the high cost of governance on the elaborate web of corruption the country is entangled in.
According to him, there was no reason a poor country like Nigeria should engage in excessive financial imprudence under the guise of governance, adding that some of the funds often ascribed to the cost of governance are stolen “legitimately,” in the guise of security votes.
Arguing that governance in Nigeria offers less when compared to the cost of governance in very rich countries, he advised that based on the financial hardship that the country is facing as a result of the COVID-19 pandemic and other issues, the country can no longer prevaricate when it comes to reducing the cost of governance.
He said excessive salaries for elected representatives and perquisites of the office such as cars, housing and their obsessive renovations, furniture allowance, travelling with a coterie of followers, all paid from public coffer were some of the identified areas of waste in governance.
He recommended that constituency projects should be abolished because it promotes illegality, stressing that there is no reason for elected members of the national and state assemblies to double as public utilities providers/contractors, a uniquely Nigerian anomaly, which fuels corruption.
Ogbonda further suggested that a Nigerian councillor, for instance, should not be earning more than a permanent secretary in a ministry, noting that councillors in rich countries are mostly part-timers and are paid a sitting allowance and have their other paid jobs.
“The president has to reduce his fleet of aircraft, cars and maintain a lean office. Governors have to reduce their fleet of cars and reduce their staff. The states, we are told legalised the huge pensions and other benefits paid to ex-governors. These laws are oppressive and were passed under duress by pusillanimous members of the states’ Houses of Assemblies,” he added.
Ogbonda’s view is shared by a former member of the House of Representatives, Mr. Eseme Eyiboh, who said: The practice of paying pension to the governors, deputies, and speakers at the sub-national government is as insensitive as it is unproductive. These men have their way to the state treasuries willy-nilly, and in most cases, potential members of the National Assembly with paycheques too. The unfortunate incident in our democracy is the legislative delinquency of the legislature’s inability to practice separation of powers to the extent of effective oversight and robust legislation. The erstwhile governors are increasingly instituting succession patterns that perpetuate their influence, and control of both the legislature and membership of state and the National Assembly.
It is not for nothing that many believe that the National Assembly is one of the biggest money-guzzlers in the country’s brand of democracy. Besides the hefty amount, which lawmaking costs the country, many still do not believe that lawmakers are doing enough to be kept as full-time workers.
Eyiboh specifically thinks that the “poor attitude of our people to recruitment into our sub and national institutions occasions the backlash of excruciating cost of governance. Most times, the salaries and allowances of National Assembly members are speculative and a function of public perception. So, I think, the cost of governance is rather higher in the executive and judiciary arms notwithstanding the several interventions by statutory regulators for salaries and allowances. For example, the security and service-wide votes at the sub and national governments constitute a cesspool of corrupt tendencies. It is preposterous to levy the blame of excessive cost of governance on the legislature alone.”
He continued: “Every Society begets the type of leadership it deserves. The high turnover rate in the legislature constitutes a leadership deficit arising from the malignancy of the people, and the governors. Election processes are compromised to serve the long-term self-interest of the few tyrants with the abatement of the people in whom sovereignty supposedly belongs. Today and across the spectrum, politics is a high-end investment with a requisite lure for return on the investment. Every election cycle is envisaged to present the prospectus for peer review and representation audit of the representatives but alas…’ money answereth all things.’ The leadership recruitment culture impacts on the cost of governance.
“Our democracy is not development-driven in practice, nor attitude, but a purveyor for the appraisement of the tyranny of the minority (the leaders) by the majority (the led). The buffet is a merry-go-round until we deliberately enthrone attitudinal re-orientation and re-order our national urges and aspirations as a people committed to leadership, good governance, and social justice.”
No comments yet