Soaring cost of governance: All eyes on Tinubu
With about 26 days left to constitutionally nominate cabinet ministers, and as his government continues to take shape, President Bola Ahmed Tinubu, for the umpteenth time, has been reminded of the need to cut the cost of governance in line with economic current realities.
Dwindling revenue on various fronts, fiscal measures being introduced in the economy, mounting debts, and debt-servicing obligations are already putting strains on the nation’s finances, while government hopes to run the country on shoestring budgets that cannot engender true development.
As these happen, development economists and public sector experts, stress that bogus civil service costs Nigeria around 30 per cent of its annual budget, noting that the Federal Government could reap an estimated N12 trillion annually from the realignment of its national workforce.
It would be recalled that former President Muhammadu Buhari had, on March 17, 2023, assented to a bill mandating the incoming president and governors to submit their nominees, within 60 days of taking their oath of office.
Last year, out of the country’s ₦16.3 trillion budget, ₦6.8 trillion was spent on the payment of salaries and other personnel overheads. This year, the figure is higher as N8.5 trillion of the N21.82 trillion budgeted would be spent paying salaries and allowances of public officers and other ancillary costs.
Indeed, it is estimated that Nigeria can save as much as N12 trillion annually from the merger of government Ministries, Departments, and Agencies (MDAs) that have overlapping functions. This is if it implements the recommendations of the Stephen Oronsaye report on the reduction of the cost of governance. Nigeria is currently neck deep in debt with the nation’s total debt stock now estimated at N49.85 trillion, according to the Debt Management Office (DMO).
Still, the rising cost of governance is taking a huge portion of the yearly budget, leaving behind peanuts for developmental projects. During Buhari’s eight years in office, for instance, only 19.7 per cent of the total budgetary spending, or N14.5 trillion went into capital expenditure (CAPEX), much of which would end up in office equipment and sundry items. The total CAPEX outlay was less than half of the over N30 trillion deficits accumulated by the administration.
Sadly, within eight years, N59.2 trillion was frittered on overheads, personnel costs, and other items of recurrent expenditure and debt servicing. The African Development Bank (AfDB) had raised the alarm that the rising cost of debt service, which the World Bank said could surpass 100 per cent of retained revenues, would crowd out investment in infrastructure needed to develop Africa.
The DMO also informed that between October and December 2022, Nigeria spent N406.77 billion on domestic debt servicing, while it spent $312.27 million (N143.74 billion) on external debt servicing, giving a total of N550.51 billion. Between January and March 2023, Nigeria spent N874.13 billion on domestic debt servicing, while it spent $801.36 million (N368.87 billion) on external debt servicing, giving a total of N1.24 trillion.
A detailed analysis of Nigeria’s 2023 budget shows that a total of N18.04 trillion is allocated to all government MDAs. With a total of 541 MDAs, each MDA is estimated to receive about N33.27 billion.
Going by the Oronsaye recommendation that the MDAs be pruned down to 161, Nigeria will only need a little above N5 trillion to spend on all the MDAs put together, saving the nation over N12 trillion.
But that is only one leg of the journey. The ostentatious lifestyle and fiscal indiscipline of elected government officials present even more cause for concern.
In the 2023 budget, Nigeria is to spend N14.2 billion on the Presidency alone while the National Assembly has a budget of N228.1 billion. Former President Buhari between 2016 and October last year, spent about N81.80 billion on the Presidential Air Fleet (PAF) maintenance and foreign trips.
The humongous figures include N62.47 billion for the operation and maintenance of PAF, N17.29 billion for foreign and local trips, and N2.04 billion earmarked for related expenses. The Presidency has maintained 10 aircraft since the inception of the Buhari regime in May 2015.
Just last week, President Bola Ahmed Tinubu joined the race to enter the Guinness Book of World Records with his over 120-car convoy at a time Nigerians are struggling to survive under the harsh economic conditions in the country occasioned by the high cost of living.
As the Federal Government desperately seeks ways to cut governance costs due to low revenue from oil sales, stakeholders believe that this is the best time to muster the political will to implement the recommendation of the Stephen Oronsaye Report.
Recently, the Presidential Advisory Council submitted its report to President Tinubu in which it proposed the merger of the Federal Inland Revenue Service (FIRS), Nigerian Customs Service (NCS), and the Nigerian Maritime Administration and Safety Agency (NIMASA) into the Nigerian Revenue Service (NRS) to ensure an efficient collection of all direct and indirect taxes, as well as levies on behalf of the Federal Government.
This recommendation has been seen by stakeholders as a sign of hope that the Oronsaye report might be implemented by the current administration, even though they also called for caution as the objective appears to be mainly to increase revenue with little emphasis on cost reduction.
Lead Director of Centre for Social Justice (CSJ), Mr. Eze Onyekpere, in his reaction to the proposal by the council, said that there is no empirical evidence to show that the merger will guarantee efficiency and transparency in revenue collection.
According to him, while these objectives are desirable, it is not clear that a merger is the best way to facilitate their realisation. “It appears that these objectives can be realised by supporting these agencies as they currently exist. Furthermore, there will be a huge challenge in merging agencies with diverse mandates. The council’s recommendation assumes that these agencies simply exist to collect revenue.”
He added that the mandate of the Nigerian Maritime Administration and Safety Agency (NIMASA) is the enthronement of global best practices in the provision of maritime services in Nigeria.
“Its areas of focus include effective maritime safety administration, maritime labour regulation, marine pollution prevention and control, search and rescue, cabotage enforcement, shipping development and ship registration, training and certification of seafarers, and maritime capacity development. Most parts of NIMASA’s mandate are beyond revenue assessment and collection,” Onyekpere said.
He noted that even though the Nigeria Customs Service and FIRS collect revenue, they are focused on different revenue streams of the government, saying, “collecting these streams of revenue needs to be deepened through specialisation, institutional autonomy and use of knowledge and experience acquired over the years.
“The recommendation of the council if implemented will create a revenue behemoth, which will be too big and unwieldy to the extent that if anything goes wrong in its administration, the entire revenue chain suffers. It is recommended that instead of a merger, these agencies should institutionalise enhanced collaboration, information sharing, and exchange of workable ideas. They should be strengthened in their present form,” he noted.
On his part, the CEO of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, warned that the whole exercise needs to be looked at very critically so that the government will not, in the process of solving a problem, create a bigger one. He stated: “I think it is a proposal we need to examine very, very carefully so that in the process of wanting to solve a problem, we do not create a bigger problem.
“The core function of NIMASA is not revenue collection. The core function is maritime security. Now, if you merge it and make an accountant the head of the agency, how will the person supervise security?
“We need to be careful. If it is about revenue generation, I think a framework can be created so that the revenue component can be taken care of by FIRS, and the revenue will be flowing directly to FIRS so that you can leave the core services to those who know the business.
“So it is something that requires rigorous and very robust consultation. Whatever happens, robust stakeholder consultation is key in this process.”
For Professor Uche Uwaleke, a lecturer at the Nasarawa State University, Lafia, the merger is a great idea because it will promote efficiency, and transparency and block revenue leakages.
“When you merge revenue collection agencies, it tends to bring about what we call the economy of scale; it reduces the cost of collection of revenue and also encourages standardisation of revenue collection methods. It helps the government to see the whole picture of the revenue.
“This practice is not new. In the UK, for example, before 2005, they used to have Inland Revenue Service and Her Majesty’s Customs. Both were separate, but they later merged the two because they saw the need to do so. Today, in the UK, it is Her Majesty’s Revenue and Customs Service that collects all forms of revenue, whether it is income tax, company income tax, indirect tax, or customs duties,” he said.
He added that it is the same thing in India, noting that the individual agencies will be subsumed in the new agency as departments, performing their core functions within the same organisation. He noted that the move is also in line with the plan to reduce the cost of governance, which is part of the Oronsaye Report that proposed that agencies with overlapping functions be merged.
“As we have them now, Customs and FIRS have overlapping functions. Let us do this because we cannot be doing the same thing and expect a different result,” Uwaleke said.
In his reaction, the Executive Director, of the Civil Society Legislative Advocacy Centre and Head, of Transparency International, Nigeria, Auwal Ibrahim Musa (Rafsanjani) said that he was in support of any policy that will bring about transparency, efficiency, and block revenue leakages.
He said that the Oronsaye Report has already recommended that federal agencies and parastatals with overlapping functions should be merged. He, however, cautioned that if it is a way to create jobs for the “boys” without adding to productivity, then it does not make sense.
“Since they will all require legislative arrangements, they need to look at it very well. We need to have a second look to see whether we need to merge them, to find out if merging them will lead to better service delivery. Again, we also need to look at how to take care of those that might lose their jobs as a result of the merger,” Rafsanjani said.
For Professor Godwin Oyedokun of Lead City University, Ibadan, it is a matter of securing the system to block revenue leakages. Using the example of a house with multiple entrances, Ayedokun said: “If your house has 10 doors, you need 10 security systems to secure your house.”
According to him: “Nigeria is losing a lot of revenue because of the multifarious revenue collecting agencies. We need to have a unified revenue collection agency as it is done in other countries. Apart from blocking leakages, the cost of the collection will also come down.
For Chief Executive Officer, Dairy Hills Limited, Kelvin Emmanuel, the Stephen Oronsaye report is the most comprehensive set of public sector reforms proposed for reducing the size of governance in Nigeria.
He explained that before implementing the report, the National Assembly needs to amend the Federal Character principle that proposes 2.7 per cent representation from each state and the FCT on the Federal Executive Council (FEC).
He added: “Nigeria has to move away from a representative model of government towards a performance-driven model of governance, where merit is rewarded over the state of origin. The report recommends the merger and dissolution of MDAs as a way to cut costs and remove non-performing parastatals, departments, and agencies.”
Government must also automate the procurement process as a tool to reduce procurement fraud and rid the government of excesses at a time of austerity and enforce sections 22(2) of the Fiscal Responsibility Act of 2007 that requires MDAs to remit 4/5th of operating surplus back to the Consolidated Revenue Fund (CRF).
In his comments, Professor Sheriffdeen Tella explained: “The high cost of governance occurs at not less than two levels — the costs in terms of the multiplicity of MDAs and duplication of functions, which the Oronsaye committee tackled but recommendations not fully implemented. Secondly, wages and salaries of political actors, particularly the legislature and public important officers or parastatals, which determine their salaries and allowances outside the purview of the official Revenue Mobilization and Fiscal Commission and the third point is the unregulated number of political assistants for political office holders especially governors must be addressed.”
Tella, who is a Professor of Economics at the Olabisi Onabanjo University, Ago-Iwoye, added that the waste of financial resources in maintaining obsolete government properties such as the refineries, presidential planes, and buildings among others are contributing to the high cost of governance.
Get the latest news delivered straight to your inbox every day of the week. Stay informed with the Guardian’s leading coverage of Nigerian and world news, business, technology and sports.