Nigeria now occupies the inglorious position of global headquarters of poverty. The mismatch between population and economic growth is primarily responsible for that infamous rating. The next factor is the high cost of governance which is compounded by unbridled corruption.
The cost of governance gulps down 70 per cent of Nigeria’s annual budget. Consequently, the federal government borrows as high as N60 billion monthly to pay its workers.
The high cost of governance is a self-imposed calamity which must be reversed to safe funds for infrastructure development. Economists believe that Nigeria needs to invest a minimum of $30 billion per annum in the next 10 years to reduce its debilitating infrastructure deficit.
However, the entire 2019 budget is just above $29 billion. The capital expenditure is just about $660 million. That is what would be used to address decaying infrastructure.
The federal government had in the last 15 years relegated infrastructure development to the back burner as it allocates a scant 30 per cent of its annual budgets to capital projects.
Recurrent expenditures always take the lion share. Ironically, some states of the federation spend as high as 60 per cent of their annual budget on capital projects.
If the federal government dedicates 60 per cent of its annual budget to capital expenditures, it would free something close to $3 billion per annum for infrastructure development. That is still something like a drop in an ocean, but it would make more impact.
Nigeria is plagued by a king-size cabinet and an outrageous and unwieldy civil service. In fact the perception is that the federal civil service needs less than 40 per cent of the workers on its pay roll to function effectively.
The Stephen Oronsaye Presidential Committee on the Restructuring and Rationalisation of Federal Government Parastatals, Commissions and Agencies recommended extensive mergers and scrapings that would hack down hundreds of federal agencies.
The White Paper Recommendation Committee set up by the Goodluck Jonathan administration recommended the reduction of federal government agencies from 541 to 321.
Jonathan could not implement the recommendation because general elections were a few months away.
The truth is that someone has to summon the courage to trim down government workforce to acceptable and manageable limits. All that is needed is for government to be transparent in the down-sizing process. Those to be affected must be adequately compensated and their retirement benefits paid immediately.
Civil servants abhor retirement because in Nigeria a worker’s income ends the day he retires. President Muhammadu Buhari is still battling to clear the back log of pension arrears dating back to 1997.
In the oil industry, employers sometimes induce workers with bumper severance packages to encourage them to retire before time. Chevron once rewarded some of its managers willing to leave service before time with a severance package of N140 million instead of the stipulated N50 million. Many opted to retire and the company had enough names required to reduce its overhead cost at a time oil prices were heading south.
The federal government can apply such measure to get enough names to quit the civil service and reduce the cost of governance down to 40 per cent of annual budget. The initial cost of the severance packages would be high, but the long-term gain is tremendous.
If the federal government spends N2 trillion on severance packages to cut the size of the civil service to the limit that would consume only 40 per cent of annual budget, it would have succeeded in freeing resources for the provision of infrastructure that would enable even those disengaged from the civil service to create jobs with their severance packages.
In a market-driven economy, governance is not about direct creation of jobs by government. It is about empowering the private sector to create jobs. If government maintains its jumbo workforce and spends 70 per cent of its income on salaries, the result would be decaying infrastructure and an alarming rate of unemployment. That is what Nigeria is facing at the moment.
Buhari celebrated the alarming cost of governance last week with the inauguration of a king-size cabinet to implement a pocket-size budget. The president has assembled 43 eminent Nigerians to help him implement his campaign promises.
Ironically Nigeria has no money to sustain the jumbo cabinet. From the paltry earnings from oil sales, an Irish firm named Process and Industrial Development (P&ID) is angling to extort $9 billion for a controversial breach of contract.
The cabal that ruled Nigeria when late President Umaru Musa Yar’Adua was critically ill in Saudi Arabia, hurriedly signed a skewed contract in January 2010 with P&ID to build a gas refining plant in Calabar. It turned out that the transaction was meant to mortgage Nigeria’s future. President Goodluck Jonathan ordered renegotiation which was rejected by P&ID. Now a British court has converted an arbitration award to a court judgment that empowers P&ID to confiscate Nigeria’s asset worth $9 billion as damages and accrued interest for the profit P&ID would have made in the project for 20 years.
When that is yanked from Nigeria’s lean foreign reserves, the federal government might have to be borrowing close to N100 billion monthly to pay salaries of its unwieldy civil service.Nigeria has no reason managing a $375 billion economy with 43 ministers. Donald Trump, America’s mercurial president manages a $21 trillion economy with a 15-member cabinet. Britain, the world’s fifth largest economy is governed by a cabinet of 21 ministers.
The time has come when Nigeria must cut it coat according to its cloth rather than its size. We must reduce the cost of governance to a maximum of 40 per cent of annual budget.
