Moral burden of paying politicians retirement benefits

As the May 29 handover day draws near, it is doubtful if the federal and state governments can pay the fat retirement and disengagement benefits of political officeholders who have served their terms without further borrowing. The federal government has infinite capacity to borrow through sale of treasury bills or issuance of bonds and so may fulfil the payment obligation without the public knowing since treasury bills are sold bimonthly. Many state governments may not be able to pay because they have exhausted their borrowing limits with commercial and development banks while for most of them the window of opportunity to issue fresh bonds have closed. This is because the revenue accruing from the federation account to the states is barely sufficient to service their existing bond amortization obligation not to talk of meeting criteria for new issues.

The retiring politicians, however, have a huge moral burden on their neck. The entitlements were self-determined during the boom era which might have gone for good. Nigeria earned an average of $55 per barrel and produced an average of 2.1 million barrels of crude oil per day between 1989 and 2014. The real boom era was between 2010 and 2014 when average price of crude oil was $100 per barrel. Most of the outlandish retirement benefits were fixed between 2008 and 2014. Now that crude oil is selling at about $65 per barrel, there is no justification for the citizenry to fund that out-of-the-world self-determined opulent retirement deal.

There is nowhere in the world where politicians are so compensated as they are expected to be accomplished people in their callings who chose to give back to their society by serving for a limited period which is just a fraction of their working life. Why should the state be made to pay lifelong retirement benefits to someone who served it for four or eight years out of an average working life of 35 years?

Today, governments at both the federal and state levels cannot balance their budgets because of the revenue shock occasioned by crude oil price decline which is due to failure to build a robust economy and necessary fiscal buffers while the boom lasted. Currently, our economy is in serious turmoil.

The outgoing federal and the state governments should therefore avoid creating moral hazard for themselves by reverting to the retirement benefits initially prescribed for them by the Revenue Mobilization, Allocation and Fiscal Commission. Anything above that would amount to violating the 1999 Constitution of the Federal Republic of Nigeria and pretending that all is still well with our economy which they had great opportunity to transform. Now is not the time to plunder the weak economy.

Bolade Agbola