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Nigeria can save N3.7trn by gutting inefficient MDAs

Nigeria can save N3.7trn by gutting inefficient MDAs

Nigeria can save as much as N3.7 trillion every year by implementing the Stephen Oronsaye report’s recommendation to scrap or merge Ministries, Departments, and Agencies (MDAs) of government carrying out similar functions, according to a BusinessDay analysis.

This comes at a time the Federal Government is desperately seeking ways to cut governance costs due to low revenue from oil sales and the effect of the deadly coronavirus pandemic.

An analysis of Nigeria’s 2021 budget shows that a total of N5.3 trillion is allocated to all government MDAs. Since there are 541 of them, a back-of-the-envelope estimate puts the average spend of an MDA at N9.8 billion yearly.

Therefore, following the recommendation of the Oronsaye report, pruning the MDAs down to 161, Nigeria will only need to spend N1.6 trillion on them. This leaves the country with savings of N3.7 trillion.

However, scrapping inefficient ministries may not often translate to the full saving of the amount it would have otherwise have spent, but it presents a picture of what is possible if the government musters the political will to act.

A further analysis demonstrates how this is possible. By scrapping just 10 MDAs, whose functions are replicated by other government agencies, Nigeria can save N107.7 billion.

A breakdown of the 2021 budgetary allocation to 10 MDAs obtained from BudgIt, a civic-tech organisation that advocates for fiscal transparency and accountability, shows that scrapping them could save Nigeria over N107.7 billion.

Read Also: ICPC indicts MDAs’ finance, accounts directors in budgets frauds

Some of these agencies include National Emergency Management Agency (NEMA), Federal Character Commission, Public Complaints Commission, National Salaries, Incomes, and Wages Commission (NSIWC), and the National Productivity Centre (NPC).

Others are the Nigerian Building and Road Research Institute (NBRRI), Energy Commission of Nigeria (ECN), National Metallurgical Development Centre (NMDC), Nigerian Institute of Mining and Geosciences (NIMG), National Centre for Agricultural Mechanisation (NCAM).

This analysis validates the Oronsaye report, which concluded that Nigeria can save trillions of naira if it decides to reduce the cost of running its government.

Analysts say Nigeria’s biggest challenge is not necessarily spending more but that it is not spending better. For example, the billions of naira spent on salaries of government officials who perform similar functions across different agencies could be better deployed.

“Personal and overhead accounts for about 70-75 percent of our budget estimate and the remaining 25-30 percent goes into the capital expenditure; this shows that the cost of governance in Nigeria is very high across the three tiers of government,” Moses Ojo, chief economist at Pan African Capital Holdings Limited, notes.

Ojo adds that reducing that number will make the government have enough savings that will add more to the economy, especially in the area of infrastructure development, but that it could see sizable workers in federal civil service lose their jobs, which would compound the unemployment situation in the country.

Over the years, the cost of governance has been very high and alarming and therefore unsustainable as recurrent expenditure continues to significantly exceed capital expenditure.

This problem has continued to generate public concern and national discourse because of the negative implication on investment, industrial expansion, infrastructural development, and growth of the real sectors of the economy.

Earlier in February 2021, Femi Gbajabiamila, speaker, House of Representatives, reinforced concerns over the bulging cost of governance.
His call came at a time when Nigeria is confronting dwindling income from oil and non-oil revenue, a spending plan that has resulted in over-borrowing and interest payments that leave little for nothing, except paying salaries.

Ayodele Shittu, a lecturer at, department of economics, University of Lagos, believes that reducing the MDAs is not the only solution but that the country should embrace public sector innovations in order to use limited resources effectively.

“Let’s be innovative, entrepreneurial, and effective in our thinking and by doing so, we can now begin to use the limited resources we have created in order to increase marginal social benefit and reduce the marginal social cost of spending,” Shittu states.

Some developing countries are already making efforts at reducing the cost of governance. For instance, in 2015, India introduced e-governance in administration in order to reduce the cost of running its government. Also, African countries like Ethiopia, Rwanda, etc. have resorted to a reduction in the number of political appointees involved in the act of administration.

The Buhari administration has said it is committed to implementing an ambitious report of the Presidential Committee on Restructuring and Rationalisation of Federal Government Parastatals, Commission and Agencies led by Orosanye, a former head of the Civil Service under Goodluck Jonathan’s administration.

However, while the cost of governance continues to balloon, the government, including the executive, legislative, and the judiciary are yet to summon the political will to do the needful.

“The country should take a holistic evaluation of the Federal Government recurrent structure of budget and scraps those items that are less important. We should also carry out a holistic appraisal of the core mandate of MDAs, e.g. the one that is doing practically the same thing should be merged and those agencies that have outlived their importance should be scraped since their impact is not felt in the country,” Damilola Adewale, a Lagos-based economic analyst, says.