Spiraling wage bill slows move to tackle $200bn infrastructure deficit

Nigeria’s spiraling public wage expense is making it harder to meaningfully address the nation’s infrastructure deficit.

Africa’s largest economy needs at least $20 billion a year, or up to $200 billion in the next 10 years to finance its huge infrastructure deficit, according to the Urban Development Bank of Nigeria.

The minister of Finance, Ngozi Okonjo – Iweala said at the House of Representatives earlier last week that the wage bill for public servants had more than doubled from N857bn in 2009 to N1.8trn ($11.1bn), per annum, by 2014.

This brought the projection for recurrent spending in 2014, to 52 percent of the total budget of N4.64 trillion, while capital expenditure was equivalent to 24 percent, with debt service and statutory transfers making up the rest.

“The projection of 24 percent for capital items is inadequate, in view of the infrastructure deficit and of issues of disbursement,” said FBN Capital analysts, led by Gregory Kronsten, in a July 24 note.

The budget office’s analysis for 2012 shows that N1.02 trillion was released for capital outlays, of which 71 percent was utilised.

The increase in wages was largely as a result of pay rises awarded before the 2011 general elections, as well as the minimum wage legislation.

There were also other items ex capital spending, which accounted for almost one quarter of the budget.

These are the mounting debt service payments and statutory transfers to institutions such as the National Assembly, the Universal Basic Education Commission and the Niger Delta Development Corporation.  

The poor performance of concessions in the country means the government at all levels are still the largest spenders on infrastructure.

 The Infrastructure Concession Regulatory Commission (ICRC) set up in 2005 as the Federal Government’s regulatory agency for the provision of institutional framework and guidelines for caltalysing public private partnerships (PPP’s) has been mostly ineffective.

 Chidi Izuwah, executive director, ICRC, in a recent presentation said the critical success factors for PPPs in the country include access to long term capital, legislation, political will, and institutional framework.

Given the high levels of corruption and bureaucratic inefficiency, many PPP concession projects have however become stalled.

The concession for the Lagos – Ibadan expressway was recently cancelled by the FG, while the Lekki toll road was bought back by the Lagos State Government from the concessionaires due to opposition to expanded tolling on the 50 km road.

Analysts say the solution in the medium term is to transform revenue collection to boost government spending on infrastructure.

Nigeria’s tax revenue to gross domestic product (GDP) fell to 12 percent after the rebasing exercise, which is one of the lowest in Africa, as well as for a country of its economic size.

The Federal Government’s revenue as a percentage of GDP also fell to 4.6 percent from 8.7 percent previously.

“A simple analysis of actual FGN spending in the first four months of the year shows that on a pro-rata basis, recurrent spending with debt service was running 58 percent ahead of budget, while capital items and transfers were 48 percent and 23 percent respectively behind the projected levels,” said Kronsten.

PATRICK ATUANYA