Cost of governance: Prune down ministries now, experts tell Tinubu

Consistent with some positive steps already taken, observers have advised President Bola Ahmed Tinubu to urgently reduce the cost of governance by cutting down on the number of appointees and ministers.

It is their belief that if Tinubu is keen on making progress in the management of the nation’s economy, he would have to cut down on the cost of governance that steals development from Africa’s largest economy.

Tinubu would need all the monies he can save and gain to do this. The country needs to increase its spending from its current very low levels, to promote economic development.

Over the years, fingers have continued to point at the over-bloated bureaucracies- large ministries, agencies and parastatals- that have become a cog in the wheel of Nigeria’s progress.

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Despite its vast development needs, the World Bank says Nigeria spends only $220 per Nigerian per year, and at merely 12 percent of GDP, this is one of the lowest levels of spending in the world. Unfortunately, low public spending translates into poor development outcomes.

The country is among the eight economies with the lowest human capital in the world, ranked 167th out of 174 countries on the World Bank’s Human Capital Index.

“With 60 percent of the low levels of overall spending being absorbed by public sector salaries and pensions, and growing interest payments, fiscal space for implementing projects, especially multi-year projects, remains highly constrained.

At the present level of public investment allocations, and even before considering mounting climate change adaptation costs, it would take Nigeria 300 years to provide the minimum infrastructure that the country needs,” the bank further noted.

The costs of Nigerian governance are exceptionally high, and the benefits of that governance go to a small number of the elite group who demonstrate too little concern for the welfare of the Nigerian people.

Nigeria’s constitution mandates the appointment of at least one minister from each state of the federation. This makes for the appointment of ministers who are actually neither needed nor able to make critical impact.

Festus Keyamo, the immediate past minister of state for Labour and Employment made this point in May when he acknowledged the unconstitutionality of the practice of appointing a minister of state who takes directives from the senior minister, a colleague at the Federal Executive Council (FEC).

“Mr. President, the concept or designation of ‘Minister of State’ is a constitutional aberration and is practically not working for many so appointed… And in any case, many of the roles of both ministers are so ambiguous that the bureaucrats would always interpret them to satisfy the ones they see as the ‘senior ministers’ or ‘main ministers’ for fear of being persecuted by them… It also follows that it would be difficult to assess the individual performances of the ministers of state since their discretion is shackled under the discretion of the ministers… As a result, many ministers of state are largely redundant, with many going to the office for symbolic purpose and just to while away the time.

“Files are passed to them to treat only at the discretion of the other minister and the permanent secretary. Yet, the ministers of state will receive either praise or condemnation for the successes or failures of such ministries.”

The bloated size of government comes with high cost of public sector expenditure and its negative impact on the development process in the country, African Development Bank President, Akinwumi Adesina noted last month.

“The cost of governance in Nigeria is way too high and should be drastically reduced to free up more resources for development. Nigeria is spending very little on development.

“Today, Nigeria is ranked among countries with the lowest human development index in the world, with a rank of 167 among 174 countries globally, according to the World Bank 2022 Public Expenditure Review report,” he said.

Akinwumi argued that, “unless the economy is revived and fiscal challenges addressed boldly, resources to develop will not be there. No, bird can’t fly if its wings are tied. Nigeria currently faces huge fiscal deficits, estimated at 6% of GDP. This has been due to huge federal and state government expenditures, lower receipts due to dwindling revenues from export of crude oil, vandalism of pipelines and illegal bunkering of crude oil.”

He further noted that, Nigeria now spends 96% of its revenue servicing debt, with the debt-to-revenue ratio rising from 83.2 percent in 2021 to 96.3 percent by 2022.

In August 2013, former minister of solid minerals, and World Bank vice president for the African region, Oby Ezekwesili warned that 82 percent of Nigeria’s budget goes for recurrent expenditure.

Ten years later, little in remediating this development inhibiting and growth hindering tactic has happened.

In 2022, 96.3 percent of government revenue was spent on servicing debt.

Gross Domestic Product (GDP) grew by 2.25 percent (year-on-year) in real terms in the third quarter of 2022, a decline from 4.03 percent in the third quarter of 2021.

In Nigeria’s 2023 budget, only 30 percent of total expenditure will be spent on much needed capital projects. The non-debt recurrent expenditure (NDRE) of N8.33 trillion remains the largest expense in the budget (about 40 percent), and is 16 percent higher than the 2022 revised budget of N7.11 trillion. It includes personnel cost of N4.99 trillion, which accounts for 60.33 percent of NDRE.

Debt service cost of N6.31 trillion represents about 31% of the Budget. All these underscore the imperative to address expenditure inefficiencies.

Sada Soli, a lawmaker from Katsina state raised concerns about the increase in personnel cost during the debate on the 2023 budget.

“There are a lot of things that are going wrong because we overlook the issue of personnel cost in our budget scrutiny,” he posited. “This is the time to scrutinize this personnel cost. A lot of shenanigans are going on with the issue of personnel costs. So, we must not shy away from scrutinizing it, cut if we need to because a lot is going wrong.”

In 2012, the ‘Oronsaye report’ was submitted to government. The 800-page report recommended the abolition and merger of 102 government agencies and parastatals, while some were listed to be self-funding.

The report revealed a high level of competition among several overlapping agencies, which had not only created ill feelings among government agencies but also brought about unnecessary wastage in government expenditure.

The report also recommended, among other things, the discontinuation of government funding of professional bodies and councils. The measures were, primarily, free funds for the much-needed capital projects across the country.

Since the submission of the report, rather than reduce, harmonise or merge some agencies as recommended in the report, the Buhari administration established more agencies. Scores of additional agencies, commissions and parastatals have been created through new legislative bills in the National Assembly, thus putting extra fiscal burden on public finances.

Nigeria’s new president needs money to finance development. His policy advisory team has advised him to reduce the state’s stake in the oil and gas sector to raise up to $17 billion to boost economic growth during his four-year term, a policy document showed.

The team also proposed the merger of the Federal Inland Revenue Service, Nigerian Customs Service, and the Nigerian Maritime Administration and Safety Agency (NIMASA) into the Nigerian Revenue Service.

The merger, according to the advisory council, will aid the collection of all direct and indirect taxes and levies on behalf of the federal government. The council therefore advised the passage of an emergency economic reform bill to grant the president special powers to drive the economic reform agenda.

While this would be a good start, Mr. Tinubu needs to put together a team of ministers and advisors that share his market approach to economic development.

The statist approach favoured by his predecessor has clearly failed Nigeria and its citizens.

By and large, Ebenezer Obadare, the Douglas Dillon senior fellow for Africa Studies at the Council on Foreign Relations (CFR) noted, “Buhari failed simply because he lacked the wherewithal to govern. For one thing, if he had anything resembling a coherent economic vision, he never once articulated it, and for a man who was once ousted from power for, according to his adversaries, arrogating to himself “absolute knowledge of problems and solutions” and acting “in accordance with what was convenient to him, using the machinery of government as his tool,” he rarely saw the need to avail himself of the wealth of technical and economic expertise at his disposal. If anything, he always exuded the air of someone trapped in a 1970s command-and-control mindset, unable to adjust to the exigencies of the current moment, yet unable to do anything about it.”

Experts suggest that Nigeria’s new President would need to pick ministers and advisors with a strong distrust of command and control economics to help him.

They abound within the country and among Nigeria’s diaspora groups. They do not abound within Nigeria’s notoriously incompetent political class. Many of former governors are lobbying to be appointed into Mr. Tinubu’s cabinet.

An Abuja-based Economist, Collins Arungwa said that it would take a strong political will for the new administration to heed the call of of former Minister of State, Festus Keyamo to do away with junior ministers in the current dispensation.
“The observation made by Keyamo (SAN) was apt. But you have to mix politics with reality, particularly in our own clime. The Nigerian Constitution expressly says that there must be at least one cabinet member from each of the 36 states. We have between 26 and 28 federal ministries and sometimes the President takes direct control over a key ministry like the Petroleum Resources as was the case during the Muhammadu Buhari era.

“To achieve the kind of thing Keyamo was saying, you need a constitutional amenment to alter the section that states that each state is entitled to at least one ministerial slot. It was that provision that created a situation where the president would appoint some people as ministers of state,” Arungwa said.
He also expressed pessimism over the possibility of reducing the cost of governance because of the nature of politics that is being played in Nigeria.

“The Stephen Oronsaye Report contains everything that could change for good the face of governance in Nigeria if implemented, but governments and administrations are side-stepping the report. Why? The reason is simple. We are still practising crude democracy where a President has a very long list of those he needs to settle with all manner of appointments because they played one role or another in his victory at the polls,” he further said.