The four leading candidates – Rabiu Kwankwaso of New Nigeria Peoples Party (NNPP), Atiku Abubakar of the Peoples Democratic Party (PDP), Bola Tinubu of the All Progressives Congress (APC), and Peter Obi of the Labour Party – have been engaging citizens across the country and even released manifestos to drive home their policy directions if elected.
While the manifestos of the candidate may differ, however, the economic realities are glaring for all to see. Whoever wins on 25 February will have to deal with a debt profile of N67.8 trillion, a fuel subsidy regime that everyone agrees is not sustainable, poor revenue, double-digit inflation, and a surging recurrent component of the budget that has contributed to rising budget deficit.
At the heart of the challenges is the cost of governance. In 2014, former president Goodluck Jonathan proposed a budget of N4.2 trillion with N2 trillion allocated to the recurrent component of the budget to finance salaries, overheads, and pensions.
Buhari’s promise on cost of governance
When Mr Buhari was campaigning in 2015, one of his key promises was to fight corruption, which involves “rooting out dishonest public servants and imposing tough sanctions” as stated in the APC manifesto.
The party manifesto stated that “Nigeria has too many bloated and unnecessary parastatals – for example, there are ten separate government agencies in the energy sector alone, yet we have no power.”
It promised to “reduce the overall number of bloated and unnecessary parastatals, through ‘amalgamation and abolition’.” “However, we recognise that in some instances, we will need to create new agencies to push forward our economic agenda,” it stated.
For instance, the party promised to amalgamate eight federal parastatals in the ministry of health, and create “a single ministry to co-ordinate most or all of its functions.”
Atiku-Okowa AD
While the government could pat itself on the back on implementing the Integrated Payroll and Personnel Information System (IPPIS) to reform the civil service by removing “ghost workers”, most of the other promises of “amalgamation or abolition” are yet to be fulfilled.
There was a small merger in 2015 when the president put some ministries together under a single minister. For instance, the Ministries of Power, Works, and Housing were merged under Babatunde Fashola. But the action did not in a significant way reduce the bill of the ministries. By 2019, the government reversed itself by separating the ministries into two.
The administration even created another ministry – the Ministry of Humanitarian Affairs, Disaster Management, and Social Development.
The government has in the past seven years focused on removing ghost workers from the system rather than fulfilling its promise of reducing the size of the government. Currently, the total workforce of the federal government stands at 720,000 workers, according to the Bureau of Public Service Reforms.
Owing largely to the inability to reduce the size of government bureaucracy, coupled with the implementation of the minimum wage increment, the recurrent expenditure currently stands at over N8 trillion.
On the revenue side, the government implemented the treasury single account (TSA) to streamline revenue collection. However, the size of the bureaucracy remains a challenge.
To contextualise the situation, recurrent expenditure in the 2023 budget is over N8.3 trillion. This is an over 400 per cent increase between 2015 and 2023.
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In the budget, service-wide vote is N1.06 trillion. This is more than half of the 2015 recurrent expenditure of N2 trillion. The allocation for debt servicing is N6.3 trillion, a leap compared to N953 billion in 2015.
Available data shows that the cost of running the government takes a large chunk of the N10.4 trillion revenue of the federal government for the year 2023.
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Despite this increment in allocation to recurrent expenditure, there is agitation for the review of minimum wage, as inflation continues to erode the purchasing power of workers in Nigeria. Last month, the Minister of Labour and Employment, Chris Ngige, announced that the committee on salaries is currently reviewing the minimum wage.
In addition, several labour groups are demanding a review of salaries. For instance, the Academic Staff Union of Universities (ASUU) shut down the university system for eight months in 2022 over conditions of service, funding of universities, and dispute over IPPIS. Other groups like the National Association of Resident Doctors (NARD), and Joint Health Sector Union (JOHESU) also have demands that are wage-related.
Oronsaye Report
One of the options available to the federal government was the report of a committee on the restructuring and rationalisation of federal government parastatals, commissions, and agencies. The committee, chaired by Steven Oronsaye, was inaugurated on 18 August, 2011 by former President Jonathan. The committee submitted its report in April 2012.
The committee recommended the abolition, reductions, merger, and revision of some MDAs. According to the report, there are 541 federal government parastatals, commission and agencies. The committee recommended that the 263 statutory agencies be reduced to 161, that 38 agencies be abolished, 52 agencies be merged, and 14 agencies be reverted to departments and units under ministries.
A white paper committee, headed by the then Attorney-General of the Federation and Minister of Justice, Mohammed Adoke, reviewed the report and rejected most of the recommendations of the committee when it submitted its report in 2014. However, even the accepted recommendations were not implemented until the Jonathan administration left office in 2015.
In 2021, the government of Mr Buhari inaugurated two committees. One headed by a former Head of Service, Bukar Aji, was mandated to review the Oronsaye Report and the government white paper. The other committee chaired by Amal Pepple was mandated to review MDAs created between 2014 and 2022.
The Secretary to the Government of the Federation, Boss Mustapha, in July 2022 set up another white paper committee, headed by Ebele Okeke, to review the report of Ms Pepple’s committee.
Less than five months into the end of this administration, it does not appear that the administration has the will to implement a reform to reduce the size of government.
One major hurdle facing the implementation of the report is the Nigerian Labour Congress (NLC) and other labour unions, who have in the past warned government on the implementation of reforms that may lead to downsizing.
NASS, presidency also contribute to high cost of governance
Equally, the government is also struggling to curb its spending. For instance, N228 billion is being allocated to National Assembly in 2023 with N30 billion earned mark for a severance package for outgoing lawmakers and the inauguration of the next assembly.
It is not just the National Assembly that is contributing to the bloated national budget, even President Buhari that promised to cut down the presidential air fleet is yet to fulfil the pledge. In 2023, the Nigerian government will spend over N12 billion on the fleet, an amount the Commandant of the Presidential Air Fleet (PAF), Abubakar Abdulahi, recently described as inadequate. He said the fleet had incurred debt on behalf of the nation. To put this expenditure in proper context, it required N4.37 billion in 2022 to keep the presidential jets running, but it will cost N12 billion to keep them running this year.
Furthermore, insecurity around the country has also contributed to the surge in government spending, as over N2.98 trillion has been allocated to defence-related agencies in the 2023 budget.
This is just a small peek into the fiscal realities in the transition budget of President Buhari, a budget which large chunk will be implemented by whoever takes over on 29 May. The new president will have big decisions to make on the fiscal status of the country.
What candidates are promising Nigerians
Atiku and private sector led government
Atiku Abubakar, the presidential candidate of the Peoples Democratic Party (PDP), is basing his campaign on a lean government in a private sector-driven economy.
The former vice president is proposing to break the government’s monopoly in every sector and also devolve more responsibilities to the states and local governments.
According to his manifesto, “My covenant with Nigerians”, his government will focus on being a regulator, enabler, and facilitator. To make it work, the former vice president is proposing strengthening regulatory agencies and guarding them against political interference.
There is also a proposal to fully privatise the entire electricity value chain by selling off the transmission agency. The country’s refineries are also to be sold off to engender efficiency.
“Privatise all government-owned refineries and issue new licenses for greenfield investment in crude oil refining. Open up the power sector from generation to transmission for private investments.
“Break Government Monopoly in key sectors. Private Sector will be encouraged to invest in sectors hitherto exclusively or predominantly government-owned.
“Reform of public institutions to make them stronger and more supportive and facilitating enhanced-private sector access to credit will be prioritised. Regulatory institutions will be strengthened and their independence will be shielded from political interference.”
On reforming the public sector, Atiku is proposing to “Implement a four-year plan for the digitisation of major government operations such as procurement in order to achieve transparency and reduce leakages.
Furthermore, “Strengthen the use of business intelligence software to analyse public service productivity.”
Atiku’s plan for privatisation has been very controversial notably due to the failure of some of the firms privatised when he was the vice president from 1999 to 2007. As the vice president, he was the Chairman of the National Council on Privatisation.
Some entities like the Ajaokuta Steel Complex, Delta Steel Company and other assets have become subjects of controversies. In 2013, the governor of Kaduna State, Nasir el-Rufai, who served as the Director-General of the Bureau of Public Enterprises (BPE) in that period, in his book “The Accidental Public Servant” accused Atiku of meddling in the privatisation process.
Atiku was under fire in 2019 for his vow to privatise the defunct Nigerian National Petroleum Corporation (NNPC), as the opposition used it to campaign against him. Despite the uproar over his plan, he has doubled down on selling some national assets to raise $10 billion to fund the economy.
School feeding and conditional cash transfer
Atiku is also proposing to expand the school feeding programme of the present administration and the conditional cash transfer to the most vulnerable in society. Unlike the privatisation of assets, this will most likely expand the budget.
Bola Tinubu and unlimited spending plan
Bola Tinubu, the candidate of the ruling All Progressives Congress (APC), is proposing “no limit on government spending” as a means of developing the economy. The former Lagos State governor appears to be Keynesian – an adherent of British Economist, John Maynard Keyes, whose revolutionary economic theory helped the United States to manage the Great Depression.
The thrust of the theory is that aggregate demand, not price, is the most important driving force in an economy. Mr Tinubu, in his manifesto,“the Renewed Hope”, is proposing the suspension of spending limits in the budgetary process.
The manifesto is proposing a radical spending spree and the employment of millions of “unemployed youths” to build national infrastructure that will stimulate growth. Mr Tinubu classifies pegging of budget value to a specific dollar rate as an “artificial constraint”.
“Budgetary custom bases our annual budget and fiscal policies largely on the dollar value of projected oil revenue. Not only does this practice artificially restrict the Federal Government’s fiscal latitude, it also unduly attracts the nation’s attention towards a single source of fiscal revenue to the detriment of others.
“To achieve optimal growth in the long term, we must wean ourselves from this limitation. A more efficient fiscal methodology would be to base our budgeting on the projected level of government spending which optimises growth and jobs without causing unacceptable levels of inflation. As part of this prudent growth-based budgeting, we will establish a clear and mandatory inflationary ceiling on spending. However, we must break the explicit link between naira expenditure and dollar inflows into the economy.
“Much like the European Union has done, we too must be realistic and legislatively suspend the limits on government spending during this protracted moment of global economic turmoil exacerbated by domestic challenges in security, economy and demography.
“With the fiscal latitude provided by the above-mentioned budgetary reform, government can hire millions of unemployed Nigerians to modernise national infrastructure. A truly national highway system must be built to make road transportation faster, cheaper, and safer.”
To reform the civil service, Mr Tinubu is proposing a cap on expenditure on government buildings and package for elected officials. Most other reforms are a continuity of those of the current administration.
“We will continue the work of the current administration in reforming the civil service to fight corruption, reduce bureaucracy, streamline agencies and decrease inefficiency and waste.
“Bona fide hard-working members of the civil service are to be commended for their public service and shall be protected. However, we will continue the process of weeding out ghost workers, as well as ghost projects and expenditures from the system.
“We will streamline the amount that government spends on itself. A cap will be placed on fiscal expenditures for the construction of government buildings and on the salaries and related compensation packages of elected officials and senior personnel in the executive branch of the Federal Government. Such expenditures will have a low priority in our administration,” the proposal reads.
No tax increase
Mr Tinubu is proposing not to increase tax, as he describes it as “counter-productive”. Rather, he is promising to review the corporate tax system and create a progressive tax regime.
“During times of economic weakness, increasing taxation is counterproductive. Higher taxes drain an already weakened private sector, inviting possible economic contraction and higher unemployment.
“We shall review the corporate tax system and deploy technology and effective policies to better rationalise the system. Our aim shall be to create a progressive tax regime, plug harmful loopholes, enhance the efficiency of collection and give the people a greater sense of responsibility in relation to their taxes,” the manifesto reads in part.
Mr Tinubu’s manifesto is silent on where the funds for the “spending” will come from. Some have accysed him of planning to embark on “printing of money” to fund the spending spree.
Peter Obi pledges to implement Oronsaye Report
The presidential candidate of the Labour Party, Peter Obi, is anchoring his proposal on frugal and prudent use of resources. The former Anambra State governor also favours the use of public-private partnership to grow the economy.
His manifesto, “Our Pact with Nigerians”, is big on reforms of the public sector. It is pledging to review the recommendations in the Oronsaye Report so as to implement them.
“Our determination to reduce cost of governance in Nigeria will start with the immediate implementation of the Oronsaye Report which recommended the consolidation of agencies of government.
“This will be our top priority within the first year of our administration. We will review the recommendations of that report while engaging with industry players to design the implementation of the proposed reforms. While we are focused on cost reduction and streamlining of government operations for efficiency and effectiveness, we will ensure that the implementation of the reforms is pursued in a way that protects the livelihood of our hard working and efficient civil servants.”
The manifestos is silent on what would be the fate of those likely to lose their jobs if the report is implemented. There is also the possible push back by organised labour unions to such reforms. The manifesto did not provide much on how to manage the push back.
Mr Obi is also promising to “install a new budgeting system founded on the cardinal principles of public accountability, objective setting, and programme implementation.” He said the new system will place emphasis on “evaluation and feedback.”
He promises to adopt the zero-based budget (ZBB) format as against the envelop budget system being currently used by this administration.
“We will strive towards a zero-based national budget to overcome the mindset and reality of past non-performing national budgets that are routinely hampered by budgetary deficit overhang,” it reads.
The current administration had adopted the ZBB system in 2015 for the 2016 budget but the budget was marred with errors. The Ministry of Finance subsequently blamed the ZBB for the errors, noting that government staff were yet to master the new template.
“The members of staff in the Ministry of Budget and National Planning as well as those handling budget issues in all ministries and extra-ministerial agencies are grappling to master the technicalities in the ZBB template,” the ministry stated then.
Mr Obi also proposes a structural change in revenue mobilisation by allowing the states to collect taxes and credit the federal government its share. To achieve this, he plans to create a joint tax board of (Federal Inland Revenue Service and States’ revenue services) to reduce the incidence of multiple taxation. The effort aims at creating a centralised database.
He also wants to work with states to remove non-state actors collecting tax on behalf of states and local governments.
These changes are going to require alteration to the constitution and other extant laws. The proposal did not provide the timeline for the execution of these changes.
The candidate is also proposing “an aggressive technology-driven public sector financial management system anchored on a reformed, well-trained, and motivated civil service. We will undertake public sector reform as a priority in order to provide institutional support to entrepreneurial governance that will drive up efficiency.”
Rabiu Kwankwaso and his plan for fiscal discipline
The former governor of Kano State and candidate of the New Nigeria People’s Party (NNPP), plans to revive the economy through financial discipline as itemised in his manifesto, “My Pledge to You”.
Mr Kwankwaso noted that Nigeria is under a financial strain, and by implication borrowing to fund subsidies, salaries, and social programmes. He said the size of the recurrent expenditure must be reduced, and proposed privatisation as one of the means to achieve this.
Rabiu Musa Kwankwaso
In the manifesto, Mr Kwankwaso highlighted some challenges associated with Nigeria’s fiscal regime. These include low VAT, high Company Income Tax, inefficient tax system, and low revenue from the oil and gas sector.
One of the proposals is a cap on all tax obligations on corporate entities. Mr Kwankwaso said his government will cap CIT at “25 per cent” and end the multiple obligations like the two per cent education tax, one per cent NITDA tax, and 0.25% NASENI tax. Instead, he said the government should allocate to all concerned parties from the 25 per cent CIT.
Mr Kwankwaso also promises to change the capital and recurrent expenditure ratio in the budget to 65:35 per cent ratio, noting that the recurrent expenditure must be reduced significantly.
In all, it appears all the candidates said they are keen on addressing the high cost of governance and the dwindling revenue of the government. They have presented proposals for reforms, many of which are similar.The wise question is: can they and will they implement the proposals?
Source: www.premiumtimes.com
