Tunde Balogun owned
a barbershop from which he used to make a living. As a struggling young
man living in Ikorodu, a suburb of Lagos, he could not afford to rent
an apartment and had to sleep in his shop. With the little income from
his trade, he had hoped that he would be able to pay his bills and
afford the little luxuries of life possible even for someone like him.
His major challenge however was power supply. With a little generator
usually known as “I better pass my neighbour”, he hoped to be able to
remain in business. When he discovered that he was making little or no
progress in this line of business, he had change his means of
livelihood.
“Usually, my major
problem was power and when I consider that I was not making good profit
after removing cost of fuel and servicing the generator, I had to pack
up.” He is now a commercial motorcycle operator popularly called Okada.
“At least with this one, all I have to do is maintain the machine and
afford fuel” he said.
With an ordinary
diploma in business administration, he said his attempt to get a job
before going for higher education was unsuccessful. “It was the little
funds I saved while working as a casual worker at a Chinese-owned
factory that I was able to set up the barbershop. I had to quit that
job because of the inhuman working condition at the factory. My
brother, suffer dey this country,” he said.
Many Nigerians can
understand Tunde’s story. The state of infrastructure in the country
has made it increasingly difficult for businesses to thrive, especially
in sectors which rely heavily on such amenities as power and
transportation. What that means is that the additional cost incurred in
improvising in order to remain in business is passed on to the
reluctant consumers, thus limiting consumption of those goods or
services.
This sorry state of
the economy was brought to sharp relief by the recent disclosure by the
governor of the Central Bank of Nigeria (CBN), Lamido Sanusi of the
high cost of maintaining government, which he said has made it
increasingly difficult to invest in the critical sectors of the
economy. The cost of doing business is high and this has pushed up
interest and inflation rates. A recent World Bank report doing business
in Nigeria showed that there are several constraints which impede the
survival of small to medium-size domestic firms, one of which is the
poor state of infrastructure.
A fortnight ago, Mr
Sanusi stated that if the country continues to spend on areas that add
no real value to the economy, it will be difficult for the nation to
achieve any meaningful development. Relying on figures from the budget
office, he said out of the over N500 billion total federal government
overhead, the overhead of the National Assembly was N136.2 or 25.1 per
cent. He said this huge cost of maintaining government was harmful in
view of the numerous challenges facing the nation.
According to him,
the lopsided structure of the country’s budget in favour of wasteful
spending was fuelling inflation and making it difficult to service
other sectors. He said, “Ninety percent of tomatoes produced get wasted
between the farm and the market. We produce cassava than any other
nation, but we have no (finished) cassava products. We produce crude
oil, but we rely on imported fuel.”
Budget figures
In the 2010 budget
proposal sent to the National Assembly in November 2009, out of the
N4.079 trillion proposed expenditure, N1.37 trillion was earmarked for
capital (infrastructural and developmental) expenditure; N2.011
trillion for recurrent (salaries, allowances and servicing government)
expenditure.
The rest was for
debt servicing and statutory transfers. Out of the statutory figures,
the National Assembly was allocated N127.7 billion, health got N161.84
while education was allocated N249.08 billion.
However, by the
time the budget was eventually passed by the lawmakers, the total
budget figure had jumped to N4.6 trillion, with N1.8 trillion earmarked
for capital projects and N2.027 trillion for recurrent expenditure,
while the allocation for the national Assembly was jerked up to over
N136 billion. There are fears that the total budget figure may rise to
N4.85trillion by the end of this fiscal year.
Director general in
the budget office, Bright Okogu said in an environment where various
parties always have to restructure and reconcile the difference in
figures between what the executive proposed in the Appropriation Bill
sent to the National Assembly and what comes out as the final figure
included in the Act, “It is inevitable that one would have the
challenge of expansionary numbers.”
Mr. Sanusi said he
harped on the overhead cost of government because they are the greatest
inflationary item in the budget. “The issue of overheads was selected
(in my lecture) because they are the most inflationary elements.” He
added that the nation’s overhead cost have been on the rise since 2009
and have been a great challenge in the management of the economic
indices of the nation.
Ali Ndume, the
House of Representatives’ minority leader who took on the CBN governor
when he appeared before the House of representatives to defend his
statement said while the percentage of the lawmakers overhead relative
to the budget is still debatable, that is not the only contributor to
the poor economy. “What happens to the remaining 75 per cent, where do
they go?” the lawmakers asked.
Perhaps it was a
rhetorical question designed to draw the attention of the public to the
fact that legislators are not the only wanton spenders in government.
And as if to confirm this, two days later, the Finance Minister,
Olusegun Aganga said he would be cutting down recurrent expenditure.
“As of today, the recurrent expenditure is too large and therefore we
don’t have enough for capital project, so that was one thing we needed
to change and I have a committee working on that and we are changing
that structure, to review the level of recurrent expenditure. It is too
high, ” the minister said. He cited the instance where personnel cost
went from N985 billion in 2009 to N1.5 trillion, “this is before we
made adjustments for minimum wage.” Mr. Aganga who also recently
admitted that the country has recorded growth without job creation and
employment, said there was need to cut down on the recurrent
expenditure and increase capital spending.
Slimming the federal establishment
A financial analyst
who spoke on condition of anonymity, said the high recurrent over
capital allocation has always been the norm in the country’s budgeting
system. According to him the difference now is that the high cost of
maintaining government was no longer sustainable. “The recurrent budget
itself was never sustainable. What are its components? If salaries,
then we should be slimming the federal establishment. There is a strong
case for this, for as the public sector moves from being a service
provider to providing regulation for designated sectors, we would need
fewer numbers, and more skills. But where is the political will to take
on a (possibly) bloated civil service?” He said government may however
be reluctant to contemplate reducing the workforce. “Unemployment is a
major problem already. We cannot think of adding to it without first
implementing a poverty reduction strategy that is strong on the
creation of new jobs.
“An overly large
recurrent budget could be because we can easily hide rent-seeking
behaviour in salaries and overheads, as opposed to the capital budget.
In this case, we should be looking to a stronger public expenditure
management framework to deal with this,” he said. Over the years, the
country has always allocated an average of 70 per cent of budgetary
allocations to servicing government.
Lagos based lawyer,
Bamidele Aturu said the lawmakers and members of the executive are
behaving like vampires ready to suck the blood out of the nation. “They
imagine that the country belongs to them. That explains their greed and
profligacy. We have been tolerating them for too long.” He said the CBN
governor was right to have raised the alarm, but also advised him to
look within. “He should also know that even in the CBN there is
wastage. I think it is an elite problem.” According to him, the economy
was worse off as a result of this lopsided budget structure. “When you
spend so much on allowance of people who are not adding real value, the
result is what we see in the poor state of the economy. The roads are
not there, transportation is a problem so goods and services will be
expensive. We don’t even have good waterway transport system.
The economy is
crippled.” He said the business of law making should be made part time
in order to cut down on the cost of maintaining their stay as a full
time function. Felix Oboagwina, spokesperson of the Democratic People’s
Alliance said the presidential system of government was becoming too
expensive to maintain. “Or we must find a way to tame the cost of
government. The general feeling now is that we have lost control of
self serving legislators which is tyrannical and incorrigible.”
Lots of noise, little will
Despite this
outcry, it is not clear how much lessons the government has learnt.
Figures from the 2011 budget which would soon be presented to the
National Assembly indicate that it is still business as usual. The N4.5
trillion 2011 budget estimate will have an increased non-debt recurrent
expenditure compared to the 2010 budget. The recurrent non-debt
expenditure increased by 6.77 per cent to N2.849 trillion with major
increase in personnel cost and lower overheads.
Quite surprisingly,
funds allocated for revamping the economy (capital expenditure)
decreased by 20.9 per cent to N1.083 trillion, a far cry from the N1.37
trillion for 2010.
Despite the many
statement by government officials suggesting this is a problem that has
been recognised and will be tackled, a preview of the 2011 budget which
is due to be presented to the Assembly on Tuesday shows that some bad
habits are set to be repeated. For example, as revealed in our
exclusive story last week, the president has given permission for the
sale of official residences to principal officers of the assembly. The
Senate President, Deputy Senate President, Speaker of the House of
Representatives and the Deputy Speaker have all been given leave to
purchase their current living quarters. Provision has already been made
in next year’s budget for the construction of replacements at the cost
of N1.5 billion.
With additional reporting by Emmanuel Ogala
