BEHIND THE FIGURES by Ijeoma Nwogwugwu

Ijeoma.nwogwugwu@thisdaylive.com

An important debate has been raging on the back pages of this paper between Nasir el-Rufai, a member of our editorial board and former Minister of the Federal Capital Territory, and the Budget Office headed Dr. Bright Okogu. Both parties have disagreed and agreed, in some instances, on the structure of the 2012 budget. But one aspect that stood out in all the articles was the acknowledgement that a concerted effort has to be made to prune the cost of governance.

While it’s been rather convenient for some commentators to focus on sensational items in the budget that attract attention and can make the headlines such as the inexcusably exorbitant amount spent by the presidency on feeding and banquets all year round, in relative terms, these items as a percentage of non-debt recurrent expenditure are minuscule. What this means is that even effecting a 50 percent cut in these news-grabbing items in the budget would hardly make an impact on the savings that would accrue to the federal government for reallocation to capital spending. This explains why the cut by only 2 percent in recurrent spending in the 2012 budget was deemed inadequate.

However, there are two items in the 2012 budget that account for a lion share of expenditure this year. These are the security budget and personnel cost. Given the rising level of insecurity in the country, this column shall not delve into the merits and demerits of the sum, be 922 billion or N1.145 trillion, allocated to the security sector. For one, it lacks the expertise to determine what should constitute the right amount for allocation to the Nigerian armed forces, the police and security agencies in times of heightened security threats. And two, I agree with Dr. Okogu that when it comes to matters of national security, we should be circumspect when delving into the details of the budget allotted to the security sector, again, especially in times of heightened security threats.

With respect to personnel cost, on the other hand, I shall again refer to my article last month in which this column estimated that at 1.7 trillion, personnel cost alone will account for 56 percent of total recurrent expenditure and 36 percent of the total budget in 2012. Although this computation was based on Okogu’s statement last December that personnel cost was expected to rise to N1.7 trillion in 2012 from N1.5 trillion last year, that article triggered a response from the Budget Office on the 2012 fiscal framework.

From the information provided by the Budget Office, it showed that the share of different expenditure heads as a percentage of total expenditure are as follows: statutory transfers of N397.93 billion – 8.38 percent; debt service of N559.58 billion - 11.78 percent; overheads of N260.6 billion – 5.49 percent; personnel of N1.655 trillion – 34.85 percent; service wide votes, Multi-Year Tariff Order and pensions of N556.10 billion – 11.71 percent; and capital expenditure of N1.319 trillion – 27.79 percent.

Since the recurrent budget comprises personnel cost (salaries), pensions, overheads, service wide votes (including MYTO) and debt-service payments totalling N3.031 trillion, this means that the federal government’s personnel cost of N1.655 trillion will account for 54 percent of total recurrent expenditure while the same personnel cost will account for 86.4 percent of non-debt recurrent expenditure in 2012.

It should be noted, however, that these estimates do not take into consideration personnel costs that will be incurred by public sector institutions that are entitled to statutory transfers as per the constitution. These include the National Judicial Commission, Independent National Electoral Commission, the National Assembly, Niger Delta Development Commission and Universal Basic Education Commission. If we factor them into the equation, the federal government’s wage bill will inch up to N2 trillion in 2012. This is humongous, and I believe is where more attention needs to paid by the government and anyone interested in reducing the cost of governance.

As el-Rufai rightly pointed out last week, between 2005 and 2007, a conscious effort was made by the administration of President Olusegun Obasanjo to rationalise the public sector, during which almost a 100,000 public sector workers were let go. Unfortunately, between 2008 and 2011, a lot of these public servants were smuggled back into the pay roll after they had been paid their terminal benefits, a fact attested to recently by the Finance Minister and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala.

Another factor that led to the hike in the payroll of the federal government was the increase in salaries of university lecturers and medical personnel between 2009 and 2010, which was followed by the passage of the minimum wage legislation in 2011. This coupled with the creation of new departments and agencies of government through acts of the National Assembly have all helped to increase the wage bill to frighteningly unsustainable levels.

So the question is how should the federal government cut its wage bill without causing social upheavals and throwing more people into the labour market, because just like it’s been argued that the removal of subsidy on petrol was not well-thought out by the government, it will also be counter-productive to resort to slash and burn cuts of public sector workers that could lead to unintended consequences in the long run.

We tend to get emotive over the removal or sustenance of fuel subsidies, but the same degree of passion and healthy discourse on the wage bill, especially by the unions, has been absent. In fact, I find it rather ironic that everyone agrees on the need to divert more resources to infrastructure development for electricity, roads, water, refineries, etc, but few acknowledge that one of the major impediments to this is the size of the federal government’s wage bill.

A way out is for the federal government to continue to adopt measures to wean out ghost workers in the public sector through the use of biometrics. Incidentally, Okonjo-Iweala revealed at a town hall meeting last December that through the use of biometrics, the federal government has been able to cut the pension bill of the police force by N1.5 billion. This is just one parastatal. One can only imagine the savings that could be made if biometric data capture was used to exorcise ghost workers across the length and breadth of the public sector.

Another measure is for the federal government to undertake a diagnostic review of its parastatals that are unproductive. If we have to be honest with ourselves, institutions such as the Ajaokuta Steel complex, the refineries, NITEL/M-Tel, etc, are moribund. Yet, we retain the workers in such parastatals on the government’s pay roll for doing nothing year in, year out. Obviously, some soul searching has to be done to determine if it makes sense to continue to retain these workers who are not adding value and are a drain on limited resources. Some might want to make a case for workers in the refineries on the premise that the federal government intends to fix them, my response to this is, insofar as they are run by NNPC, no one should hold their breath for the refineries to attain 60 percent output, let alone 85 or 90 percent output.

A third way out is through the rationalisation and consolidation of ministries, departments and agencies of government. Although a committee is in the process of reviewing the desirability of the numerous MDAs in government, concerns remain that if care is not taken, the process of rationalisation could be politicised and stalled by vested interests wanting to mark their territories and retain the status quo. To prevent this from happening, the presidency, especially, will need the political will to see this through.

A fourth way is for the federal government to prune the number of political appointees in the public sector, starting from the presidency to the numerous aides appointed by heads of the MDAs. This should also be extended to the disbanding of numerous needless committees in the public sector that meet endlessly, submit reports that are not implemented, and yet get paid sitting, transportation and accommodation allowances for work that is largely ignored by civil servants. A perfect example is the Petroleum Ministry, which in the last few weeks has set up four committees largely to get the Petroleum Industry Bill passed and review the KPMG audit on NNPC. In my estimate, one committee or task force with right terms of reference could have achieved the same objective.

A fifth way is for more pressure to be mounted on the legislature to comply with the salaries and allowances fixed for its members by the Revenue Mobilisation Allocation and Fiscal Commission. By hiding what they pay themselves, these so-called lawmakers have become law breakers. As a matter of fact, investigations have shown that contrary to the impression created by the Senate and House of Representatives that they both slashed their quarterly running costs by 40 and 60 percent respectively last year, this was a ruse used to hoodwink the public. No cut was effected at all.

What they cleverly did last year was to increase the National Assembly budget by almost 300 percent from the N81 billion that was proposed by the executive in the 2011 budget to N232 billion when budget was being deliberated on in the parliament for appropriation. Then they cut it to N153 billion after the executive screamed blue murder, following which they informed the public that they had reduced their running costs, when in actual fact no such cut was ever implemented. They continue to smile to banks with all their over-bloated allowances in place.

Finally, a review of arcane public service rules will also have to be undertaken, so that workers who might have been let go from the system, do not get reabsorbed through the loopholes inherent in the public sector.

But let no one be under any illusion. Reform measures of this nature that could ultimately reduce the wage bill will not be easy to institute. Neither can they be implemented by the mere stroke of the pen. They must be carried out in a manner that is sustainable, justifiable, and are backed by adequate safety nets that will help to absorb the pain of job losses. Failure to be measured and methodical will attract the same backlash and politicisation that the fuel subsidy removal saga unleashed.

Sexed-up Fuel Numbers
The numbers emanating from the House of Representatives’ probe on fuel subsidies on the volume of petrol imported into the country are indeed very, very interesting. What we’ve been informed is that we consume 35 million litres a day but import 59 million litres daily. It has therefore been suggested that the balance of 24 million litres a day is being smuggled to neighbouring West African countries.

I find this hard to believe for one simple reason: if smugglers managed to ferry 24 million litres every day of the year into neighbouring Niger, Cameroun, Benin, Chad, and perhaps, farther afield into Togo and Ghana, the price of petrol in those countries will be much lower than it is today.

Moreover, given that the size of the economies of these countries put together is still smaller than the Nigerian economy, and by extension their fuel consumption requirements, if 24 million litres made its way every day into those countries through smuggling, our smugglers would have taken their oil marketing companies out of business a long time ago.

My take on the sexed-up figures emanating from the Farouk Lawan-led committee is that the 24 million litres was never imported into Nigeria, but subsidy claims were made on them by unscrupulous importers/oil marketers who knew and still know how to manipulate the system. Therein lies the corruption in the fuel importation regime.

If the committee really knows its onions, it should redirect the searchlight on international commodity traders, overseas refiners, shippers, and the Nigerian Ports Authority to first determine if, when and how much fuel was imported into Nigeria. It is only after this has been established that officials from PPPRA, DPR, Akintola Williams Deloitte & Touche and the Finance Ministry can be questioned on how payments were made on phantom fuel imports that never made their way into the country.

But something tells me that this will be a tall order for the House committee to achieve.