Reform Bloated Civil Service to Save Cost, FG Told

Obinna Chima

A member of the Central Bank of Nigeria’s (CBN) monetary policy committee (MPC), Mr. Chibuike Uche has said that the inability of the federal government to meaningfully reform its over bloated civil service has continued to obstruct economic growth.
To this end, he urged the government to be bold enough in executing some reforms in the civil service.

According to Uche, owing to this, most of the “excessive monies being injected into the economy- borrowed or printed- end up being used to service the recurrent needs of this inefficient government machinery.”
Uche said this in his personal statement at the November MPC, a copy of which was obtained on the central bank’s website recently.

He pointed out that despite the fact that oil prices have started inching upwards the Nigerian economy remained in “dire straits without any clear path for positive change ahead.”
He argued that the additional revenue being earned from oil have only brought about temporary relief for the federalgovernment, insisting that the structural defects the Nigerian economy “remain unaddressed.”

“The confusion surrounding the exit of the country’s economy from recession is indicative of the widespread pessimism about the future of the Nigerian economy.
“The poor state of the Nigerian economy is perhaps not surprising especially given the fact that the government has done very little to operationalise its economic change mantra,” he maintained.

He expressed concern that the government was increasing its international debts, which according to him had attendant exchange rate risks, without a clear plan of its repayment.
“These huge borrowings and injections into the national economy also complicate monetary policy by making the future direction of inflation unclear.

“The above dynamics also impact on the health of our country’s banking system. It is for instance my view that a good way of gauging the economic health of any nation is to examine the health of its banking system. “This is so because banks essentially intermediate between surplus and deficit units of any economy. The success of such intermediation always depend on the health of the underlying economy that such intermediated capital is used to finance,” he added.
In addition, he expressed concern about the high levels of bad debt portfolio in some Nigerian banks.

“It is based on this level of increasing threats that I find calls for the further tightening of monetary policy to be inappropriate.
“An immediate consequence of such a hasty action will be a corresponding rise in the already high levels of the bad and doubtful debts portfolio of Nigerian banks.

“In my view, the need to prevent another banking crisis should be of great importance in the formulation of monetary policy in present day Nigeria.”
He also said there was need for the central bank to curtail the speculative behaviour of private portfolio investors in the country.

This, he described as unfortunate given the “fact that history has taught us that speculative short term capital flows are incapable of aiding the economic development of developing countries. Foreign capital is only useful to economic development to the extent that it helps fund the acquisition of long term capital assets, skilled manpower and technology.

“While short term speculative capital can sometimes help shore up the value of local currencies in developing countries, to the delight of central banks, this has never been sustainable.
“The capital flight/ exit that always follow usually have far more negative consequences than whatever temporary gains the inflows may have had,” he said.

On his part, the Deputy Governor, Financial System Stability, CBN, Dr. Joseph Nnanna, noted that the financial conditions of banks remained fragile due to provisioning for foreign exchange interventions and open market operations, rising average interbank and open buy back market rates.
Banking sector credit to the core private sector contracted by 0.36 per cent in July (-0.62 per cent on annualised basis) as a result of the persisting crowding-out effect of government borrowing requirements.