Why Cost of Governance Can’t Reduce

Political more than economic consideration appears to have greater influence on President Goodluck Jonathan’s decision to dump the Stephen Oronsaye led presidential committee on rationalisation of government establishments

By Anayo Ezugwu  |  Oct. 21, 2013 @ 01:00 GMT

THE federal government has finally succumbed to pressures from organised labour to dump the Stephen Oronsaye report on the rationalisation of government ministries, departments and agencies, MDAs. The organised labour had kicked against the report, saying that implementing its recommendations would lead to loss of thousands of jobs and consequently increase the unemployment rate in the country.

President Goodluck Jonathan last year set up a Presidential Committee on the Rationalisation of Ministries, Departments and Agencies headed by Stephen Oronsaye, a former head of the civil service of the federation. The committee had submitted its report, early this year recommending the scrapping of some agencies and parastatals and the merger of others considered to be performing overlapping functions.

But the federal government explained in the Medium Term Expenditure Framework and Fiscal Strategy, MTEFFS, which was sent to the National Assembly by President Jonathan, that it would not save much money by reducing the number of MDAs. It added that the merger of the agencies would involve some legal processes that cannot be accomplished within a short period of time.

The document said, “It had been hoped that significant savings would be made from the implementation of government’s white paper on rationalising public agencies. Unfortunately, very little or no savings are likely to be made from the implementation of government’s white paper on rationalising public agencies due to the fact that many agencies recommended for closure or merger were allowed to remain partly due to the fact that some of them are underpinned by law, which cannot be repealed in the short run.”

President Jonathan
President Jonathan

According to the government, the reduction in capital expenditure is explained by the fact that revenue will dip in 2014 and capital projects will be affected. The government also raised the alarm that recurrent expenditure was drying up the resources required for the development of the nation, adding that the quest for higher emoluments by public sector workers was unsustainable.

The MTEFFS paper said, “Between 2011 and 2013, we were able to reduce the share of recurrent spending to about 68 percent and raise capital to 32 percent. However, because of the new challenges occasioned by the projected significant reduction in revenue in 2014, there will be a temporary dip in the share of capital spending to about 26.22 percent. This is because the brunt of the shortfall in revenue is borne by capital expenditure. It is essential to note that the level of outlay of personnel cost is crowding out expenditure on capital spending needed to develop the nation and constitutes a major drain on public resources. Even now, there continues to be pressure on demand for higher emoluments, pensions, etc. This is clearly unsustainable and would need to be addressed.”

The government warned that if the increasing emoluments were not checked, it would spend a higher share of available resources on salaries and allowances of workers that have little or no work to do due to lack of capital. The government also disclosed that increasing oil theft had had negative impact on the implementation of the 2013 budget, adding that a worsening of the problem in 2014 would exacerbate the challenge of meeting oil revenue projection. It also said that the delay in passing the Petroleum Industry Bill was affecting the auctioning of new oil acreages with the resultant non realisation of signature bonuses that had been reckoned as part of the sources of revenue to the government.

The government hinted that efforts would be made to increase the contribution of tax revenues. The federal government pegged new borrowing in 2014 at N572 billion, slightly lower than the N577 billion stipulated for 2013. However, the cost of debt servicing will go up from the N591.76 billion in 2013 to N712 billion in 2014. This is made up of N663.61 billion for servicing domestic debt and N48.39billion for servicing the foreign component.

Meanwhile, many Nigerians believe that dumping the report will be a missed opportunity for government to reduce the cost of governance to a manageable level while also streamlining the operations of its various organs for efficient service delivery. More than 70 percent of government resources are currently channelled towards the servicing of civil servants salaries, leaving less than 30 percent for issues such as debt servicing and execution of capital projects.

This has inevitably led to stunted development and a very high level of poverty. Nigeria’s unemployment rate stands at 23.9 per cent and youth unemployment is 37.7 per cent, according to the National Bureau of Statistics. Despite being the sixth largest exporter of crude oil in the world, more than 70 per cent of Nigeria’s estimated 167 million population are poor, living beneath the United Nations poverty threshold of $2 per day. Nigeria’s human development index performance is one of the poorest in the world, while 10.5 million children of school age are not accommodated in the formal education system. This is the highest in the world, according to UNICEF.

It is also very difficult for Nigerians to believe that scrapping a whopping 220 agencies of government and doing away with excess bureaucracy will not save billions of naira for use in other areas of need. According to the Adamu Fika-led committee that reviewed the Oronsaye report, the federal government will spend N1.031 trillion on civil servants out of N4.9 trillion budgeted in 2013. It is also difficult to conceive that the underlying reason for the action is not political. If such agencies are scrapped, what will happen to all the political appointees that are serving there as board members? Where will the contracts be coming from?

Contact Us