Despite sharp revenue shortfalls, mounting debts and a recession, the Federal Government’s persistent inability to slash the cost of governance was again recently highlighted by stakeholders. Provisions like the billions of naira for food, travel, purchase of new cars, repetitive purchases and continued use of the envelope system in the 2021 budget across agencies suggest a reluctance to cut costs even while most Nigerians are consigned to deprivation by the adverse economic conditions.
When faced with fiscal adversity, in addition to rolling out stimulus plans to jump-start the economy, what do responsive governments do? They initiate cost cutting on a large scale by cutting personal luxuries, waste and foregoing non-essentials. This is combined with improvement goals, such as boosting outcomes and improving the pace and quality of service delivery. Nigerian governments — federal, state and local — however persist in loading their annual budgets with indulgences, repetitive items that can be put off, and perks for officials. Such preferences are not sustainable in a country in recession, harbouring over 100 million poor persons and having a 27.1 per cent jobless rate. The IMF summed it up: “A lack of fiscal space, especially in countries that entered the current crisis with weak fiscal and external buffers and high public debt, imply that countries may need to rely on some form of expenditure reshuffling to facilitate their response to urgent spending needs.”
Poignantly, such reshuffling has been absent in Nigeria’s budgeting process. This was highlighted by analysts contributing to a social media discourse under the hashtag, #Wasteful2021Budget, who fretted that some recurring items in the budget did not reflect the prevailing economic uncertainty. They cited N507 million to purchase cars for some tertiary institutions, rehabilitation of offices and millions for calendars. While some institutions insist that some expenditure is necessary, the Presidency would be hard put to justify some sub-heads in the N12.3 billion it earmarked for the Presidential Villa. The Organised Private Sector argues that in the face of the country’s dire straits, more strenuous efforts should have been made to slash sub-heads such as N436 million to purchase motor vehicles for the State House, and another N116 million for tyres and other accessories for “operational vehicles.”
Such items run through the budgets of the ministries, departments and agencies despite the N5.2 trillion deficit in the N13.08 trillion 2021 budget that requires borrowings of N4.28 trillion to fund. Comparatively, only N3.85 trillion or 29.43 per cent is for capital expenditure, while recurrent expenses (N5.65 trillion) and debt servicing (N3.12 trillion) combined account for 67.04 per cent of the total. Waste should be reduced, especially on items like cutlery, computers, vehicles, printers, photocopying machines that appear every year in the votes for many MDAs. For a government that recently confessed that it would resort to borrowing to pay salaries, every effort should be deployed to shave off unnecessary items that would not hamper smooth running of governance.
The repercussions are grim. Apart from the binge borrowing, basic government functions, especially security, education, health and road infrastructure have almost collapsed. While the rulers live in opulence, the twin scourge of unemployment and poverty is ravaging the people. The times call for strict belt-tightening. Prepared amid the raging COVID-19 pandemic, meltdown and impending recession, the 2021 Budget of Economic Recovery and Resilience may not accomplish its lofty goals unless the government drastically shelves frills and directs massive spending to infrastructure, social services and poverty alleviation. As the extreme poverty capital of the world, the country has no business maintaining officials in excessive luxury.
The waste is traceable to the continued use of the “envelope” budgeting system. Under this lazy and fraud-prone template, officials simply change or retain figures from the preceding year under each heading and sub-head. Vice-President Yemi Osinbajo had at the outset of the regime in 2015 promised that it would adopt the “zero-based” system that, unlike the traditional envelope template where incremental increases are added to preceding year’s budget, is based on need. Under this scientific method, said Investopedia, “the budget for each new period is created starting from a zero base.” Accenture found that between 2013 and 2017, zero-based method of budgeting grew exponentially and is recommended for countries battling sharp declines in public revenues. It compels policymakers “to justify each expense before adding it to the new budget. The major advantages are flexible budgets, focused operations, lower costs, and more disciplined execution.”
Joyce Banda, within a year of taking office as president, sold Malawi’s sole presidential aircraft in 2013 for $15 million; Mexico’s populist president has put the Boeing 787 Dreamliner purchased by his predecessor up for sale to save costs. But at N12.55 billion in 2021, the cost of maintaining Nigeria’s eight aircraft-strong Presidential Air Fleet has risen by over 190 per cent in four years.
Governments are taking extraordinary fiscal and monetary measure to combat the pandemic-induced downturn, injecting bailouts that the Council on Foreign Relations estimates will reach $10 trillion by year-end. PwC recommends that Nigeria cut waste, raise spending on infrastructure and stimulate productive activities to sustain and raise taxation. The MDAs should sharply reduce transactions (awarding endless contracts) and concentrate on boosting jobs. For instance, using direct labour to cut the National Stadium, Abuja grass, would cost far less than the N81 million the Sports Ministry seeks and provide relief for some unemployed Nigerians.
In confronting its long-running economic crisis, said online portal, Cairn Info, Greece on the one hand, slashed spending by the MDAs, expanded and deepened its tax net and further shed commercial assets. On the other, it raised spending on health, education and SMEs, enacted measures to assist the informal “black” economy to empower the jobless and vulnerable, and adopted measures to mitigate absolute poverty and improve the welfare system.
One of the most effective ways to rein in waste in government is to increase transparency and accountability. Relevant laws and initiatives like the Freedom of Information Act, which allows the public to access government documents, and with a few exceptions, monitor how the government is conducting itself, should be allowed to work. As part of the needed radical economic package to bail out the country from recession, the President, Major General Muhammadu Buhari (retd.), and his cabinet should lead by example by effecting drastic cost-cutting measures and free funds for critical infrastructure and stimulus.
The National Assembly has a responsibility to conduct proper oversight and root out all forms of reckless federal spending.
