August 9, 2022/CSL Research
Over the weekend, there were news reports that the Nigerian Governors on the platform of Nigeria Governors’ Forum (NGF) have advised the Federal Government to consider laying off all civil servants who are 50 years and above and levy those with salaries above N30,000.00. According to Premium Times report, the governors proposed at a meeting with President Muhammadu Buhari in July.
The proposal also urged the government to begin implementation of the updated Stephen Oronsaye Report, which suggested merger and shutdown of agencies and parastatals with duplicated or contested functions to address bureaucratic inefficiency and reduce the cost of governance.
The report further noted that the federal civil service employs just about 89,000 people but will spend about N4.1 trillion on personnel costs this year, from its N17 trillion budget for the entire country.
Although, the Nigeria Governors’ Forum has denied its involvement in any alleged demand by state governors on the Federal Government to retire federal civil servants above 50 years and levy those with a certain minimum salary, we believe the prevailing fiscal challenges necessitates a critical review of the cost of governance.
The Stephen Oronsaye’s report had recommended that some MDAs be merged to eradicate the existing duplication of functions and create synergies. Specifically, it recommended the consolidation of the EFCC, ICPC and the CCB; Revenue Mobilization, Allocation and Fiscal Commission (RMAFC) be amended to accommodate the functions of the FRC as well as those of the National Salaries, Income and Wages Commission (NSIWC); Infrastructure Concession and Regulatory Commission (ICRC) be subsumed in the Bureau of Public Enterprises (BPE); the Nigerian Investment Promotion Commission (NIPC) be merged with the Nigerian Export Promotion Council (NEPC); the Public Complaints Commission (PCC) be abolished; the Border Communities Development Agency (BCDA) be abolished; and its functions reverted to the National Boundary Commission under which it was a department prior to its establishment amongst others.
We recall that the Minister of Finance, Zainab Ahmed, had reported N1.63trn Revenue for January to April 2022. This figure annualized comes to N4.89trn, which is 41% less than the N6.91trn budgeted for non-debt recurrent expenditure. The revised government expenditure for 2022 was estimated at an all-time high of N17.31 trillion. Revenue projection of N9.96trn will likely underperform estimate.
We forecast that the budget deficit will come in at N9.7tn, above the government’s deficit target of N7.35tn. Recurrent spending will likely overshoot targets while capital spending will be lower than planned, in our view, oil revenue will significantly fall short of target, but non-oil revenue will outperform budget estimates. We believe the target oil revenue is ambitious in our view.
While we think the oil prices will end up higher than the government’s revised expectation of US$73/bbl, we do not believe that the revised target oil production of 1.6mbpd from 1.88mbpd is achievable. Going by the latest data released by the NUPRC, average daily oil production (including condensates) for the first half of the year was 1.48mpd, lower than the OPEC benchmark of 1.68mbpd in the review period. The perennial issues of pipeline vandalism, theft, and terminal shutdowns have continued to constitute clogs. With no lasting solution in sight to curb this menace in the year, oil production will most likely remain at sub-optimal levels for the rest of the year.
