July 3, 2023/CSL Research
A major problem President Bola Ahmed Tinubu has to look into as he seeks ways to solve the country’s revenue problem is the high cost of governance and waste in many government enterprises. Since his inauguration, the President has been reminded severally of the need to cut the cost of governance in line with economic current realities. Dwindling revenue on various fronts, mounting debts, and debt-servicing obligations have strained the nation’s finances leading to higher than budgeted fiscal deficits. The fiscal deficit has more than doubled from 1.0% of GDP in 2014 to about 3.2% in 2022. This is above 3.0% of GDP as the Fiscal Responsibility Act (FRA) recommended.
For context, a look at the 2023 National budget shows the civil service costs Nigeria 38.15% of its annual budget. In 2022, out of the country’s ₦16.3trn budget, ₦6.8trn was spent on the payment of salaries and other personnel overheads. This year, the budgeted figure was increased by 18.36% to N8.33trn of the N21.8trn expenditure plan would be spent paying salaries and allowances of public officers and other ancillary costs. Indeed, it is estimated by public sector experts that Nigeria can save huge sums annually from the merger of government Ministries, Departments, and Agencies (MDAs) that have overlapping functions. If the total of 541 MDAs can be pruned to 161 as recommended by experts in the field, Nigeria can cut down expenditure on MDAs to about a third of current expenditure.
Nigeria is currently neck deep in debt with the nation’s total debt stock now estimated at N49.85trillion according to the Debt Management Office (DMO). This could go up to N72trn when the ways and means debt are included and this excludes further borrowing for the year. The rising cost of governance is taking a huge portion of the yearly budget, leaving behind peanuts for developmental projects. During Buhari’s eight years in office, for instance, only 19.7% of the total budgetary spending, or N14.5trn went into capital expenditure (CAPEX), much of which ended up in office equipment and sundry items. The total CAPEX outlay was less than half of the over N30trn deficits accumulated by the administration. On the other hand, for the eight years, N59.2trn was frittered on overheads, personnel costs, and other items of recurrent expenditure and debt servicing. The African Development Bank (AfDB) had raised the alarm that the rising cost of debt service, which the World Bank said could surpass 100% of retained revenues, would crowd out investment in infrastructure.
However, that is only one aspect of the problem. The ostentatious lifestyle and fiscal indiscipline of elected government officials present even more cause for concern and needs to be addressed if Nigeria’s fiscal woes are to be ameliorated.
