REDUCING THE COST OF GOVERNANCE

Nigeria must rescue itself from the fiscal cliff that it hangs, write Ejeviome Eloho Otobo and Oseloka H. Obaze

Every so often, the calls for reducing the cost of governance in Nigeria, especially at the federal level, cast a spotlight on the spiraling recurrent component relative to the capital component of the federal fiscal expenditure. But also highlights the accretion of power and portfolios of the federal government. The recent call in a newly released report by the Independent Corrupt Practices and Other Related Offences Commission (ICPC) underlined the fact that as a result of the expensive governance structure, less than 30 percent of the federal government revenue were allocated to capital projects. ICPC’s report validated our op-ed of 19 May, 2019, wherein we argued that “the prevailing high cost of governance in Nigeria is attributable to both structural and operational factors”.

ICPC, by advocating the restructuring of Nigeria into six regions as a measure pivotal to reducing the cost of governance, buttressed the growing recognition of the linkages between cost of governance and a plethora of structural factors. Bold as this recommendation appears, it is one that has been long advocated by some statesmen, political leaders and policy analysts. In contemplating reduction of cost of governance in Nigeria, it is useful to frame the tasks in terms of three concentric circles. The first and innermost circle relates to the issues concerning the constitutional sources of the current high cost of governance. The second circle pertains to the federal bureaucracy, which includes the ministries, departments and agencies of the executive, legislative and judicial arms of the federal governments, several of whose functions are duplicative or overlap. The third circle pertains to the sub-national tiers of government – the state and the local governments.

To grasp the constitutional sources of the high cost of governance in the inner most of the concentric circles, it helps to explain the constitutional constraints on Nigeria’s economic performance and, particularly, how such constraints have impeded the growth of revenue base of the federal and sub-national tiers of governments. Three main constraints are germane.

First, while assigning exclusive statutory responsibility for management of natural resources to the federal government was intended to shore up its revenue; that choice has had the perverse effect of making the federal government overly dependent on oil and gas, while neglecting the development of other mineral resources and deepening corruption, with adverse consequences for revenue generation. Second, the inclusion of power supply infrastructure in the exclusive list in the constitution deprives the states of the opportunity to license, produce and regulate electric power in response to their needs, thus limiting their economic output, employment and revenue base. Third, the economic wherewithal of the states, including their performance and financial viability, has been impeded by granting the federal government multiple sources of revenue to the detriment of the states. In addition to natural resources, the federal government collects revenue from value added taxes and business registration. These two sources of revenue ought to reside in the states, to give states competitive advantage through offering different incentives. Also, the federalisation of so many standards across the country, especially, regarding wages, salaries and other public sector entitlements, has imposed huge fiscal burden on the states.

Constitutional, political and administrative (CoPA) reforms usually occur when the necessity of, or demand for, change is aligned with the political and financial incentives to do so. Nigeria has reached that critical juncture. The political incentives are evident from the growing sense that the current constitutional and political system is dysfunctional and not delivering optimally for a majority of Nigerians. The financial cost of administering Nigeria’s federal system has become prohibitive. The inertia in undertaking the needed reforms in the country is illustrated by the failure to act on successive constitutional and administrative reforms reports: the 2005 National Political Reform Conference; the 2012 Presidential Committee on Restructuring and Rationalising of Federal Governmental Parastatals, Commissions and Agencies; and the 2014 National Political Conference. This has raised questions on the possible fate of the envisaged report from the Deputy Senate President Ovie Omo-Agege-led Constitutional Review Committee.

The lack of progress in implementing the wide-ranging proposals in previous reports is a cautionary pointer on what could be achieved in the current national context – in which even the use of the word “restructuring” evokes mixed reactions. Advisedly, we have elected to use “reforms”-a more conventional term. Whatever reforms that are proposed would require a prudential approach, guided by a set of principles and pragmatic concerns. The principles would include acknowledging that the cost of governance is one of many considerations, albeit an important one in CoPA reforms. The other principle is subsidiarity – the notion that public policy issues are best addressed at the level nearest to the people. This is the predicate for state policing.

Other practical considerations subsist. The 2023 presidential and general elections campaign are afoot and forging consensus, which has proven elusive on CoPA reforms, would be even more difficult on the cusp of those elections. The proposal to restructure Nigeria into six zones –an idea afloat since the 2005 National Political Reforms Conference – is unlikely to command broad based elite consensus. There were heightened expectations that the recommendations of the APC Committee on Restructuring led by Governor El-Rufai, would help Nigerians to rally around a consensus on three low hanging fruits of CoPA reforms: resource control, state policing and abolition of the local governments. Inexplicably, nothing happened, even as such action would have fulfilled President Buhari’s campaign promise to “initiate action to amend the Nigerian Constitution with a view to devolving powers, duties and responsibilities to the states.” Such inaction reflects the enduring lack of elite consensus on most nation building reforms.

There is no universally agreed optimal size of government. Still, when any tier of government fails persistently to meet its recurrent expenditure from its revenue, that is a warning signal to adopt fiscal prudence. Nigeria must rescue itself from the fiscal cliff that it hangs. This will require thoughtful reflection and much needed action on the nature, scope and sequencing of CoPA reforms.

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Otobo is a Non-Resident Senior Fellow at the Global Governance Institute, Brussels. Obaze is Managing Director and Chief Executive Officer, Selonnes Consult in Awka