Friday, December 07, 2012

Can reduced government spending enhance our economy?

A few approaches to answering this good question:

Anti-corruption - At this time, we need to reduce the financial reward for political officeholders to discourage "do-or-die" politics and perhaps encourage eggheads like me ;)

Economic growth - Produce more (consume less?) is the current imperative.  To produce more, we need to get infrastructure up, and rent-seeking down.  We must get more small-chunks of resources to productive hands, and disperse the glut of resources at the center (mostly from oil receipts).  This is understood but implementation is slooow.

Electricity - If we would get electric power provision right, we would spend less next year on diesel, generators, transport, communications, health and so on.  Ok, this has little to do with reduced government spending, but it's so important for our economic growth that I had to sneak it in.

Inflated budgets - Study the details of the budgets proposed for various agencies, ministries, etc.  Clearly most are overbudgeting: multiple requests for the same items, wage bills that can't possibly be explained by multiplying the small take-home pay by the number of staff, ... and other inconsistencies.  Why?  And what is the way forward?  Can we encourage these units to review their budgets, come up with new numbers, and maybe reward the rank-and-file staff with extra pay from the savings?  We could create a dropbox for such reviews.

Nine zeros is a billion. I can hear you say "What the hell is the National Judicial Council"

Proven unproductive sectors - a lot of the civil service and political class is unproductive, in the sense that their work has little positive effect on society.  Here are some of the ways this is so:

- Some of the staff doesn't exist i.e. ghost workers

- Some of the staff shouldn't exist e.g. We pay a stupendous pension to the families, multiple widows, and children of former military rulers and other presidents, and governors.  Why? Should they not also work?

- Some of the staff is actually anti-productive e.g. creating redtape and harassing citizens so as to collect bribes.  We ought to put such people in jail.  Instead we keep paying them to further destroy the lives of Nigerians.  For example, multinational wants to set up shop in Nigeria, you refuse unless you (not your people) can get a cut.  God will punish you.  You throw away qualified resumes sent to your boss so that you can sell the open position or give it to your cousin. 

- Where work is done, some of it is unproductive e.g. a workday that consists mostly of the effort to groom oneself, take stressful transportation methods, then settle in to gossip and or power-seeking at the office before heading back home.  It does not add anything to the world, except pollution maybe.  A legislator that can't or won't consider policy that would move the country forward but would travel all over for training (read sightseeing), seat-warming at high-tables, oversight functions like inspection of construction projects.

- A lot of the staff is good-for-nothing on the job, since the process of getting the job doesn't emphasize competence e.g. Last-minute money-sharing will get you to the National Assembly.  Being somebody's cousin will make you their paid assistant.  

- Some of the staff is redundant.  Because they do not have the necessary skills, additional skilled staff has been hired to get the job done.  There must be a stylish and humane and supportive way of either retraining them or relieving them of their duties maybe with a severance package and a business loan or school loan.

Sharing the pain -  Before the protests against subsidy removal this January, the president announced a move to cut salaries in government.  If we have given up our fuel subsidies and are making do with less, where is the matching contribution from the ruling class? How is it that they carry on wasting, carry on being overpaid, carry on receiving multiple "official" vehicles, while we are sacrificing for the future? 

Summary: Some belt-tightening may have occurred in the Nigerian government, but with a 70-30 allocation between recurrent and investment spending, the situation is far from satisfactory.  Government spending needs to be further reduced in favour of more productive spending. 

Read more:
- Budget Proposals at the Budget Office, Federal Ministry of Finance, Nigeria
- Nigeria needs to reduce rent-seeking (search result includes Udah and Obguagwu 2011, Coolidge and Ackerman World bank)
- Jonathan cuts salaries of government officials by 25% (reported January 7 2012).  He said in his speech: For the year 2012, the basic salaries of all political office holders in the Executive arm of government will be reduced by 25%. Government is also currently reviewing the number of committees, commissions and parastatals with overlapping responsibilities. The Report on this will be submitted shortly and the recommendations will be promptly implemented. In the meantime, all Ministries, Departments and Agencies must reduce their overhead expenses.

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