With the passage of the Asset Management Company bill, the Nigerian federal government will bailout the banking, financial services and equity/securities industries, clearing $10 billion in toxic assets from their balance sheets. These industries were responsible for creating the toxic asset problem in the first place.
The estimated budget deficit across all three tiers of government in 2009was $11 billion).
Thus far in 2010, there has been the same confusion over budgeting and (more importantly) over budget implementation.
A month after the revised 2010 federal budget was signed by President Jonathan, the Minister of State (i.e. Deputy Minister) for Finance, Remi Babalola, said in an interview that spending levels in the 2010 budget were "unsustainable".
President Goodluck Jonathan's 2010 Budget is 50% bigger than the 2009 budget. The Governor of the Central Bank, Lamido Sanusi, and a Vice-President of the World Bank (and former Nigerian Finance Minister), Ngozi Okonjo-Iweala, have both said the 2010 budget is unrealistic. The federal government does not have enough revenue to meet its 2010 budget obligations, prompting NEXT's sensationalist headline about "financial doom".
Remi Babalola says the federal government may have to one, two or all of:
(a) slash the 2010 budget;
(b) borrow to finance the 2010 deficit;
(c) deplete what little savings we have left in the Excess Crude Account.
This is curious, because constitutionally, the Minister of State for Finance would have been involved in putting together the budget and in getting it passed by both Houses of the National Assembly. Our fiscal fundamentals have not changed over the last few months, so Babalola would have known, while participating in drafting the budget, that it was fiscally irresponsible. His belated admission does not spare us the effects of bad budgeting.
Debt service on new debts borrowed since the 2005 debt cancellation have probably wiped out that supposed $1 billion in savings per annum on debt service the cancellation supposedly produced. Not that we were saving anything to begin with; I have shown in a prior blog post that the future value of the $12 billion lump sum we paid out is roughly equal to the yearly interest we would have paid over the next 20 years.
In the meantime, the National Assembly has raised the salaries, allowances, bonuses and sundry financial benefits of the members of both houses. We have some of the highest-earning legislators in the world.
And with (s)elections just around the corner, next year, the federal government is buying popularity with an increase in the minimum wage.
It is a bit like the Second Republic, when politicians continued spending as if the 1970s Oil Boom hadn't ended by 1980. What had been a manageable (though utterly unnecessary) debt portfolio in the 1970s swiftly became an unmanageable national albatross in the 1980s and 1990s. I fear we may be on the same path, with Fourth Republic politicians at all three tiers of government spending as though the price of crude oil were still near $150/barrel.
I don't mind the increase the minimum wage, though I doubt there was any empirical analysis of the economic effects of the increase; frankly, given the junior Finance Minister's comments about the budget, I suspect they would have gone through with the increase even if economic arguments suggested otherwise.
The real problem comes at the top of the pyramid, from our attempts to fund the existence of an excessive and uneconomic number of states and local government areas. We waste so much money funding our bloated, redundant and superfluous administrative structure. No plan for constitutional, political, economic or sociocultural reform can be taken seriously unless it deals with this issue as priority one. Without consolidation, the likelihood of achieving anything else on the priority list coming to pass is virtually nil. Aside from the fiscal benefits, we would gain from greater cohesion in policy-making and policy-execution.
Unfortunately, the politicians, the labour unions (who principally represent civil servants), and big business (rent-seekers who see more governmental entities as more troughs to feed from) are all keen on inflating the number of governmental entities. Indeed, the state governments are busily creating new local government areas (creating useless new political jobs with which to reward their patrons and clients), and the federal legislature has promised to create 10 new states next year.
Why is Nigerian politics perennially irrelevant and counterproductive?
We should have 6 states instead of 36, and 80 districts instead of 774 constitutional (and several more unconstitutional) LGAs. Instead of the single, land-instensive federal capital territory, we should have 4 federal territories, each restricted to the municipal boundaries of the affected cities (e.g. in the case of Abuja, the Metropolitan Area Council).
Done properly, we could reduce the number of constitutional political offices by 63%, while improving administrative capacity, service delivery and quality of governance. Attached to each of the political jobs represented by that 63% reduction are a variety of official (e.g. assistant, senior assistant, special assistant, senior special assistant) and unofficial (patrons and clients, contractors, girlfriends, political machines, hangers-on) positions that would de facto be cut as well.
We could save BILLIONS.
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