The True Cost of Governance in Nigeria

The True Cost of Governance in Nigeria

Nigeria is undoubtedly blessed with vast natural resources, rich economic potential and human capital. However, in Africa’s largest economy, extreme social inequality and poverty are the order of the day. The bountiful resources Nigeria is blessed with are so unevenly distributed that the country termed as the poverty capital of the world is also home to the highest-paid senators in the world. In 2019, The National Bureau of Statistics (NBS) revealed that four out of every ten Nigerians live in extreme poverty i.e. below $2 per day (which as of the time of writing this article is N960). It is a clear case of misplaced priorities that a country that has such a glaring issue with poverty is also harbouring the highest paid legislators in the world.

As the highest-paid federal legislators in the world, each Nigerian senator earns around $597,000 per year in salaries and allowances. This sums up to about ₦20 billion ($65 million) per year and ₦79 billion ($260 million) for the entire legislature, at the end of each legislative tenure. Taking into consideration that the members of the Senate are only required to sit for at least 180 days a year, this equates to ₦1 million a day. The Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) claims lawmakers also receive hidden allowances known only to the legislators, so these figures may be higher. Such allowances include absurd financial incentives such as hardship, constituency, newspaper, wardrobe, vehicle maintenance, recess allowances and immunity. The minimum wage has remained the same since it was last increased to thirty thousand Naira. Given that the average Civil servant earns about 46 to 120 US Dollars per month, the federal legislators’ salaries alone are enough to pay 191,954 civil servants the minimum wage.

In Singapore that also ranks among the highest-paid legislators in the world, high pay has been justified based on bringing the best hands to public office. This is hardly the case in Nigeria where the minimum academic qualification required for membership of the senate is a secondary school certificate and the certificates of some of the senators are deemed questionable. This extreme social inequality is unbecoming of Africa’s largest economy given that it is not caused by a lack of resources but due to misplaced priorities, resource misappropriation and mismanagement, backed by corruption, weak political will and redundant policies. The effect trickles down on education, healthcare, accommodation, access to credits and other sectors.

Some argue that the high pay is justified based on the cruciality of the functions. A cursory look at the Second Schedule of the Nigerian Constitution shows that federal lawmakers are solely responsible for making laws that affect at least 68 aspects of Nigerian society. They share this function with state lawmakers in about 30 other areas. 274 bills were passed by the Nigerian senate between 2015 and 2019. In comparison with the US, 442 laws were passed by Congress between January 2017 and January 2019. Though it is hard to measure the far-reaching impacts of the laws that were formulated by Nigerian legislators, the contrast is still glaring and outrageous in comparison with that of the U.S where legislators earn far less.

The Legislature also does more than lawmaking. The Senate is responsible for the screening of ministerial appointees and the establishment of committees for the investigation of the executive and public bodies in general. The election of Senators and the House of Representatives from constituencies all over the country also ensures citizen representation at the highest level of government. Though these functions are indeed crucial, it is still questionable whether they justify the high financial cost of the legislature. These excesses would go a long way if they are redistributed into improving the lives of Nigerians.

To draw out a map for the restructuring of their payment structure and the redistribution of the funds, the true cost of Nigerian governance must be rendered. The capital allocated to the public sector of which public servant salaries is inclusive comes from different places. Oil revenue accounts for a large part of Federal Government revenue (69% as of 2017). Corporation taxes, VAT, customs, and other levies such as toll gate fees account for the rest. States are financed in two ways: through Internally Generated Revenue (IGR) – which includes personal income taxes and other levies – as well as the money allocated to them by the Federal Government (FG) every month from the Federation Account Allocation Committee (FAAC). The local governments are also financed through a mix of allocations from the FG and IGR.

At the end of every month, the FG puts all the money that it has generated from crude oil sales, customs and taxes together. 13% of any revenue made from natural resources is returned to the states they were derived from, in compliance with the derivation principleDeductions are then made for the costs associated with collecting revenues, and the rest of the funds are distributed to the three tiers of government. The FG keeps 52.68% for its budget, the states share 26.72%, and local governments get 20.60%. 

Each state receives a proportion of federal revenues based on a “Horizontal Allocation Formula”. The first 40% of revenues are shared equally across the states. The rest is determined by population (30%), landmass (10%), IGR (10%) and social development factors (10%), made up things like school enrolment, hospital beds and so on.

A portion of this federal budget is reserved for the parliament to fund their functions. Africa is the region with the greatest percentage of the state budget allocated to parliament. The released National Assembly budget of 2017 made Nigeria emerge first with 1.71% of the entire budget going to the federal legislative houses. In Nigeria, where the GDP per capita is $2,178 and the minimum wage remains $59, lawmakers rake in $714,846 per year. Meaning a lion share of the federation’s budget is going into the pockets of public servants at the expense of the populace and more pertinent needs! This is the true cost of governance in Nigeria.

It is also upsetting that apart from funding political elites’ bloated salaries, hard-earned money in difficult times is also distributed into other devious means such as outrageous retirement plans, lavish campaign spendings, looting and Godfatherism. Numerous other factors also account for Nigeria’s bloated public sector and the high recurrent component of the budget such as an excessive number of advisers, senior advisers, assistants, and personal assistants to political office holders;  other inflated allowances that are commonplace for public office holders; official vehicles and foreign trips for political office holders and civil servants; security votes for governors; undisclosed extra-budgetary expenditure and;  arbitrary increases in the number of government agencies. This high cost of maintaining a small political elite in office comes at the detriment of the majority of poor Nigerians.

Even more interesting to note is that despite the outrageous amount allocated to Senators and Members of the House of Representatives in salaries and allowances, what they remit as tax appears insignificant as their income tax is calculated as a function of their basic salaries alone. Their allowances, which are non-taxed are about 870 per cent (Senators) and 820 per cent (House of Reps) of their basic salaries. This does not include the illegal but mammoth quarterly allowances lawmakers pay themselves as “office running cost”. This is enough to raise an alarm given that there are better uses for these misappropriated funds.

Some reductions have been attempted in the past. Towards the end of the senate’s Seventh Assembly, led by David Mark of the People’s Democratic Party, efforts of Nigerian civil society organisations only forced the legislators to knock off N20billion from their budgetary allocation, thus making them cut the habitual annual budget at that time of N150 billion to N130 billion.

First-term Senator Ben Murray-Bruce’s call for a reduction in allowances of members of the National Assembly received a widespread commendation. A couple of other lawmakers followed suit, supporting Mr Murray-Bruce’s proposal. However, no such further attempts at reductions have been made so far.

The lawmakers do not need so much in salaries or allowances. It is excess, no matter the angle one chooses to look at it in terms of the value of their output or the place of the current state of the economy. Therefore, a review of the current payment structure is in order.

A good place to start would be to set an empirical standard for determining how salaries and allowances are calculated by adopting a constitutional ceiling for lawmakers’ salaries based on economic realities. The payment structure should be reviewed periodically and mandated by the Constitution to ensure that elected representatives are being paid fairly. It should be adequately defined so that committees such as the RMAFC will be guided by law, and not sentiments or political intimidation tactics. The outcome of the payment structure review should also be made public to foster transparency.  The Federal legislature should not be treated in isolation from the Nigerian state. Their salaries should reflect the economic realities of the state.

A systematic review of pension laws in states that cause a drain on public resources for the benefit of the political elite should be done, with any suspicious, vague or hidden laws summarily reversed. Where necessary, public hearings on these innovations should be carried out often. Abuse of office and breach of the law should be investigated with those responsible fished out and duly punished. Campaign financing should also receive additional scrutiny, to prevent the nation’s democracy from being sold to the highest bidders who get reimbursed from the public wallet when those they have elected assume office.

Another possible measure might be to reduce the number of elected representatives in the National Assembly. Reducing the number of senators to one will save a lot of funds that go into financing them and their advisers and committees, which would otherwise be channelled into other economic investments. It would be more economical and less burdensome on citizens for the government to save money by cutting costs from within and the funds are redistributed to sectors of the economy that are more deserving of it.

This proposal may pose some challenges in the sense that the legislature is created by Section 47 of the Nigerian constitution and any amendments done by it has to be by a majority vote of legislators. It is hard to imagine that Nigerian politicians will vote in favour of cutting down their salaries.

In all this, we must not forget that the case of the legislators is just the tip of the iceberg in the amount of wasteful luxury in the country’s budgetary allocations to public servants. It has been reported that senators’ allowances are not even up to the earnings of governors. The issue of misappropriated funds might be larger than what has been reported before or what is captured here.

The true cost of governance in Nigeria is that the entire country is working tirelessly to make it work while a few political elites through some devious schemes are taking the lion share of the rewards to fund their excesses. This is a cause for alarm as such valuable resources, if properly redistributed, would go a long way into solving the country’s economic and social challenges

The solution to the outrageous cost of governance, to be truly effective, must be radical, well-structured and delivered without undue delay or bureaucracy.  Otherwise going by past precedents, it may just end up adding to the theatrics of absurdity that currently exists.

1140 641 CSR-in-Action

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