Arguably, the most telling criticism of the incumbent administration is that it has taken its foot off the reform gas pedal. It was heir to what might pass for the most comprehensive attempts at reforming the Nigerian economy in a way that improves the efficiency of its resource allocation process, and hence of its competitiveness, since independence in 1960. The Obasanjo administration, its many warts notwithstanding, passed a slew of legislations — on public procurement, fiscal responsibility, etc. — on which one was hoping that the Jonathan administration would consolidate.
In the event, the incumbent administration drove through the structural reforms in the power sector, which changes to the relevant statutes during the Obasanjo government had made possible. And this, boosters of the Jonathan administration often cite as evidence of its commitment to reforms. While not pooh-poohing the huge amount of political will that was required to make the transition from public ownership of electricity generation and distribution assets to the current ownership by private entities (the Obasanjo administration could not find the courage to make this transition), it is hard to expect this one reform to drive new higher trend rates in domestic output growth.
This difficulty is that more operose,in the face of the other more daunting obstacles to doing business in the country. Sadly, the overall reform challenge neither lends itself to simple solutions, nor to early results. All of which mean that any government committed to reforming the economy must sell each reform initiative (and the respective stages thereof) as passionately and rationally as possible in order to get the necessary critical mass of public support behind each one. Paraphrasing Adam Smith, the head of such government “will accommodate, as well as he can, his public arrangements to the confirmed habits and prejudices of the people; and will remedy as well as he can, the inconveniencies which may flow from the want of those regulations which the people are averse to submit to.”
Put this way, the task of reforming the economy is as much about sensitising the people to the need for change, as it is about sequencing the various reform initiatives in a way that gets more benefit from the new system for more persons, per unit of loss by each person who previously benefited from the old system. Without doubt, the reform initiative that currently qualifies the most under this definition would be one that improves the efficiency of the public bureaucracy.
The sad thing about the national reform efforts to date, beginning with the 1986 initiatives under the military, is that our decision to make the private sector the main engine of domestic growth has been taken on the back of a demonisation of the public sector. And for good reasons for that matter. We all are witnesses to how an inept and bumbling public service conspired (and still acts) to decelerate domestic progress. Yet, while the more successful bits of our reform effort to date, especially the sea change in the telecommunication sector, clearly indicate that the public sector is no longer suitable for the role of provider of most goods or services in the economy, none has yet made the public service obsolete.
The public sector suffers from two failings when it comes to providing goods and services. First, is that it often does this as a monopoly. Consequently, the absence of competition stifles any drive for innovation. Second, it often does not have the profit motive as the main driving force in the allocation of its resources. It thus does not seek “least cost” solutions to its provision of any good or service.
Unfortunately, the private sector suffers from as many shortcomings too. It often wants to see a direct link from its efforts to the returns to such effort. Where therefore, the net gain to the provision of a service or good cannot be completely captured by its operations, private entities are loth to invest. These “public goods” — the army, streetlights, education, and health at the mass retail end — may only be properly provided by the public bureaucracy, until their consumption may be made excludable and rivalrous.
Given how much these public goods matter to the health of any economy, and consistent with our ongoing commitment to effective resource use within the economy, the main assignment is to push the envelope for public sector efficiency. And government has tried. Indeed, the now notorious Oronsaye report, to the extent that it sought to eliminate overlaps in the central government’s provision of certain services would have helped move the envelope that much further.
Government, however, put popular consideration above efficiency in rejecting the recommendations of the commission. Set against the now popular plaint that the recurrent part of the federal budget accounts for a large, unhealthy, and growing part of government spending, it is hard to see how government can hold out against eventual consolidation. Worries over the downsizing that may result from this exercise are legitimate, though. And this is not just because government exists for the greatest good of the greatest number. It is also because disgruntlements on an industrial level — the result of such downsizing — might translate into massive vote loss.
Fortunately, the numbers do not support this fear. It would help if we could one day (and very soon, too) have official numbers on what proportion of the recurrent part of the federal government’s budget is actually due to staff salaries. I would wager that fuelling of the large convoys, the generator in the “big oga’s house”, travels (including estacode) and hotel bills, etc. comprise 80% of the recurrent budget.
If this is true, then what government should aim to cut are not so much the staff salaries, as this other “running costs”. How best to do this? Stop the agencies from running; while continuing to pay staff salaries. We then can consolidate the ministries, departments, and agencies as recommended in the Oronsaye report, without ceasing to pay staff salaries. These personnel would, however, stop coming to work. And over a transition period — five years? — would be entitled to their full pay, until they can retrain and transit to functions in the private sector.
Mr. Uddin, an economic historian and finance expert, writes a monday column, and is a member of the editorial board of Premium Times.
