Policy Briefs

An Insight Into Hidden Costs of Governance

Remarks By Mr. Oseloka H. Obaze, MD/CEO Selonnes Consult Ltd.
On “The State of Nigeria’s Economy and The Imperatives of Cost Benefit Development Analysis of the Presidential System of Government in Africa’s Largest Democracy”  During the SCDDD Workshop of Nigeria’s 4th Republic: 17 Years of Democratic  Governance in Africa’s Largest Democracy,
27-28 May, 2016 in Abuja

I thank the Founder and Chairman of SCDDD, Prof. Ibrahim Gambari and his team and my fellow participants.

I wish to thank Prof. Ode Ojowu, for his lucid and magisterial delivery of his provocative lead paper, titled, “The State of Nigeria’s Economy and The Imperatives of Cost Benefit Development Analysis of the Presidential System of Government in Africa’s Largest Democracy”, which makes my task a lot easier. I also thank him for staying away from the controversial and emotive approach of adding up all the money Nigeria has squandered over the past years as a means of proving how profligate we have become as a nation; such a process detracts for the assessment issues at hand. His charts were nonetheless very illustrative and convincing.

I am not an economist, so I will focus on my area of expertise, which is public policy and governance. Nevertheless, as a member of Nigeria’s attentive public I will make some brief comments of the state of our economy as I perceive it. It is a given that our scope of development is not commensurate with the size of our rebased economy and certainly, with the revenue we have generated from oil and squandered over the years. We also have a national crisis in that we continue to conjecture the size of our national population. Such an indefinite approach to demographics is extremely unhelpful to national planning and policymaking. As a nation, we are sitting on a tinder box, given our youth unemployment. Our national unemployment bulge continues to grow exponentially. Our arrested development is therefore understandable.

On the question of access to land, we also have an unfolding crisis. Scarcity of water, land, and space had long been identified as potential causes of conflict, be it inter-state or intra-state. Today, two key segments of our agricultural industry – farming and husbandry – are engaged in a viciously visceral conflict due to scarcity of space. But let us be frank, this present crisis is a result of policy failure. The so called antagonists, the Fulani herdsmen and various communal farming communities across Nigeria, engaged in subsistence farming are Nigerians and are entitled to livelihood. But no segment is more important than the other. These crises continue to expand due to policy ambivalence that seems to tacitly encourage impunity and violence. The herdsmen-farmers conflict is fast assuming an ethno-political dimension, and thus must be urgently addressed.

It is common knowledge that the key sectoral pillars of our economy – agriculture, oil and gas, power and industries– are all in a crisis mode. The enablers are no better. You may add to these, challenges of hidden high cost of governance. Certainly, our 17 year-old nascent democracy needs to be better attuned to serve the greater national population and the unmet needs of our people.

Ideally, Prof. Ode Ojuwu’s paper given its title, should have been a comparative analysis between the Presidential and Parliamentary systems since we have practiced both; with a dose of analysis thrown in for good measure, of the relative cost of operating a schizophrenic hybrid of both systems, which is what we have now. Because some of us are troubled by the rising costs of governance, and whether it is sustainable, there is much nostalgic talk now about a return to the parliamentary system, as if that too won’t fall prey to the vagaries and human foibles that dog our governance methods.

As such, I will take as my point of departure from the Prof. Ojowu’s observations that the “Objective of a cost benefit analysis is to stress test democratic governance in Nigeria with a view to strengthening it and making it perform better as a continuing institution”. Such an exercise is imperative, in as much as our leaders and policymakers no longer engage do hard-headed policy analysis, be it cost-benefit related or otherwise, and as we heard yesterday, when you try you are told that you are blowing big grammar. But analyze and compare we must, since it offers great value.

There is a tendency to exhibit the usual traditional emotionalism about cost of running government; especially our democratic system. Often we considered the costs as too high and prohibitive. But a distinction must be made as to real cost and unfettered profligacy, some resulting from official malfeasance and from “transaction induced policies” as opposed to “public interest induced policies.” We heard yesterday about how some governors used their bailout funds to build roads rather than pay salaries, because it’s only from awarding contracts on roads that they can make money.

Secondly, democracy we have been told is hard work and the preferred form of government. Presumably, it offers value for money. As such the real and hidden cost and benefits may not always be quantifiable: But what is the financial cost of peace, security and stability? Can it ever be considered too high? Is it worth throwing huge sums of money at problems as we do?

Recently, there was some brouhaha over the expenses of presidential trips and it’s costing over N5billion; to many Nigerians that expenditure is excessive and adds to the huge cost of governance. But to any technocrat, Foreign Service and security personnel, we understand how such trips add up very easily, with advance teams, taking over a hotel floor for obvious security reasons and hosting receptions and all. So what we should be looking at is the qui-pro-quos from such engagements and the tangible benefits that accrue to Nigeria when the President undertakes such trips.

But then, when you use the cost of running our legislative branch as the key variable for analysis, you get troubled. Our legislators totaling “10,922 across the three tiers of government” incur about the second highest per capita remuneration costs globally. Is it worth it? Go Figure! What has happened is that just like our budget, we no longer benchmark policies and outcomes, relative to expenses. Then again, in our situation where there’s dire poverty and we are incrementally inching into a debt trap; it becomes easy to ask as Prof. Ojuwu did; if the “Cost of lawmaking is crowding out public funds otherwise meant for the provision of services to key sectors like education and health.”

We also confront some aberrations, which we must acknowledge. We are happy to be a democracy, but one in which the cost and delivery of good governance dividends when compared to that of a benevolent dictatorship, do not add up. We are informed that “democratic governance is not a prerequisite for the presence of material development in a society”; yet we seek to enjoy such benefits including enrichments. What skews our appreciation of cost-benefit analysis is that the perceived benefits are marginal and the trickle down hardly obvious. Which leads me to some irreverent questions: What is to be preferred, a non-democracy like Singapore that delivers dividends of good governance, or a democracy like ours that remains in the lurch? Is democracy good, just for its sake and name, even when it fails to uplift the economically and politically disenfranchised? Is the high cost of running an elite-dominated democracy worth it?

The ratio of Nigerian lawmakers to national population of 170 million is 1:16,000. So, in a country where one lawmaker cost the nation XYZ amount per annum, which is larger than the cumulative earnings of the 16,000 people at the bottom of the employment totem pole, we have both a perception and real problem. Whereas the country is in economic dire straits, but the cost of governance is spiraling high we surely have a problem. Where we know for fact that the budget of running the national Assembly leapfrogged from N6.02 Billion in 1999 to N150 billion before decreasing to N120billion in 2015, an increase of 403%, we are on the threshold of recklessness. Unquestionably, the rise is far greater that the rise of benchmark oil prices, from which we singularly derive most of our revenue.

It will be far too simplistic to suggest that we can reduce or redact the cost of governance by returning to strict enforcement of financial regulations, using institutions like the Public Works department (PWD) as opposed to contractors, and doing in-house analysis as opposed to consultancies. But it will amount to a lot of savings if we do so. Having served in the federal civil service, with the United Nations and as Secretary to the Anambra State Government, I’m in a vantage position to say that often times the high and hidden costs of governance are induced by civil servants, far more so than their political masters. It is civil servants that know where to “Pad” and where the paddings are embedded. It is them that advise their masters, where to get the extras for constituency projects and how to utilize donor funding for purposes other than what they are meant for. It is astonishing that developmental grants and funding are hardly factored into our operational budgets. Because they are stand alone, they easily become subject to abuse. Contextually, Prof. Ojowu tells us of the “hidden cost of governance due to lack of synergy between the Executive and the NASS”, citing the cost implication of the delayed passing of the budget as an example. I have seen proposals that suggest that the 2016 budget should overlap the 2017 budget and run until May 2017. This is recipe for disaster, since even with the best of intentions that process will be abused and ratchet up extra governance costs.

But the symbiotic relations between the federal and state governments are also a problem that adds to high cost of governance. As SSG, we had an unstated policy of picking up the hotel tabs of most federal visitors to my state and then some. Call that good hospitality! It was not a policy I personally favoured, and one which I protested initially. But my principal then told me, “Look SSG we may need the help of these Abuja people someday.” So, such financial costly actions, when I know our Abuja friends have also obtained their out of station allowances, becomes the practice if not the norm, even as it amounts to double dipping. Same practice goes for political leaders that visit our foreign missions.
Past effort to monetize benefits as a cost-saving measure has failed woefully. Today, we hear stories how international project funding are wasted, and used for non-core expenditures. It applies to the Global Fund on Malaria and HIV/AIDs and more. States readily spend such money, but are unwilling as we were told to raise counterparts funding for that will facilitate their Universal Basic education (UBE) drawdown.

There is a litany of woes that make any cost-benefit analysis of democratic governance almost redundant. You may add to this, the issue of envelope budgeting as opposed to results-based budgeting. It’s good that we have three past foreign ministers here and many Permanent Secretaries. How many times were they persuaded with justification, to sign “Anticipatory Approval Memos” to the Head of State, which would thus bypass FEC scrutiny and due process?
Another case in point. We have just been told that the Federal Government could not sustain the $255 monthly bill given to independent marketers for fuels subsidy. By hiking the cost of PMS, this month, we effectively ended the fuel subsidy. Yet, no one has said where the savings will go and how it will trickle down the poor. Perhaps, three years from now we would be told that the savings was shared amongst political stakeholders. It has happened before, so history can easily repeat itself.

For those who are in public office and indeed, the broad spectrum of Nigerian elite, the undue burden of expectation remains very high, which also add to the huge and hidden costs of governance. Cultural and extended family responsibilities aside, Nigerians expect public officials both elected and appointed, to dole out huge sums of money and gratuities to them. This is of course, a direct result of our high unemployment and absence of social safety nets. Yet, every public servant is inundated with request for financial assistance on a daily basis. In private conversations earlier, a participant told me of how when he held a public office, he decided to tabulate for a one-week period the requests he received for financial assistance, from friends, family members and acquaintances. It amounted to N4.2 million; meanwhile his entire monthly remuneration was N700,000. What this says is that there is a commonly held perception in Nigeria that public servants have the means – both legal and illegal – of making money; and that government resources are there for them to share willfully to their kith and kin. This reality plays out in all arms and tiers of government and adds to our hidden and high costs of running government and indeed, to the rise in corrupt practices within our officialdom.

Finally, there is the issue of public interest and honour code. There are systemic and human conducts that compound our challenges. The Chinese say that “Societies create crimes and people commit them”. So, what we do not consider wasteful because it benefits us and our friends, colleagues and family, will never be a crime. We know how many times civil servants and politicians collect travel allowances, but never travel and never return the funds to government coffers.

So, is it more cost-effective to run a democratic presidential system as compared to a parliamentary system? Your answer is as good as mine! Our human and systemic costs of running governance is seriously broken, perhaps, not yet irretrievably so. Personal leadership style and commitment can make all the difference. Comparative analysis and workshops such as this can add value as constant reminders that all is not well. So too, will our shared values, if they are positive and not self-serving, which is almost invariably the case.

I could go on and on, but I must stop here, on the somber note, that the fault and implications of the high cost of governance –in that Shakespearean lingo — is in us not in our stars. Nigeria remains a uniquely not-so-quaint, but managed democracy, and an expensive one at that. Thank You.

Oseloka Obaze, MD & CEO

Oseloka Obaze, MD & CEO

Mr. Obaze is the former Secretary to the State Government of Anambra State, Nigeria from 2012 to 2015 - MD & CEO, Oseloka H. Obaze. Mr. Obaze also served as a former United Nations official, from 1991-2012, and as a former member of the Nigerian Diplomatic Service, from 1982-1991.

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