Buhari Administration to Focus on Cutting Cost of Government

Nigeria will focus on cutting the cost of running the government rather than on slashing jobs next year, and will present its 2016 budget proposals by the end of the year, the new finance minister told Reuters on Monday.

Widespread corruption and mismanagement have stunted development in Africa’s biggest economy and left it with paltry savings, dangerously pot-holed highways and constant power outages after a period of record high oil prices.

Kemi Adeosun, the new minister appointed at the start of November, has launched an Efficiency Unit based on a UK model aimed at pinpointing spending excesses and imposing guidelines in an effort to cut the vast amount of waste.

“We’re spending currently more on overhead than we are on capital, so that’s unsustainable and we don’t have the revenues that we had,” Adeosun said in an interview. “We don’t want to slash staff…because this is a government that is committed to job creation, so the obvious area to look for savings is overhead.

“While it was unclear how much savings the government could make, she said the Efficiency Unit would end chronic discrepancies among government bodies including 50,000 naira cost swings on ink cartridges and flight prices to one destination that varied by as much as 100 percent. “As long as the housekeeping isn’t good, then we’re unlikely to succeed with anything that we do, so we see this as very fundamental,” she said.

OPEC member Nigeria is reeling from the crash in global oil prices that has halved the value of its oil sales, which provide about 70 percent of government revenues even though the sector accounts for less than 10 percent of total real GDP.

Alongside the effort to streamline spending, the minister wants to make sure existing revenues actually make it into the government coffers such as from passports, exam fees and university tuition. “So if we make sure all the revenues come in…then oil becomes the icing on the cake and we can say ‘OK, we want to do bridges, we want to do power, housing’,” Adeosun said.  A government document seen by Reuters earlier this month outlined a plan for a 7-8 trillion naira budget for next year, well up from 4.5 trillion naira in 2015.

Nigeria is in dire need of infrastructure investment that the new government hopes to address with a separate $25 billion fund. Most of its roads, railways and power facilities are either in disrepair, half-built or with a capacity that is far below the country’s needs.Reinvigorating the depressed non-oil sectors, such agriculture, mining and manufacturing, as President Muhammadu Buhari badly wants will depend on how successful these structural problems are dealt with.  Capex accounted for just 556.9 billion naira for this year, but there was no release of capital expenditure money until the end of September, when about 139 billion naira allocated for the first quarter was finally released.

Construction companies with government contracts have laid off tens of thousands of workers since payments began drying up in the fourth quarter last year, with the fall in oil prices and an expensive election year looming.  Adeosun said the budget figures were still being worked on but that a medium-term framework that will serve as a base for the 2016 budget would be out soon.  She did not comment on whether the fuel subsidy, a lead weight on the nation’s purse, would be removed.Many analysts believe that the current low oil price would be an ideal time to cut it without hitting the population too hard.

Source: Reuters/CNBC Africa

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