FG plans austerity measures to avert fiscal crisis

Adebayo Obajemu

After the euphoria of a controversial victory at the last presidential election, and the hasty removal of the subsidy on oil which has triggered a quantum leap in mass suffering of Nigerians, the reality of macroeconomic picture has finally dawned on the administration.

The economy is virtually breeding and the new wage award granted to federal workers by President Bola Tinubu in his October 1 broadcast, will rise 2023 budget deficit to over N10 trillion.

Some commentators are won’t to say the Tinubu’s administration action has so far not matched his word of probity, austerity in management of the economy and the cutting down the cost of governance.

Now the icing on the cake is the concession the federal government has given to all categories of civil servants a wage top-up of N35,000 per month. At least, all federal civil servants under the Consolidated Public Service Salary Structure, which were estimated at 144,766, as at April, will benefit from the provisional salary increase in the next six months.

In view of this concession, the Tinubu administration has pushed budget deficit to N10 trillion, and would have to be coughing out at least, N5.07 billion monthly to fund the add-on, which some experts said has laid the ground for a long-lasting wage floor in the coming months, and ultimately increased the burden of salary payment on the current administration.

This development comes as Nigeria’s economy currently operates at a deficit of over N10 trillion as a result of the lower income generation with debt servicing and recurrent expenditures taking a huge chunk of the annual budget.

As part of the grand plan, the Ministry of Finance and the Budget Office (an agency under the ministry) are said to have started working on new austerity measures that would drastically cut recurrent expenditures and rein in official waste in the operations of ministries, departments and agencies (MDAs).

Ministries according to sources have been given a matching order to streamline their operations and put an end bills that would not add value to governance going forward.

Some MDAs, which are hitherto considered cost centres, are said to have been told to develop initiative to retool their operations as to be commercially viable, given slow revenue growth, huge public debt liabilities and expanded personnel cost.

Mr. Walẹ Edu, the Minister of Finance and Coordinating Minister of the Economy, has a challenging task ahead on coming up with a realistic plan for bridging the gaping hole between revenue and expenditure so as to put an end to era of huge fiscal deficits.

Under former president Buhari, the fiscal deficit jumped from N880 billion in 2015 to N9.3 trillion last year, which was about N2 trillion over the projected amount.

Buhari’s eight-year administration relied almost 100 per cent on borrowing to plug the budget gap. Where conventional loans were not forthcoming, the government resorted to the Central Bank of Nigeria’s (CBN) overdraft for support.

It could be recalled that beginning in 2015, when the last administration came to power,. the value of CBN’s overdraft ballooned from N790 billion to N23.3 trillion as at December 2022 – an expansion of 2,850 per cent.

The amount was N23.05 trillion higher than the restrictions of N252.27 billion based on a maximum of five per cent of prior year’s revenues allowed by the CBN Act, which the new CBN Governor, Dr. Olayemi Cardoso, has vowed to defend and protect.

He also made a strong statement at the Senate screening to deal with reckless deficit financing with utmost dispatch. Cardoso pledged to end the era of reckless budget support and play by the rules of CBN Act.

According to Dr. Ayo Teriba of Economic Associates, the debt market currently does not have the capacity and strength to take in more debts. Analysts say the federal and state governments have so far taken as much as 87 per cent of the total capacity of the market.

The government’s chance at the international market is grossly circumscribed by fear of debt defaults. A report by JPMorgan put the total amount of forward contract debt owed by the CBN at $6.84 billion.

About two weeks ago, President Tinubu expressed concern about Nigeria’s bloated civil service payroll at the national and sub-national levels, saying that he is frightened any time he receives a payroll number.

Speaking at a recent meeting with the Global Vice President of Oracle, Mr Andres Garcia Arroyo, at the presidential villa in Abuja, he said: “Each time they give me the payroll number, I get so frightened.

Where am I going to get the capital to develop the infrastructure we desperately require if the payroll of 1%–2% of the population is consuming all the revenue?

“I think we need tight technological control that can check and balance all necessary control points of our transaction processes. I’m looking forward to working with Oracle because I have the belief and confidence that you can do it as you have in the past.

“What the President papered over is his own self immolation of bloated cabinet, higher than the Buhari we blamed for rising costs of governance”, Professor Adeagbo Moritiwon, a political scientist told Business Hallmark.
Currently, President Tinubu has 45 Ministers, a development that is unprecedented in the history of the country.

“This unusually large cabinet has put further strain on the lean economy, especially as it comes at a time of dwindling revenues and difficulty in generating additional revenue. We are heading towards a budget deficits that will soon be in excess of ₦10 trillion”, Dr. Olufemi Omoyele, an economic analyst told this medium.

But the President himself seems to be in bed with his bloated cabinet, as he recently justified it. When accused of having a bloated government by the President of the Nigeria Labour Congress ( NLC), Joe Ajaero, the labour leader, Tinubu’s justification was that it was a means of job creation during meeting with him.

Many analysts are appalled by the idea of having forty-eight ministers along with their entourage of aides and special assistants at a time the government is inflicting on Nigerians policies that have impoverished them.

This development, according to commentators, suggests that the government is unwilling to share in the pain of cost-cutting.

Many Nigerians have called on the president to implement the Report on the Restructuring and Rationalization of Federal Government Parastatals, Commissions and Agencies, submitted to the Nigerian government in 2012, known as the Oronsoye Report, and the president’s aides have said it is under consideration. But the bloated government runs contrary to such claims.

In view of the rising unfunded fiscal deficit, which has threatened 2023 budget implementation, the Tinubu administration has, despite his own bloated government directed to streamline operation, asking ministries, departments and agencies to put a freeze to new hiring, and consider revenue-generating measures.