Salary palaver: Nigerians, what happened?

“Look! The wages you failed to pay the workers who mowed your fields are crying out against you.

The hallmark transition of Nigeria from one democratically elected administration to another is a thing worth celebrating but this celebration of “CHANGE” has been tainted by the salary palaver. For, regardless of the rising democratic profile of our great country which has earned her no mean admiration from the rest of the world, her economic prospect at the moment are probably at its lowest ebb in the history of her existence.

A review of past transitions would also reveal that at almost every point of handover, there are usually tales of woes on the economic state of the nation: from the local governments (where they are allowed to exist) to the federal government. There are usually tales of woes about arrears of salaries of civil servants running into several months. It happened in 1983, 2003, 2007, 2011 and now 2015.  Last count, arrears of unpaid wage bills across the thirty-six states of the federation plus the federal government itself was reportedly put at over N150 billion while the construction industry alone is being owed over N600 billion for jobs already completed.  A tale of getting and spending gone wrong?

If we must refresh our memory, the global economic meltdown between 2008 and 2010 had an adverse effect on our economy. The demand of our crude oil, our main source of foreign exchange till date fell. The price of crude in the international market also fell as low as US$38 per barrel. To make matters worse, Nigeria was not even meeting its OPEC production quota of 1.4 million barrels per day due to violent militancy in the Niger Delta. Nigeria’s production fell to as low as 700,000 barrels a day.  This meant that states were receiving less money from the Federal allocation. South-East state governments, for example, were receiving on the average about N28b per annum from the Federation allocation.

Between 2011 to 2014, Nigeria entered into another cycle of oil boom like we had between 1970 – 77. The price of crude within this period (2011 – 2014) averaged US$105 per barrel. Within this period also, South-East state governments were receiving on the average about N92 billion per annum. On sighting the oil boom, many of our political leaders at the state level started doubling the size of their government houses, town halls and conference centers. Some commenced the building of general hospitals in every electoral ward. Cost-centered projects along highways sprang up like mushroom.  The organized labour took it from there and commenced the usual struggle leading to massive increase in salary of workers across the country.

What happened? The answer is simple; we mismanaged the boom that was witnessed between 2011 and 2014. We forgot Keynes’s central dictum which admonishes us that: “The boom, not the slump, is the time for austerity”. We failed to save during that period. Instead, we went on spending spree on mostly populist projects without economic value in order to earn “groundless applause” from the people. To put it in a more familiar parlance, nobody thought of the rainy day.

This “scrambling merchandizing” was followed up with expensive TV shows inciting the masses that all is well; too often believing that showmanship will deliver better results, which is obviously not the case. For example, most of the states that cannot pay salaries today were only a few months ago showcasing their numerous “achievements” on national TV. Now the bubble has burst.

This reminds us of Bernie Madoff. According to Christiane Amanpour of CNN, Madoff was highly revered for what people thought was his wizardry as an investor so long as new money continued to drop to feed his Ponzi Scheme. The bubble burst when new money was not coming.  Madoff suddenly became a failure and he knew it even before he went to prison. The public image he create was a lie which eventually clashed with reality.

A few monthsof the drop in oil price has almost completely grounded the national economy.In addition to non-payment of salaries, contractors are not being paid, leading to the on-going layoff of more than 60% of construction  industry workers.

A polity that has more than 50% of its youths unemployed but with their parents now without salary is not only a time bomb, it is also a harmattan fire. When it starts, it spares no one. It destroys everything it casts its glance on. Although not new, the issue of unpaid wages has heightened anxieties among Nigerians for two major reasons. One, the parlous state of the economy has also taken a big toll on the private sector, thus reducing cash flow from that sector.

On the salary matter, a heated and vociferous argument had arisen between top functionaries of the immediate past (until May 29, 2015) administrations at the state and federal levels over what or who was (is) responsible for this unfortunate state of affairs. While the functionaries at the states attributed their inability to pay salaries to the drop in the federal allocations to them, the then federal administration accused state governments of not prioritizing salary payments.

In my view, it was a needless debate because both tiers of government are guilty. Apart from the fact that the federal government also owes salaries of workers and debts to contractors; it is not just the issue of “prioritizing” salaries. The issue that is the bane of our public administration is that there is little or no prioritizing; whether with respect to salaries or projects. The whole essence of prioritizing in public expenditure is it not to ensure that the benefits in real terms justify the cost and vice versa and even becomes more compelling in the midst of scarce resources?

It is a fact that cannot be over-labored that many state treasuries are lean due to reasons we need not go into here.  Some stakeholders have chosen to characterize the situation with the phrase “empty treasury”. But my view is that we should downplay that ascription because both in content and form, the phrase “empty treasury” does not portray a true understanding of fiscal practice in a democracy.

Even where an outgoing administration leaves behind some money, it does not amount to free money to be spent because ideally, such funds are already committed to ongoing projects. And the moment the new administration puts such funds into something else, there is a big problem.

Let me illustrate this with a personal experience. My administration as governor of Imo state, for example, left the sum of over N26.6 billion by the time we handed over in May 29, 2011. Of this amount, N13.3 billion was the balance from Imo Development bond which was earmarked for projects that were ongoing by the time we left office. Unfortunately, the new administration saw the N26.6 billion as money that was there for spending and went on a binge: it embarked mostly on cost-centered projects such as first lady’s office complex, new multi-purpose hall, new exco chambers, new international conference center, over 80 road projects, 27 brand new general hospitals and the building of squares and roundabouts, etc while abandoning the uncompleted projects left by us.