Home Finance Huge recurrent expenditure endangers growth – Alex Otti

Huge recurrent expenditure endangers growth – Alex Otti

Alex Otti, former MD, Diamond Bank and gubernatorial aspirant


Former Managing Director of Diamond Bank, and front line aspirant for the Abia State governorship, Dr. Alex Otti, has noted that no country which spends 70 percent of its earnings on recurrent expenditure can ever witness development.

Dr. Otti, who stated this while adding his voice to the restructuring debate in an interview with BH noted that the Nigerian polity is structured in a way that has made it difficult to achieve efficiency in government. He maintained that for the country to achieve development, the country should be reorganised to ensure efficiency, insisting that the country should reduce the number of states to six and whittle down powers of the federal government.

“Restructuring means different things to different people. For me, it involves a lot of things. From the economic perspective, I think the way the polity is organised is inefficient. We need to reorganise ourselves to run an efficient system,” he said.

“Today, we have 36 states, plus Abuja. We have a president and a vice president with retinue of staff. We have 109 senators, we have 360 reps members. We have slightly less than a thousand members of the House of Assembly across the states. We have 36 governors and their deputies, with many thousands of aides and commissioners and all that. I think it’s inefficient.

“The National Assembly itself, the 469 members have close to 3800 aides and all of them are being paid.” He suggested that the country be structured into six regional or states arrangement, each of which will in turn, create the number of local governments it needs and can cater for.

“The first thing that I have argued is that we need to reduce the number of states to a maximum of six, following the six geopolitical zones. You can call them anything you want; you can call them regions, you can call them states – by the way, we have 774 local governments with chairmen, vice chairmen, councillors and all that, so it’s just unwieldy.

“I believe that if we have six states or regions, we can now whittle down the power of the centre and move virtually everything to those states.

“Just imagine saving the country the salaries of 30 governors, 30 deputy governors and all the aides. The National Assembly could be one; I mean, it doesn’t have to be bicameral. It would just be National Assembly like it is in South Africa. And you don’t need more than 10 per state, so you have 60 members of the National Assembly. That way, you reduce the cost of governance.

The problem that we have running the kind of system that we run, is that no matter how you fake it, you end up spending 70 percent of our budget on recurrent expenditure. A bulk of that is paying those salaries. If you have seven out of every 10 naira dedicated to paying salaries, it’s not rocket science; you will know that you cannot develop.

“So, if we flip it and we are able to now dedicate 70 percent of our earnings to infrastructure and capital expenditure, the story would be different. That’s my major recommendation, every other thing can follow. The six states or regions would now decide how many local governments they want to have. If they want a thousand, it’s up to them.

It now depends on their ability to pay. And I can assure you that most of them may not want more than 60. So, 60 times six will give you 360 as against 774 that we have today. Every other thing will derive there-from: state police, judiciary, once you do that fundamental restructuring every other thing will follow,” he concluded.