by Ikedi Ohakim
“Look! The wages you failed to pay the workers who mowed your fields are crying out against you.The cries of the harvesters have reached the ears of the Lord Almighty” (James 5:4)
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 months of 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 most state treasury is 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. The result today is that in most cases neither the new projects nor the old ones for which those funds were initially earmarked have been completed.
This can be corroborated by the new administration’s press release in the Daily Sun of Wednesday, January 23, 2013 in which the State’s Commissioner of Finance was quoted as saying that “the previous administration of Ikedi Ohakim had secured a bond of N18 billion for capital projects such as roads, water and Oguta Wonder Lake, but when we came to power, we decided to prioritize our projects. Out of the N18 billion that was secured, about N6 billion had been spent and we met only N12.5 billion and we convened a meeting of all stakeholders and got their approval to approach SEC to change the use of the fund”.
The report further stated that the Commissioner disclosed that “the balance of the bond proceeds were channeled into critical areas of infrastructure development such as the building of 305 classroom blocks, building of ultra-modern general hospitals in the 27 local government areas of the state and construction of vital roads across the local government areas, informing that works were currently going simultaneously in the various communities”.
It is this penchant for mismatching funds that has led to non-payment of salaries and abandonment of projects which has become the rule rather than the exception. In my view, it is high time we took deliberate steps to tackle the issue of abandonment of projects started by previous administrations by new ones. It is evil and it is a major root cause of our economic calamity. It leads to nothing but wasting of resources.
Abandoning projects started by a preceding administration is a product of the “what did you achieve mentality”. This mentality makes it almost impossible for a new administration to think rationally. Instead of completing projects that will have huge multiplier effects, new administrations merely go for quick wins by duplicating mini road, electricity, water projects, brick and mortar structures etc which it can quickly complete in order to earn immediate applause from the people who are not in position to understand the tragedy of such idiosyncrasies.
Take a look at those states that have succeeded in show-casing visionary projects in the past sixteen years. You will discover that the administrations that posted monumental achievements did so by going for “shovel ready” projects started by their predecessors. You will also discover that they equally commenced visionary projects like seaport, rail, industrial parks, etc which will form “shovel ready” projects for their successors. Displaying uncommon leadership psychology recently, Governor Nyesom Wike of Rivers State was few days ago, reported by a newspaper thus “My administration will complete people-oriented projects notwithstanding who awarded them”.
According to Talmud: “It is not up to you to finish the work. But you are not free to desist from it”. When you complete projects not started by you, you make more economic impact than abandoning it and starting yours which your successor may also abandon.
As things stand today, non-payment of salaries is fast assuming the status of official policy. It is something that we must stand up against in Nigeria. It leads to economic and social calamity. I call on the legislature to come up with a bill stipulating that salaries not paid as at when due should attract interest on prevailing bank rate until paid. Salaries should be a first line charge for both the federal, state and local governments.
Quite often, you would hear some state governors pride themselves for not borrowing money from banks, even while they owe their civil servants several months of arrears of salaries in addition to non-payment to contractors for jobs duly done. By not paying workers and contractors, the government is indirectly borrowing from them without paying interest.
Notwithstanding, I do not agree with the view that only the state governments are responsible for the stunted growth of our national economy. Let me also state that it is not also true that state governors merely cart away the funds into their private pockets. Such a blanket view is dangerous because it makes it difficult, if not impossible, for us to look at the issue through the proper political prism. At the risk of being misunderstood, I can also state without any fear of contradiction, that the last federal administration is not entirely to blame for the present financial crisis which is chiefly as a result of the fall in oil prices and over which it had no control; coupled with our national penchant for Revenue/Project mismatch; edifice mentality, brick and mortar legacy syndrome, very high cost of running government, undertaking more projects than the economy can handle, project abandonment, etc.
Try as much as we can there is something we cannot run away from: The arrears of salaries owed civil servants across the states must not only be paid but also measures put in place to make non-payment of salaries a thing of the past. It is evil and it needs no emphasis to state that non-payment of salaries poses the biggest threat to our democracy.
So, what do we do? On the short run, the federal government, as a matter of urgency, must initiate both economic and political line of action aimed at finding a lasting solution. The federal government must package an urgent stimulus with very clear conditionalitiesfor both state and local governments. The second short term step is to introduce an immediate special corporate one-off tax for organizations whose annual profit, for example, is in excess of N10 billion.
Thirdly, the petroleum subsidy should be gradually removed and proceeds used for the maintenance of very vital transport infrastructure. Next, we must review the phenomenon of Constituency Project system at both the state and federal levels. Constituency Projects have constituted themselves into a big drain pipe for the country’s economy because they are poorly articulated and haphazardly executed. Perhaps unknown to many, over 70 per cent of Constituency Projects since 1999 have failed or have been abandoned. The principal reason for this is that the beneficiary communities are usually not involved both in identification, planning, execution and maintenance. Most communities wake up to see Constituency projects being executed by strangers. But shortly after,they are either abandoned or get vandalized with nobody taking ownership. Soon, another election is held and the next representative comes up with his or her own projects and the vicious cycle continues.
There are suggestions to the effect that government should embark on austerity measures and even sack workers. This is dangerous. On the contrary, what we need is more spending that would arise from a well-articulated economic stimulus package for the states and local governments.
According to Keynes’s central dictum: “The boom, not the slump, is the time for austerity”. Conversely, now is the time for the government to spend more, not less, until such a time that the private sector will be in the position to stimulate the economy.
Dr. Ikedi Ohakim is former Governor of Imo State (2007 – 2011). He writes from Owerri, capital of Imo.
The opinions expressed in this article are solely those of the author.