Jide Akintunde, Managing Editor/CEO, Financial Nigeria International Limited
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- Fiscal Policy
The big failure of Buhari’s big government 06 Jul 2020
In May this year, University College London’s Professor of Economics, Mariana Mazzucato, and United Nations Development Programme’s Head of the Regional Innovation Centre in the Asia Pacific, Giulio Quaggiotto, provocatively wrote about “The Big Failure of Small Government.” In their syndicated article, they illustrated how decades of privatization, outsourcing and budget cuts have rendered many governments incapable of responding adequately to the Covid-19 pandemic.
The administration of President Muhammadu Buhari stands in stark contrast to the fiscal practices the authors caricatured. Yet, Buhari’s big government has been a big failure, not only in managing the raging pandemic, but also on the three-point agenda he campaigned on in 2015: security of life and property, fight against corruption and job creation.
Buhari fell short, in symbolic terms – if not substantively – in signalling his preference for small government in 2015. After operating without ministers for nearly six months, he finally announced a 37-member cabinet. According to the 1999 Constitution (as amended), each of the 36 states of the federation must be represented in the federal cabinet. This provision has remained a brick wall against reducing the size of the federal government at the cabinet level. But the President had to deal with another conundrum, given that he was going to appoint himself the senior minister for the portfolio of Petroleum Resources. He resolved the dilemma by appointing one other minister from his state, thereby exceeding the minimum size for the federal cabinet. From that initial 37 members, however, he now has a cabinet comprising 44 ministers.
Another facet to Buhari’s big government was its budgeting. Its predecessor passed a budget of N4.5 trillion in 2015. From the first budget of the current administration in 2016, the yearly appropriations have expanded quite rapidly in nominal terms. At N10.8 trillion, this year’s budget is more than double the total expenditure outlay six years ago. Within the same period, non-debt recurrent expenditure increased by 88 per cent, from N2.6 trillion in 2015 to N4.9 trillion in 2020. Overall, the Buhari administration has budgeted N42.3 trillion naira in five years (2016 – 2020). The budgets in the preceding five years totalled N23.7 trillion.
The fiscal expansion has been buoyed by the creation of new ministries, departments and agencies (MDAs), thus reversing the initial step of the administration to consolidate the federal ministries. But the expansion in the capital expenditure outlays has been much greater than the rise in the overhead cost. This year, the estimated amount for capital spending increased by 347 per cent compared to the allocation in 2015.
But as opposed to “outsourcing” – or concessioning – some of the major public capital projects, the Buhari administration has been responsible for funding such projects, entirely through debt finance. The major way the domestic private sector is participating in the projects is through financing of the expanded budget deficits.
But despite Buhari’s big government, and its big spending and total control of public projects notwithstanding, the headline economic data and reports from around the country tell stories of abject failure in delivering on his aforementioned agenda. The fastest the economy has grown in the five-year period (2016-2020), is 2.27 per cent, well below the yearly average GDP growth rate of 6 per cent in the previous 10 years. Due to the negative economic impact of the Covid-19 pandemic, the economy is forecasted by the IMF to contract by 3.4 per cent in 2020.
Since the tenure of President Buhari, Nigeria has witnessed two major global shocks. The first, in 2016, was caused by the cyclical downturn that started a year earlier, while the second came with the coronavirus pandemic. Despite the different causal events, happening four years apart, the two global crises impacted the Nigerian economy through oil price collapse. Rather than bulwark the economy against the external shock, the increased fiscal spending of the last five years has appeared to increase the country’s vulnerability to future oil price collapse due to the mounting public debt and lack of fiscal buffers.
From 8.19 per cent in Q2 2015, the national unemployment rate reached 23.1 per cent in Q3 2018, after which the National Bureau of Statistics stopped providing the labour market data. The rise in the national poverty rate to 40 per cent in 2019, according to the NBS, now serves as an indicator that the jobless rate has continued to increase.
The security repercussion of the flagging economy and labour market has created an epidemic of banditry in northern Nigeria, the poorest region in the country. Wanton killings and dispossession of victims of armed robbery has compounded the unmet challenge of ending the Boko Haram insurgency in the northeast, contrary to Buhari’s promise of doing so within six months of assuming office.
This pattern of monumental failure has also characterised the government’s response to Covid-19. The pandemic is out of control in Nigeria, given very limited testing, isolation, treatment and contact-tracing capacities. And without the ability to provide palliatives to vulnerable citizens in any meaningful way, the economy has reopened when the curve for daily new infections is rising, instead of flattening.
The failure of the government in steering the economy and securing Nigerians, despite its big spending, cannot be divorced from official corruption. The extent of the looting of the public treasury is unlikely to be known until Buhari has left office. But the various forms of nonfinancial corruption of the administration are well known to include all-in-the-north nepotism, uneven response to insecurity events in different parts of the country, open disregard for the rule of law, and scandalous HR practices in the MDAs. All of these have consequently eroded competence in Buhari’s big government.
Thus, the point Mariana Mazzucato and Giulio Quaggiotto were making, while apparently against small government, was not for big government per se. They essentially argued for “investments in core public sector capabilities.” This is not what is happening under Buhari’s watch. On the contrary, Nigerians are regularly regaled with tales of how people who are not in government are the ones exercising more influence on the affairs of the State. And the administration has relied on China to deliver its infrastructure boondoggles.
It may be too late in the day. But for the Buhari administration to reverse its negative performance profile, it needs to dismantle its unwieldy structure and small worldview that have disenabled capacity-building for effective public sector governance. It also needs to expand the role of the local private sector in delivering capital projects. Happily, we now hear of a plan to concession some infrastructure projects. Ridding the plan of nepotism is a key success factor.