Femi Akindele
by on May 12, 2020
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Following the collapse of crude oil prices, Nigeria is in dire need of resources to fund the budget and development expenditure. It is estimated that the funding gap for 2020 is about $14bn and this has led the country to go cap in hand to international financial institutions like the International Monetary Fund and multilateral lending institutions. This discourse seeks to point out leakages in the federal financial system and what can be done to plug the leaking pipes as well as save cost.
The first is that year after year, the Federal Government projects big sums of money to be realised from the operating surplus of scheduled agencies under Section 22 of the Fiscal Responsibility Act. The section demands that 80% of the operating surplus of the agencies shall be paid over to the Consolidated Revenue Fund of the Federal Government. However, these agencies have devised ways to shortchange the treasury of the expected sums and the Auditor-General for the Federation’s reports are rife with agencies which failed, refused and neglected to remit the due sums. Empirical evidence shows that the agencies are never cautioned. The Accountant-General of the Federation and the Ministry of Finance can fine tune the Treasury Single Account or any other special fund/account to sweep all revenues due to the scheduled agencies and at the end of the month or quarter, reconcile accounts. The Federal Government keeps its 80% while releasing 20% to the agencies.
It is estimated that operating surplus can generate not less than N1.5tn. The implication of this reform is that the government gets what is due to it automatically and needs not chase the agencies or give them the opportunity to mismanage the due remittances. The management of any of these agencies that creates any other account to divert the due funds will clearly be committing an offence for which it will be removed from office and diligently prosecuted and sent to jail.
Again, the Auditor-General of the Federation reports on a yearly basis about the Value Added Tax and withholding tax deducted by the Ministries, Departments and Agencies from participants in public procurement and other transactions, which they fail to remit to the treasury. Between the Accountant-General, Federal Inland Revenue Service and Ministry of Finance, an accounting system can be designed that sweeps all due taxes straight into the treasury. The taxes could be calculated and withdrawn before funds are released to the MDAs to fund their procurement. For example, if an agency has N200m approved for it for a particular service or construction, the tax is withdrawn pending the conclusion of procurement proceedings which if the contracted sum is less than the approved sum, a reconciliation will be made between the agency and the tax authorities and the treasury. This could guarantee not less N200bn of new money to the treasury.
The MDAs are procuring the same goods, services and construction at very different prices. Evidently, they are at liberty to fix prices after what appears to be competitive bidding. In these critical times, it stands to reason that the Bureau of Public Procurement should have a standard and updated price database. This is in accordance with its function under Section 5 (1) (e) of the Public Procurement Act 2007 which demands that the Bureau should monitor the price of tendered items and keep a national database of standard prices. If inflated procurement prices are brought down to the normal market prices, the Federal Government will save not less than N200bn a year.
Closely related to procurements is the challenge of inventory, stores and disbursements where some notorious agencies procure goods, for instance vaccines, lock them up in stores and refuse to disburse them and public budgeted fund releases in subsequent years go through a phantom procurement process and the same goods procured in an earlier year, at the public expense are represented as having been procured again. The fiscal, procurement and anti-corruption authorities need to follow up on this challenge. Recall that the 2017 Report of the Auditor-General of the Federation reported on store items not taken on store charge running into hundreds of millions of naira.
On public private partnerships, the government must clearly make decisions where its investments have been converted to opportunities for the “private sector” to reap where they did not sow. The private sector is put in quotes because the operators of such parasitic enterprises in terms of the real beneficial owners may be senior public servants who use shields and masks to cover their faces through incorporated entities. For instance, after the Federal Government spent money constructing the Ikeja Local Airport and the access roads, leaving the toll collection to a company that remits peanuts to the authorities is a sacrilege and gang rape on the public revenue. A toll gate where over 60,000 cars ply daily and where the minimum rate is N200 should be a gold mine for the relevant agency, of which a good part will be paid to the treasury as operating surplus. Leasing out the laboratory testing part of a major hospital to the private sector who charges high fees for laboratory tests and keeps the money while the hospital is looking for money to meet its basic needs is a senseless exercise. It is either the managers of these agencies do their jobs in accordance with reason or they be shown the door. The government cannot be looking for funds to finance basic services when it is overwhelmed by elementary leakages that can be easily plugged. These leakages across the entire Federal Government value chain can generate not less than N100bn in new revenue.
The idea of petroleum subsidy seems to have been over following the crash of crude oil prices. Whether the government will be able to summon the political will to plug this leak if crude oil price were to rise above $70 per barrel tomorrow is another thing entirely. The seal must be put to this leakage which can save no less than N1tn annually. Another undue subsidy is the electricity subsidy. Whenever the economy stabilizes, the Federal Government must review the privatisation of the distribution companies and its holding onto and investment in the transmission arm of the electricity value chain. It is either the owners of the DISCOs are ready to invest more funds, or the government finds a way to inject new private money into the sector. This can be done by getting new investors to join existing ones or listing them on the Stock Exchange. The tariffs will need to go up after confidence building and value for money measures (from the perspective of Nigerian citizens) have been put in place. Another trillion annually would have been removed from the burden of the government.
On the monetary policy side, the idea of different exchange rates sanctioned by the Central Bank of Nigeria for different transactions imply that the government is subsiding those transactions which get their foreign exchange at the reduced rates. All the foreign exchange rates should be converged to one rate around the extant investors and exporter rate with enough flexibility to adapt to changing macroeconomic circumstances. This may also save not less than N1.5tn for the government.
There are many more areas of getting new money and cost saving. But this can be the starting blocks.
By Eze Onyekpere
Source: https://punchng.com/nigerias-leaking-pipes-and-cost-saving-strategies/
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