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EFFECT OF MONETIZATION POLICY ON THE COST OF GOVERNANCE IN THE FEDERAL MINISTRIES OF EDUCATION AND HEALTH
1.1 Background to the Study
Fringe benefits and allowances have always been integral part of the remuneration of officers in the Nigerian public service right from the colonial period (OHSF, 2013). It is no doubt that they constitute a large part of workers compensation in Nigerian public service. The abuses, misuse and mismanagement of fringe benefits such as residential accommodation, furniture allowances, medical trips, motor vehicles and domestic servants among others have over the years resulted in high cost of governance. This has been reflected in the increasing recurrent expenditure as against the capital expenditure. Thus, monetization was introduced to make amends to these abnormalities associated with the administration of workers compensation in the Nigerian civil service where the Federal Ministries of Education and Health are integral part. However, the success or failure of any given policy depends on the level of its implementation. Policy implementation thus, becomes the bedrock of any policy assessment and analysis.
Personnel compensation could thus, be seen as the starting point of cost of governance in both public and private organizations. This is because, compensation package consists of the wages and salaries as well fringe benefits attached to them. The package constitutes large part of organisational expenditure. Kurfi (2010) believes that workers compensation constitutes about 60% of organisational recurrent expenditure. In the same vein,Obasanjo, 2003 (in Shala2006), claims that, over 60% of the annual budget goes to recurrent expenditure which is dominated by workers related expenditure.
In the wake of global reform agenda towards economic rationality, particularly during
the 1980s, most public organisations resort to the adoption of the newly found bride called the
New Public Management. This "paradigm shift" in the management of public organizations is
premised on the tenets of economic efficiency and market driven ideology. Thus, concepts
such as competition, customer relation, performance measurement, budget cuts, user charges,
leaner government, decentralisation, contracting out, and among others constitute the basis of
the New Public Management (Osborne and Gaebler: 1991).
There is this unanimous decision among scholars and practitioners of public finance
that cost of governance is measured based on recurrent expenditure (Chigozie, 2013). The
argument is that, capital expenditure impacts more on the economy with respect to
employment, investment and other growth inducing activities other than recurrent spending.
In a similar vein, the Central Bank of Nigeria (CBN, 2005), states that: ― In Nigeria, costs
associated with the running of government have increased dramatically over the years such
that an increasingly reduced proportion of public revenue is available to support and
implement the primary functions of government‖. The magnitude of loss caused by increasing
recurrent spending led the committee for public service reform in the present 2014 National
conference to suggest the following recommendation:
No political appointee from ministers to commissioners and local government chairmen should employ special advisers, special assistants and personal assistants or make any such appointments by any name called. Instead as a cost saving measure such political office holders should utilise the staff of their ministries where it becomes necessary as contained in circular reference number B63833/93 of January 3, 2000.
In its attempt to reduce the costs of governance in Nigeria, the federal government in
2002 inaugurated the Chief U. J. Ekaete led committee on monetisation of fringe benefits. The
committee report was received, adopted in 2003 and communicated to various ministries in
circular reference No.SGF/19/S47/C1/11/371. The policy was to commence on July 1, 2003.
However, on December 9, 2003, President Obasanjo through a letter, reference No. Press/36-1
and addressed to the Head of Service of the Federation, amended certain provision in the
circular and gave the commencement date of the policy as October 1, 2003. Contrary to this,
the policy did not take off until June 2004. The policy was initially restricted to the core civil
service before it was later extended to parastatals and agencies. By core civil service, it meant
the Ministries excluding the Parastatals, Commissions, Boards and Agencies (Stephen, 2011).
Prior to the monetisation policy, abuse of office and public properties, unnecessary
foreign medical trips and mismanagement by public authorities were pervasive, and
unprecedented. For instance, Mobolaji, (2003) comes out with the following revelations with
regards to the Nigerian public service that:
…… instead of one car, our indigenous civil service "oga" has 10 government cars at his beck and call; has 10 servants; has three government houses (in Abuja, Lagos and Kaduna) because, yes, each can have more than one wives (the colonialist had only one, if any), rides in first class plane (there were no planes then, just boats), including for the week-end to London; has free medical treatment for the entire family (the colonialist in general had only his wife, if at all) - all while getting a fat basic salary in additional to other allowances.
With the presence of such abuses by the public officials, one can best argue that
monetisation could be the only salvation to these unethical behaviours of the public servants.
Market oriented policies in the wake of reforms during the Obasanjo's reform agenda in the
civil service include the SERVICOM, the Due Process, the performance management and the
monetisation policy were all geared towards enhancing economic efficiency and ensuring what is known as the reinventing government. The monetised fringe benefits in respect to federal civil servants are the residential accommodation, furniture, utility, domestic servants, motor vehicles, provision of drivers, fuelling /maintenance of transport facilities, medical treatment, leave grant, meal subsidy and entertainment. These fringe benefits are converted to cash payment using the basic salaries of workers as the basis for the computation. In essence, they are calculated in relation to worker‘s basic salary.
The objectives of the monetisation policy as conceived and expressed by Shala, (2006) are in the areas of minimisation of cost, waste and abuse of public facilities; reduction of cost of running government machinery; reduction of the huge rental costs, encouragement of ownership of private personal housing, promotion of culture of discipline in the use of public utilities and income regeneration to the government to prosecute capital projects. These are the core objectives of the monetisation policy in Nigeria.
Having observed the ugly problems in the civil service and the resultant presumed solution that will render effective, efficient and economic conscious civil service, the research aims at investigating the effect of monetisation policy on the cost of governance in Federal Ministries of Education and Health.
1.2 Statement of the Problem
The civil service which is seen as the machinery for the execution of government policies and programs has over the years faced serious criticisms. These stem from the fact that, the concepts of effectiveness and efficiency have been eroded and the lofty goals for which the civil service is established have been shattered away. The public service which was hitherto used to have a cherished history of commitment, dedication and valuable service to
the nation has been relegated to reckless misrule, spiraling decline and systemic and
institutional decomposition. The service came to be characterized by lack of professionalism,
excessive partisanship, endemic corruption, slowness and inefficiency and crass selfishness
and greed (Hamid, 2008).
This prompted reforms upon reforms to ensure that the civil service performs to its
optimality in an effective and efficient manner. One of such policies put in place to achieve
economic efficiency and resource management (low cost of governance) is the monetization
policy. It is necessitated by the excessive rental and maintenance costs of workers
accommodation, unwarranted misuse of public utilities, unwarranted medical trips, mis-
management of government owned cars and inflation of their maintenance costs. These and
many other fringe benefits as provided by government are abused and irrationally
mismanaged by public officials that have excessively raised government recurrent expenditure
over the years. For example, Kwanashie (2004), preoccupied by high costs of governance
The federal public service is said to employ about one million people with state and local governments also providing employment for even a larger number of people. The cost of maintaining the service accounts for 60 per cent of government revenue. In many states of the federation, the percentage could rise as high as 80 per cent. What is left for capital projects is often not enough to jump start economic growth.
These excessive recurrent expenditures are largely associated with the costs incurred
In the administration of the fringe benefits that were hitherto paid in kind. Kind payment for
Such fringe benefits had led to serious abuse, waste and high governmental costs. The ugly
Face of this scenario is captured in the following words of Pere, (2013):
For instance, it costs government lots of funds to construct, purchase or rent residential accommodation for public servants. Large amounts of resources were occasionally spent on renovation, maintenance and furnishing of such accommodation, as well as on the purchase, fuelling and maintenance of official vehicles for public servants. It is on this record that many public servants maintained a fleet of official vehicles in their offices and homes. Similarly, telephone, electricity and other utility services in the official quarters of public servants maintained by government, were open to various forms of misuse.
The Obasanjo Administration adopted the monetisationprogramme following strong representations by the Revenue Mobilization, Allocation and Fiscal Commission and after an intensive debate on the argument that the nation is devoting over 60% of its revenue to sustaining recurrent overheads, to the detriment of capital/infrastructural development (Ayanwale, 2009). Consequently, Government introduced the monetisationprogramme, on the conviction that if implemented, the policy will reduce to barest minimum such negative fiscal tendencies as waste and abuse of public facilities. For instance, it cost Government lots of funds to construct, purchase or rent residential accommodation for public servants. Large Amounts of resources were occasionally spent on renovation, maintenance, and furnishing of such accommodation, as well as on the purchase, fuelling and maintenance of official vehicles for public servants. It is on record that many public servants maintained a fleet of official vehicles in their offices and homes. Similarly, telephone, electricity and other utility services in the official quarters of public servants maintained by government, were open to various forms of abuse and misuse. One main consideration underlying the implementation of the monetisation policy is the desire to reduce the pressure on public resources, arising from
government's involvement in the physical provision of fringe benefits.
Ten years after the take-off of the monetisation policy in Nigeria, the recurrent expenditure of the government continues to increase while at the same time that of the ministries where monetisation policy is adopted have also significantly increased. For example, the recurrent expenditure in the education ministry rose from #72.2 billion in 2004 to #92.6 billion in 2005. It continued to rise to #129.4 billion in 2006, #137.5 billion in 2007, #162.7 billion in 2008 and reached #360.8 billion in 2013 (Slideshare, 2014). This continues to escalate as the recurrent expenditure of the ministry continues with #444 billion in 2014 and #459.66 billion in 2015(Budget Office of the Federation; 2014; 2015).Nothing different can be said in regards to the ministry of health as#224.1 billion was appropriated for recurrent expenditure in 2012, #223.78 billion in 2013, #216.4 billion in 2014 and #237.1 billion for 2015. It was alarming to for example have 82.38% of the federal ministry of health budgetary allocation going to recurrent expenditure, where only 17.62% of the #262.74 billion is for capital expenditure. With such kind of geometric increase in recurrent expenditure and the corresponding decline in capital spending, one will invariably question the monetisation policyand doubt their efficacy at providing that missing and unanswered question on the high cost of governance infederal institutions like the Federal Ministries of Education and Health