By YUSUF ISHAKU GOJE
Yesterday, the residents of Kaduna state and the nation at large heaved a sigh of relief as the Nigeria Labor Congress (NLC) called off its five day warning strike, after just two days. Despite the mass appeal the strike and protest got, it had thrown many residents into hardship due to the suspension of essential services by the unions.
What has come out clearly from this imbroglio is the fact that the state government has recently sacked thousands of local government staff, and plans to sack more from the State civil service. The argument advanced by the government is logical to some extent, considering that ongoing reforms have rendered many of the civil servants redundant and our dwindling revenue in the face of rapid population growth. Notwithstanding, labor has countered by accusing the government of not adhering to laid down legal process for disengaging redundant staff.
Looking at some of the information put out especially by the government, there seems to be some ambiguities that needs clarification. This will surely give credibility to the argument advanced by the government and keep residents better informed of decisions taken on their behalf. Similarly, it will demonstrate the government’s commitment to the key principles of the Open Government Partnership (OGP).
In the course of the stalemate, the state government through a press conference led by Jafaru Sani, Kaduna Commissioner for Local Government Affairs, and Bariatu Mohammed, Head of Service, said it is not sustainable for the state to continue to spend “84 to 96 percent” of its Federation Accounts Allocation Committee (FAAC) receipts on salaries and personnel cost as it has done since October 2020.
This justification seemed to hold water not until one juxtapose it with a statement in an interview granted by the Chief of Staff to the Governor, Muhammad Sani Abdullahi (popularly known as Dattijo) to Kaduna Weekly/Leadership.ng. Therein, he talked about a mechanism that ensured Statutory Allocations, VAT and loans are used to pay for infrastructure and projects. Furthermore, he said the IGR is what they dedicate to paying salaries.
This is what he stated verbatim, “We have a mechanism that we have created, where every single month, out of the statutory allocation that we get, we pay for infrastructure first. All the money that we get from VAT is directed towards our priority projects. All the money that we get from loans are for these projects. So, the only money that we use for recurrent spending is our IGR which we want to dedicate to paying salaries. But basically, we are ring-fencing a lot of funding around VAT, external financing and part of FAAC, to ensure that we are able to pay for our priority projects.”
Interestingly, officials from the government seems to be saying two different things. On the one hand the Commissioner and Head of Service are saying salaries consume almost all of FAAC, while the Chief of Staff to the Governor is saying there is a mechanism that ensures the same Statutory Allocations is used to pay for infrastructure, and IGR is to be used for salary payment. The government needs to clear this ambiguity to help residents understand the true situation.
Equally, so far the government has placed more emphasis on Personnel Cost versus FAAC. However, this might not present the holistic picture. As we need to factor in the cumulative revenue (including VAT, IGR loans and grants) and then carry out a comparative analysis. Just to demonstrate this point, lets look at the 2021 approved budget and 2020 budget performance.
For instance, the Kaduna State 2021 approved budget shows that personnel cost is N40,221,607,403.18. This is just 33.4% of the recurrent revenue of N120,637,804,364.12; 49.1% of the total recurrent expenditure of N82,057,386,938.30; 24.4% of the capital expenditure of N164,610,200,280.77; and 16.3% of the total revenue (including OB) of 246,667,587,219.07.
Also, a look at the Kaduna State 2020 Forth Quarter Budget Performance Report shows the Year to Date Summary (January to December, 2020) performance for personnel cost is N33,223,096,909 (68.50%), overhead is N12,844,098,317 (44.31%) and capital expenditure is N118,734,846,278 (81.26%). If one looks closely you will see that the recurrent of N46,067,195,226 is just 27.9% of the total expenditure of N164,802,041,504 for 2020.
From the point of view of the layman, the above data shows that personnel cost is still at manageable levels. So while redundancy is a cogent reason to right size, personnel cost can still be sustained. This assumption have some justification in the Kaduna State 2020 Debt Sustainability Analysis (DSA) report, which states that, “the Kaduna State Government target on Internally Generated Revenue (IGR) is to be able to fund all recurrent and even part of expenditure so as to set its FAAC and grants for infrastructure development.”
In view of the foregoing, the government has done well in ensuring progressive increase in IGR from 2015 till date; however, a number of questions needs to be clarified. The present IGR being declared by the government, does it include the Statutory remittance of 10% and revenue collected on behalf of the local government areas in line with the State Tax Law, 2020? Can we have clarification on why these local government funds are not adequately remitted as stated in the 2018/2019 Auditor-General report and budget performance report? Is the performance also as a result of the backlog of tax defaulters being recovered? If yes, when the government recovers it, will this level of performance be sustained?
Also, pundits have also postulated that the decision to rightsize is a pre-condition for the draw down of the second tranche of the World Bank loan. As they cited the 2017 mass sack of state civil servants, which preceded the government receiving the first tranche of about N53 billion.
If all or one of the questions and postulations above turns out to be in the affirmative then the challenge we have is that of revenue not civil servants consuming 84 or 96% of FAAC. Just maybe the government needs to embrace tightly the above optimistic quoted statement in the 2020 DSA report and solve the revenue gap so that as they rightsize all the affected staff should timely be paid their entitlements.
We anticipate clarification on some of the ambiguities!