Nigeria can save N3.7trn by gutting inefficient MDAs

Nigeria can save as much as N3.7 trillion every year by implementing the Stephen Oronsaye report’s recommendation to scrap or merge Ministries, Departments, and Agencies (MDAs) of government carrying out similar functions, according to a BusinessDay analysis.

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This comes at a time the Federal Government is desperately seeking ways to cut governance costs due to low revenue from oil sales and the effect of the deadly coronavirus pandemic.

An analysis of Nigeria’s 2021 budget shows that a total of N5.3 trillion is allocated to all government MDAs. Since there are 541 of them, a back-of-the-envelope estimate puts the average spend of an MDA at N9.8 billion yearly.

Therefore, following the recommendation of the Oronsaye report, pruning the MDAs down to 161, Nigeria will only need to spend N1.6 trillion on them. This leaves the country with savings of N3.7 trillion.

However, scrapping inefficient ministries may not often translate to the full saving of the amount it would have otherwise have spent, but it presents a picture of what is possible if the government musters the political will to act.

A further analysis demonstrates how this is possible. By scrapping just 10 MDAs, whose functions are replicated by other government agencies, Nigeria can save N107.7 billion.

A breakdown of the 2021 budgetary allocation to 10 MDAs obtained from BudgIt, a civic-tech organisation that advocates for fiscal transparency and accountability, shows that scrapping them could save Nigeria over N107.7 billion.

Some of these agencies include National Emergency Management Agency (NEMA), Federal Character Commission, Public Complaints Commission, National Salaries, Incomes, and Wages Commission (NSIWC), and the National Productivity Centre (NPC).

Others are the Nigerian Building and Road Research Institute (NBRRI), Energy Commission of Nigeria (ECN), National Metallurgical Development Centre (NMDC), Nigerian Institute of Mining and Geosciences (NIMG), National Centre for Agricultural Mechanisation (NCAM).

This analysis validates the Oronsaye report, which concluded that Nigeria can save trillions of naira if it decides to reduce the cost of running its government.

Analysts say Nigeria’s biggest challenge is not necessarily spending more but that it is not spending better. For example, the billions of naira spent on salaries of government officials who perform similar functions across different agencies could be better deployed.

“Personal and overhead accounts for about 70-75 percent of our budget estimate and the remaining 25-30 percent goes into the capital expenditure; this shows that the cost of governance in Nigeria is very high across the three tiers of government,” Moses Ojo, chief economist at Pan African Capital Holdings Limited, notes.

Ojo adds that reducing that number will make the government have enough savings that will add more to the economy, especially in the area of infrastructure development, but that it could see sizable workers in federal civil service lose their jobs, which would compound the unemployment situation in the country.


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