The state governments in the North-East and North-West geopolitical zones were the most expensive states in Nigeria in 2011 when measured in terms of personnel and overhead costs, data compiled by BusinessDay Research and Intelligence Unit (BRIU) have revealed.
The data was compiled from the Central Bank of Nigeria’s Annual Report 2011.
Based on combined regional personnel and overhead costs, the six states in the North-East zone, comprising Adamawa, Bauchi, Borno, Gombe, Taraba and Yobe spent N182 billion out of N360.6 billion realised as revenue for the year 2011, which means that 51 percent of the revenue made by the zone ended up as personnel and overhead costs.
Also, the North-West geopolitical zone, which is made up of Jigawa, Kaduna, Kano, Katsina, Kebbi, Sokoto and Zamfara expended 44.8 percent as cost, which translated to N217 billion out of N485 billion total yearly revenue realised by state governments in the region. The North- Central was third with 41.4 percent of its 2011 receipts or N196 billion, incurred as the cost of governance. Cost of governance is the money spent on salaries and administrative expenses.
The South-West, South-East and South-South ranked 4th, 5th and 6th with 37.3 percent, 27.5 percent and 21.9 percent of their total annual revenues for 2011 ending up as the cost of governance. In other words, N230 billion, N89 billion and N251 billion respectively were the combined expenses incurred by state governments in the three geopolitical zones in the south.
On state-by-state analysis, the combined personnel and overhead cost of Kano State was the highest in the country, translating to 75 percent (N72.4 billion) of its 2011 total annual receipts, being used in paying personnel and overhead costs. The state was left with N24.6 billion for developmental projects. Kano was closely trailed by Bauchi (70%) and Plateau (68%) in that order, which amounted to N45.4 billion and N42.8 billion respectively of the total money received by the aforementioned state governments being spent on administrative costs. In the South-West region, Oyo State (63%) and Ogun State (57%) were the most expensive state governments, while Akwa-Ibom State was the least expensive (9%) among the states analysed.
If the level of expenses and internally generated revenue (IGR) remain unchanged for some time, only two states in Nigeria would comfortably pay their personnel and overhead costs without having to rely on the monthly federal allocation. These are Lagos and Abia States. In 2011, Lagos State realised N147 billion as IGR, whereas its combined personnel and overhead costs amounted to N70 billion, while Abia State made N31 billion as IGR whereas its combined personnel and administrative cost was N26 billion.
At the Annual Capital Market Committee retreat in Warri, Delta State recently, the governor of Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi called for a reduction in the cost of governance. He said “at the moment, 70 per cent of the Federal Government’s revenue goes for payment of salaries and entitlement of civil servants, leaving 30 percent for development of 167 million Nigerians. That means that for every naira government earns, 70 kobo is consumed by civil servants”.
Another research report supports the observation made by the CBN governor about the high cost of governance. According to the research work of Stephen Ejuvbekpokpo published in the Global Journal of Management and Business Research in 2012 entitled “Cost of governance on economic development in Nigeria”, he found that “a unit rise in recurrent administrative expenditure would lead to a 0.52 unit fall in gross domestic product (GDP). Conversely, he found that a unit rise in capital administrative expenditure would cause gross domestic product to fall by 0.45 units”. Put in another way, if recurrent administrative expenditure rises by 100 percent, GDP will fall by 52 percent, just as if the capital administrative expenditure surges by 100 percent, GDP will fall by 45 percent.
The cost managing the economy formed part of the speech given by the Chairman of NESG, Foluso Phillips.
He told participants at the recent NES18 that The cost of managing the Nigerian Economy at present is larger than its productive base.
“We cannot defend an unsustainable situation. We cannot sustain this model. We all have to fix this problem faster than we are currently addressing it.”
Phillips, who was addressing dignitaries at the Nigeria Economic Summit (NES #18) at the Transcorp Hilton Hotel, Abuja told the gathering that the current reality surrounding the cost of managing the country presents a situation where the three million or so people who work for the federal, states’ and local government, not forgetting the legislature, consume about 70 percent of the annual budget on salaries, allowances and overheads, while the rest of the 160 million odd Nigerians depend on the balance of 30 percent to provide the infrastructure, education, health and other services which most governments have a responsibility for.
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