Nigerian governors have advised the federal government to offer federal civil servants who are older than 50 years a one-off retirement package to exit the service, as part of coordinated efforts to instill fiscal discipline and prevent the nation from imminent economic collapse.
The governors made the proposal at a meeting with President Muhammadu Buhari in July, NEWS REPORTER gathered from sources privy to details of the meeting.
The proposal also urged the government to begin implementation of the updated Stephen Oronsaye Report, which suggested merger and shutdown of agencies and parastatals with duplicated or contested functions as a way to address bureaucratic inefficiency and reduce the cost of governance.
Officials familiar with details of the meeting, who spoke to NEWS REPORTER, explained that the governors were concerned about the deteriorating state of the economy and a proposal to restore fiscal discipline was presented to the federal government.
The federal civil service employs just about 89,000 people but will spend about N4.1 trillion on personnel costs this year, from its N17 trillion budget for the entire country. It is not clear how many workers are above 50 years of age, or how much goes to them.
The suggestion comes as indications emerge that the nation may be teetering towards the cliff of economic collapse.
NEWS REPORTER reported Wednesday that Nigeria’s external reserves amount to only $15 billion, well below the $36 billion balance on the gross external reserves claimed by the bank. With the nation spending N5.9 trillion on imports in the first quarter of the year, reserves of $15 billion would barely cover four months of import.
Last week, details emerged that the balance in Nigeria’s Excess Crude Account had depleted significantly from $35.37m to $376,655, leaving the nation with no buffers to stabilize the economy and its currency. Yet another indication emerged recently that the nation was broke as debt service surpassed revenue.
According to details of the 2022 fiscal performance report for January through April, Nigeria’s total revenue stood at N1.63 trillion while debt servicing stood at N1.94 trillion, showing a variance of over N300 billion.
As part of measures to restore fiscal discipline, the governors advised the federal government to reduce expenditure immediately by eliminating petrol subsidy and NNPC-funded projects, cap the Social Investment Programme (SIP) and National Poverty Reduction with Growth Strategy (NPRGS) budgets to N200 billion, eliminate extra-constitutional deductions from FAAC, and reduce SWV items for SDG and NASS Constituency projects.
The governors also asked the government to reduce duplications (e.g. empowerment programmes) and waste, reduce 1% granted to NASENI to 0.2%, amend the Act in 2022 Finance Bill, reduce personnel costs of federal government MDAs, and expedite privatization of non-performing assets like the NDPHC power plants.
Similarly, the governors urged that the 2023 – 2025 MTEF should reflect the suggestions and government’s commitment to restore fiscal discipline while the planned 22% increase in salaries in 2023 be reconsidered. They added that the fiscal deficit should be reduced to no more than 2% of GDP in 2023 – 2025.
Foreign Exchange and Reserves
To conserve foreign exchange and grow the reserves, the governors suggested that foreign trips by MDAs, including budgetary-independent agencies such as FIRS, NPA, NIMASA and NCC, be put on hold for at least one year. They also urged the Ministry of Foreign Affairs not to issue requests for Visas to foreign embassies for federal government officials and their families, unless express approval is granted by the presidency.
They also suggested the movement from State Income Taxation to Consumption Taxation, adding that with the introduction of 3% Federal Income Tax, state-level PIT should be abolished. Similarly, they suggested that state Sales Taxes (flat rate of 10%) should be enacted for the 36 States and FCT, VAT levels increased to 10% with a timeline to raise it to between 15% and 20%, as well as re-introduction and passage of VAT into the Exclusive List. It was not clear whether all governors agreed with the position on VAT being moved to the exclusive list.
To improve tax revenues, they suggested that the federal government should introduce a flat 3% Federal Personal Income Tax on all Nigerians earning more than N30,000 per month, adding that persons earning less than N30,000 per month whether employed or not, including farmers and traders, should pay a monthly FPIT of N100. Similarly, telecoms firms and NIMC should collaborate to ensure deduction of this from phone credit of individuals and linking to NIN and BVN.
The governors also suggested centralization of the collection of all federal oil and non-oil taxes in one agency, the FIRS, while Customs, NPA, and others assess and issue demands. They suggested that the Federal Government improve crude oil and gas production, resolve lingering issues of ownership of gas in PSCs (eg Nnwa-Doro, OML 129) to help position Nigeria to take advantage of the gas needs in Europe, and provide incentives to expedite development of vandalism-resistant deep offshore fields like Bonga SW (Shell), Preweoi (Total), Zabazaba (ENI) and Owowo (Exxon).
The governors equally advised the government to encourage (and pre-finance, if necessary) Dangote Refinery to early completion to reduce massive future outflows of foreign exchange.