Cutting the cost of governance and the Steve Oronsaye report

Given the economic mess that was inherited by the Bola Tinubu administration which was demonstrated by an unsustainable debt service ratio of 97%, relatively low government revenue, high cost of government, high inflation rate, and several other unfavorable economic indices, one would have assumed that the first thing that the Tinubu administration would have done upon resumption of office was to make drastic cuts in the cost of governance.

In fairness to the administration, they did cut the cost of governance by removing the fuel subsidy but the sad reality was that while the general public was made to bear the brunt of the removal of the fuel subsidy, the administration increased the size of government and the associated cost of running the government, thereby nullifying whatever positive effect the cost-cutting exercise might have had.

So, it was a very welcome development when after eight months of trial and error with economic policies the government announced that they would be implementing the Steve Oronsaye report on reducing the size of government which was what some of us expected that a prepared administration should have started with.

For those who are not aware, the Steve Oronsaye report was the outcome of a panel set up by the Jonathan administration in 2012 to restructure and rationalize federal government agencies and parastatals to cut the cost of governance.

A white paper was issued on the report two years after and it was due for implementation but unfortunately, the 2015 general elections were fast approaching by then and it would have been political suicide to implement such a far-reaching reform in the civil service just before a general election. As a result of this, the implementation of the report was stalled and has remained in the cooler since then.

The Steve Oronsaye report summarizes that a large number of government agencies and parastatals that have similar functions should be merged, several redundant ones be scrapped while some agencies were recommended to revert to being departments in their supervising ministries. The report aimed to have a much leaner and more efficient government while cutting the cost of governance in the process.

So, it was indeed a breath of fresh air when the government announced yesterday that they were going to implement the Steve Oransaye report which is indicative that they are ready to take the bold step of restructuring the civil service and making drastic costs in the cost of governance after playing politics with Nigeria’s economic problems for nine months.

While the decision might have been influenced by Atiku Abubakar’s suggestion to the administration to emulate the cost-cutting approach of the President Milei-led Argentine government which is already reaping numerous benefits for the Argentine economy, the Bola Tinubu-led administration must also understand that for economic policies to work, they must be robust and not just ad hoc as has been the case with the economic policies previously rolled out by the administration.

In this vein, it will be suggested that the cost-cutting exercise should not just be limited to the civil service structure but must include drastic cuts in overheads and procurement costs. With these cuts in the cost of governance, we will see the inflation rate coming down while the Naira will also regain some of its lost value.

However, the best benefit we can derive from this cost-cutting exercise is what we do with the money saved from the exercise because if we fritter it away on other luxuries for those in government as was done in the past, it will amount to an exercise in futility.

The best way that the savings can be utilized is to use it to fund the productive sector of the economy. To borrow from Peter Obi’s slogan, we must move “from consumption to production”. This means that we should use the funds previously used for running ‘big government’ (consumption) to start funding companies in manufacturing and agriculture (productive sector).

This funding can be channeled through development financial institutions like the Bank of Industry (BOI), Development Bank of Nigeria (DBN), Bank of Agriculture (BOA), and the Nigeria Export-Import Bank (NEXIM) that all already have expertise in funding businesses in the productive sector.

With increased productivity in the country, we can be assured that the inflation rate will come down, millions of jobs will be created, the Naira will appreciate and the government will earn more revenue from taxes while the overall health of the economy will improve.

Kudos to the Bola Tinubu administration for taking the decision to implement the Steve Oronsaye report but making a success of it will be determined by how disciplined they are in implementing the report and what they do with the savings they make from the cost-cutting exercise.

Oshobi, a development economist, author, and management consultant writes from Lagos.