Budget 2012 (2) – Three Billion Naira Daily for Insecurity?

We will revisit our analysis of the security sector budget beginning with some clarifications and rebuttal of the Budget Office’s right of reply to last week’s column titled – “Where el-Rufai Got it Wrong“. I commend the Budget Office for choosing to respond this way instead of asking the SSS to arrest me as the President did on July 1, 2011. The democratic space can only be expanded with more freedom to express opinions and disagree often, and it is not just about politics. It is about improving our nation, enlightening our citizens and raising the levels of accountability. And the world today is too open and citizens too aware for much secrecy in governance to be sustained.

The “right of reply” only served to confirm the points I made about lack of transparency in the revenue and expenditure details regarding cash calls, special funds and transfers to ECA/SWF, but avoided the issues by suggesting that the version of the Medium Term Fiscal Framework (MTFF) that I referred to is “the web version”, which ‘omitted’ such important details. I asked friends in the National Assembly for their more detailed version and got the same document. Are we not as citizens entitled to this complete information as well?

Nigerians now know that our JV cash call budget for 2012 is some N832 billion (about $5.4 billion). But where is that detailed in the Appropriation Bill? Is it not a violation of the Constitution for this huge item of expenditure to be incurred without  specific inclusion in a money bill passed by the National Assembly? Is the approval of MTFF required by the Fiscal Responsibility Act 2007 enough to override the requirements of the Constitution? I think not!

The same applies to the special funds for the federation. Last time I checked they added up to 7.5%, and no new revenue allocation law has been passed yet. And there is a world of difference between “fuel subsidy removal (FSR)” and deregulation. It is sacrilegious to some of us that deregulated some monopoly sectors to confuse the two. The attempt by the budget office to refer to the partial FSR which hiked the price of petrol to N97 per liter as ‘partial deregulation’ is simply untenable. This administration is not deregulating the petroleum sector today. It is desperately looking for easy money to fund its profligate habits and thought the FSR would be one source. When the Petroleum Industry Bill is enacted into law, we will concede that deregulation has been restarted. Until then, we should call a spade a spade!

The Budget Office may think that a country like Nigeria with ‘a strong balance sheet’ cannot be said to be broke. The balance sheet lists assets and liabilities, not the level of one’s liquidity or solvency. The difference between the balance sheet and income statement is that one can have a strong balance sheet but be unable to meet day-to-day financial obligations. That is the situation with Nigeria with its trillion naira budget deficit but billions of barrels of oil reserves. As for the celebrated Fitch rating, we will leave that for another column, but suffice it to say that such rating agencies are being asked questions in other jurisdiction about their rosy ratings that evaporated overnight amidst the financial crisis of 2008. We live in Nigeria. These overnight Nigeria experts don’t. We do not need them to validate or contradict what is evident to those of us that have lived here for more than 50 years – which is – today, the FG’s cost of operations exceeds its sustainable income – and something needs to be done about it right away to avoid disaster in the short term! At least no one contested the ‘expensive leaders’ part of last week’s column, so we hope the costs will come down!

I wish government officials will cease patronizing ordinary citizens by assuming that they are more patriotic than the rest of us. Saying the truth about one’s country is not talking it down. We love this country too, unconditionally. We neither need huge feeding allowances, expensive planes and bullet-proof SUVs nor a coterie of aides to do so. So let us debate the issues and cut the patronizing crap!

On the non-inclusion of funding for SURE-P and size of the recurrent budget, the Budget Office agreed with the view expressed last week. It merely went on to say that the President’s food budget include banquets (how many in a year?, once-a-month?), lunch on Wednesdays (50 in one year?) and so on. As a quantity surveyor, one can itemize each component of cost, describe and price it. When I did all that and adjusted for such ‘extra-over’ items, the villa’s kitchen will still spend nearly N2 million daily.  So what kind of food are they eating? And does that make sense when a large swathe of the population lives on less than $2 a day?

The response of the budget office to the observation on the huge levels of personnel cost (N1.6 trillion) is interesting – “You just can’t throw civil servants out into the street overnight without careful assessment, knowing that each such person has six or more dependents they support in our population.” This is nothing but pathetic populism from those preaching that our views are driven by politics.

The statement can be faulted on several grounds. (1) Assuming it is correct, does that mean the 7-8 million Nigerians that are civil servants  and their dependents are a bigger priority than investing in infrastructure (N1.3 trillion in the 2012 Budget) for the 160 million that are not civil servants and their dependents? (2) Is it not a fact that between 2005 and 2007, a carefully thought-out severance exercise was carried out in which 45,312 civil servants and 50,054 parastatal personnel were severed at a cost of some N67.8 billion? (3) Is it also not a fact that an additional 38,732 parastatal staff were to be severed in 2008 at a cost of N29.1 billion?, (4) All those severed had received pre-retirement training, severance payments and had even begun collecting their pensions by mid-2007?,  (5) Some 20,000 of such pensioners were then smuggled back into the public service by 2009 and restored to the payroll, after collecting their terminal benefits, (6) perhaps an equal number has been added in 2010 and 2011, and (7) these actions resulted in blocking bright, young entrants and injection of new blood into the service?

As chair of the public service reform team between 2005 and 2007, I know these to be facts and the Finance Ministry leadership knows that too. What is so difficult about getting rid of these already-severed staff, and completing the 2008 exercise now? Dr. Goke Adegoroye who was the DG of the Bureau of Public Service Reform, now retired, published  these details in his book “Beyond Yours Faithfully” and available for the government to dig into, if the political will to do so exists. How personnel costs increased from about N600 billion (including the National Assembly) in 2007 to over N800 billion in 2010, and then N1.6 trillion in 2012 is partly attributable to some of the retired but smuggled public servants! We must do what is right to bring down that personnel cost budget because it does not make sense. Simple!

It is only on the details of security expenditure that the budget office got it right. On the headline items, everything written in last week’s column is correct. When we got to the details, budgetary provisions in 2011 were mistakenly referred to instead of those of 2012. I apologize for the mix-up which arose because of having to refer to many documents and sources at the same time.  However, the principle of questioning whether the president needs new planes now remains, as well as concerns about Iridium being used for secure communications. Even if some foreign government departments use Iridium, their intelligence services do not do so for secure communications, and certainly not for data communications. We deserve better. This week, we will look at the 2012 numbers and re-present with our analysis of last week related to security spending.

As stated last week, I will appeal again to Nigerian citizens to study the budget as much as, if not more than they read the Constitution. It is the only way we can see how policy decisions translate into resource allocations, and ask questions about how our resources are spent. Details of the budget are available online on http://budgetoffice.gov.ng/2012_budget_proposal.html or if for any reason unavailable, http://el-rufai.org/2012/01/full-access-to-2012-budget-proposal/

Last week, we pointed out that the amount headlined for the security sector excluded (1) Amnesty Programme (N74 billion), (2) Military Pensions N60 billion, (3) Army Internal Operations (N17 billion), (5) Police Service Commission (N2.5bn), (6) Customs, Immigration & Pensions (N8.6bn), (7) SSS/NIA Pensions (N11.2bn), (9) Death Benefits – Army & Police (N5.4bn), (10) Federal Road Safety Commission (N28.9bn), (11) Maritime Security (N4bn) and Police Reform Fund (N15bn). Adding all these up brings the total of our spending on the security sector to N1.145 trillion, not the N922bn highlighted. This means that in 2012, we will be spending about N3.1 billion every day, weekends included on defence and internal security, yet we sleep these days with both eyes open due to insecurity.

The detailed 2012 budget of the Intelligence Community – the office of the NSA, the SSS (Internal Security), the National Intelligence Agency (External Counter-Intelligence) and the Presidential Air Fleet (PAF) will now be commented upon. The budget of the Defence Intelligence Agency (N10.8 billion), Defence Intelligence School (N560 million) and Directorate of Military Intelligence are under the Ministry of Defence, and are therefore excluded for the time being.

It is worth noting that the NSA is one of the 20 special advisers approved by the National Assembly for the president, but he sits in the Federal Executive Council as a member. His office is advisory and his main job is coordinating the activities of the security agencies, with staff strength of about 100. Each agency is independent of the NSA and routinely reports directly to the president. It is therefore difficult to explain how the NSA has a capital budget nearly twice that of other ‘operating agencies’ within the intelligence community – higher than that of the SSS with about 15,000 staff and the smaller but far more effective, NIA. The NSA’s budget consists of N285 million for personnel cost, N3.64 billion for overheads and a whopping N29 billion for capital projects!  The respective proposals for the SSS are N23.5bn, N4.8bn and much-improved N18bn for capital spending!  The NIA is slightly better with N23.6bn for staff costs, N3.1bn for overheads and N14.8bn for capital projects.

We will continue the in-depth analysis of the budget of the security sector next week because the proposed budget this year envisages direct spending of N130 million per hour on national defence and security, or about N3.1 billion every single day. In light of the escalation in levels of terrorist sophistication and violence in the North and other violent crimes in other parts of the country, we must insist that these daily billions will not buy us more insecurity.