FG’s revenue-generating agencies feeding fat on collections – Adio
In this interview with Mannir Dan Ali, on Trust TV, a former Chief Executive of the Nigerian Extractive Industry Transparency Initiative (NEITI), Mr Waziri Adio, spoke of how some federal government agencies paid more attention to revenue generation to the detriment of their core responsibilities. Excerpts: I know you’ve been there before, and I see […]
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In this interview with Mannir Dan Ali, on Trust TV, a former Chief Executive of the Nigerian Extractive Industry Transparency Initiative (NEITI), Mr Waziri Adio, spoke of how some federal government agencies paid more attention to revenue generation to the detriment of their core responsibilities. Excerpts:
I know you’ve been there before, and I see that you also write a column for one of the newspapers and you’ve been touching on a lot of interests. Not many people spend time studying the so-called super agencies – that is some of the government institutions that are super maybe by virtue of the work they do or the humongous amount of money they collect and also spend. So can you shed light on these super agencies and the details of your finding, especially as it impacts other areas where maybe they are just crying for survival?
I’ve done a two-part essay for ThisDay on the agencies I call super agencies or agencies that you can call governments within government and they are in the minority.
If you look at it, these agencies are not even up to 100, so they are not even up to 10 per cent of the government agencies that we have.
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But the amount of resources at their disposal, like you said, is humongous and to whom much is given much is desired; and we need to be looking at how are they getting the kind of resources and how they are spending these resources, especially at a time when two things are happening, we need all the resources, all the money we can get. Two, we need to apply the little that we have in a very prudent way.
So these agencies are in three categories. They get this amount of money because of the kind of categories that they fall into. The first one is agencies that collect revenues on behalf of the federation. Federal Inland Revenue Service, Nigeria Customs Service and Nigeria Upstream Petroleum Regulatory Commission. They collect what they call cost of collection. Customs collects 7 per cent on import dues, levies and others.
Are you saying that this cost of collection is the money they retain to spend as they wish?
Okay, so first, Customs collects four per cent cost of collection. FIRS also collects four per cent cost of collection and NUPRC collects four per cent. The idea is that when you undertake an assignment on behalf of somebody, there will be some cost associated with that. So they are allowed to collect some kind of commission; so they are more like commissioned agents for the federation.
But why are they getting this commission, I thought they are employees of the federal government. They are getting salaries from the federal government. Why this extra spending?
Yeah, the idea is this, they are seen as special agencies that play some very important roles. Take FIRS for example, you need them to collect the taxes.
But you pay them to collect them…
Yes, you need them to collect the taxes so you want to give them the incentive to bring in as much taxes as possible. So you say, okay you take a cut of whatever you are bringing. It’s like you say okay collect this on my behalf but you also have an incentive that the more you collect the more money you also get, the more you collect, the more effort you also put in.
So, the idea is to ensure that, one; they have the resources to be able to carry out the assignments that you have given to them. Two; they have the incentive to do that. Three; they also have regular predictable funding that will allow them to be able to do their job very well.
So those, the first category, you know are agencies that collect what you call cost of collection, that’s the first one. The second ones are agencies…
And out of this we are talking of billions of naira, it is not in millions…?
Yes, I will come to that shortly. So you have that first category and you know those three organisations. You can also throw NNPCL into that because they also carry out some collections.
But NNPC is privatized…
It’s not privatized. It is a government company; it’s a government-owned company. It’s owned by two entities – Ministry of Petroleum Incorporated, and Ministry of Finance Incorporated. You know, so it’s still owned by the government but it’s just running like a company. You know, there are still some grey areas around that.
To answer your question directly about the quantum of money that they collect, in the report, in the budget of the government-owned enterprises released by the budget office, released for the first time in our history. They released a 282-page document and it has the breakdown of the budget for each of these agencies. Customs will spend N452 billion in 2024.
N252 billion? That sounds like more money than Nasarawa and Yobe states combined together.
Absolutely, so you have some of these agencies that will have money at their disposal; much more than the revenues or the budget of even some states.
Ekiti State for example is N159 billion and one government agency N452 billion. Actually, the money they are going to generate is going to be N459 billion out of that they’re going to spend N452 billion, and they’re going to spend 98 per cent of the money they are going to receive.
Are there any guidelines for spending such money?
It varies among the organisations.
So you can spend it on whatever you…
I’ll come back to that a little bit you know, but Customs N452 billion, FIRS N356 billion and they’re going to spend the entire N356 billion nothing less.
Has it always been like this; huge quantity of money? Because I thought I saw somewhere that maybe in the last just three years, it was not up to a third of this amount, there’s a big jump in the quantity?
Yes, the more money you collect the more you retain because we gave them a fixed percentage which is part of the problem. But let me explain so that we get to these in a very structured way.
The first set is that you have all these agencies that collect the cost of collection. You have some agencies that you give some – a portion of some revenue and you say oh these agencies play some important role. There are some revenues that we’re going to be generating, there’s a portion of that we are going to give to them – or either a portion or whole.
For example, you have the Education Tax Fund’s two per cent. Education Tax Fund goes to TETfund. You have one per cent of federal government allocation from the Federation Account which goes to NASENI.
So you have some agencies like that, they just say okay you have one per cent. Information Technology tax goes to NITDA, so you have some agencies that are…
Even the Sugar Development…
Yes, there’s a Sugar Development Levy of five per cent. It goes to Sugar Development you know Council. So you have some organisations like that that you say for some specific reasons you need them to carry out some assignments so you give them some money like that, right?
Is there any oversight?
There should be but do we have enough oversight?
The third category is agencies that generate some revenue through fines, through levies, you know, and all of that and they see that as internally generated revenue. Federal Road Safety, so many agencies generate, like JAMB for example, NCC for example you know others like that that they charge some kind of fees.
So there are some kind of guidelines around that and recently also, the Ministry of Finance issued a circular because this has been an area of abuse.
We have a particular law that says when you generate money, internally generated revenue, you should spend, whatever is left after your expenses is considered operational surplus.
And that operational surplus, you shouldn’t take more than 20 per cent of it and you should remit the remaining 80 per cent to the Consolidated Revenue Fund of the federation.
But do organizations abide by that? There’s a finance circular that says okay 50 per cent of your internally generated revenue you must remit to federal government.
That’s the new circular by the Federal Ministry of Finance?
Yes, by the Federal Ministry of Finance.
Which is a good step in the right direction…
Which is a good step in the right direction but that also begs certain questions. The first question is that you say they should remit 50 per cent, so how do we ascertain whether it is 50 per cent that they are keeping?
That is one. Then the 50% that they are keeping how do we ascertain that that is what they need, do they need more, do they need less? Then more importantly, how do we ensure that they are spending this money judiciously? How do we ensure that they are spending this money prudently? I’ll give you a few examples.
You see, when you allow that, you know there are some problems with this kind of thing. What we try to do is to solve some problems. We want to ensure that these agencies will have the incentive to do their work very well, these agencies will have predictable and regular funding so that you know they won’t be harmstrung.
But in trying to solve that problem, you have also created some other problems.
There’s room for a lot of abuse like the example you gave. I think in the essay, the second part about the NSITF that is like not spending the money on its primary duty, can you expatiate on that?
Yeah, so let’s look at the one of NSITF. How does NSITF get money for example? There’s a portion that companies and some government agencies contribute to NSITF.
The idea is a form of social insurance to provide relief to workers who sustain injuries while they are working or to their relatives in case they are deceased.
NSITF in 2024 will get N83 billion and out of that NSITF is only going to spend N8 billion about 10 per cent on the claims of the workers and meanwhile, the NSITF will spend N25 billion on its personnel, and its own staff.
And how many people are we talking about?
Well, sometimes it’s difficult to have that because we don’t have all the data.
But they shouldn’t be more than a few hundreds to a thousand.
No matter the number of staff in the organisation; you should be asking yourself what is the purpose of this organisation? This organisation was set up to provide relief to workers, so why are you spending most of the money on the staff?
They’re going to spend another N8 billion for promotion, recruitment and about the same amount on claims.
What was the purpose of setting up NSITF? To provide succour to people who might have been injured; that is what employers are contributing money to NSITF.
Continued on www.dailytrust.com
And it’s been misapplied…
And you know, there are two issues with that. The first one is that NSITF is spending a lot of this money to take care of itself. The second part is that we are thinking of NSITF as a revenue-generating agency.
And, why is it that a lot of the time you see that NSITF is in the news because of some embezzlement? I mean I can’t even count the number of chief executives that have had to be sacked over because there is so much money around.
So much money so little oversight. Yes, you ask a question about oversight. Yes, there should be a supervisory ministry, there should be the National Assembly but you know what happens.
Shakedowns probably?
These people also know that they know where the money is, so they choose who they appoint there and they also choose how they relate with them.
As you know, I used to head a particular government agency. You know most of these places are the darlings of the people that should be over-sighting them because these are the places where they can get people employed; these are the places where they will be settled, these are the places where they can get contracts. But it is at a cost at many levels.
How do we overcome the challenges that you’ve identified?
Okay, the first thing is that when you take an organisation from having little money to all of a sudden having so much money, the logical step, especially when you don’t put proper guard-rails around things, the logical step is that they’re going to behave like people who just won a jackpot.
Let me give you an example. There’s an organisation called NASENI. In 2021, the budget of NASENI was N4 billion but we did an amendment to their law. Because NASENI is going to get one per cent of something that the federal government gets from the Federation Account; NASENI is going to get N130 billion this year.
How do you move from N4.4 billion to N130 billion within three years? So, you are suddenly suffocated with money and you don’t put proper checks around how the money is going to be spent.
Ordinarily, what should be happening is not just that, okay because you have money you have to spend it. No, it should be based on needs and there should be layers of oversight.
For example, in 2021, the total budget for FIRS was N171 billion, the same FIRS in 2024 will spend N356 billion and guess what in 2023, FIRS spent N171 billion on personnel alone.
Personnel that’s just the staff…
Personnel alone of that same organization. Apart from the personnel, it is going to spend N11 billion on long service awards.
That is, I mean probably the whole budget of a big university maybe like the University of Lagos?
That same organisation will spend N13 billion on what they call welfare packages and it’s not peculiar to FIRS.
If you go to agencies like NUPRC (Nigerian Upstream Petroleum Regulatory Commission), it will spend N19.5 billion to build corporate headquarters. But it’s not just that, NUPRC will spend N50 billion on welfare packages.
Who is getting these big welfare packages, is it their staff or members of the National Assembly or some people in the presidency?
I don’t know but the thing is that possibly this has been going on for long but we didn’t have the information.
Now that this has been disclosed for the first time, it is imperative for us in the media, in civil society, in academia, in think tanks, development cycles, public financial management experts and others to start looking at these documents, to start asking questions.
But if they throw this document there and nobody’s looking at it, nobody is asking questions, how would things change?
I remember when Prof. Oloyede, the current Chief Executive of JAMB was appointed, he was the first to start returning money back to the coffers of the federal government because before him the chief executives were in cahoots with staff there and maybe they just shared the money and it is not surprising that some of the former chief executives of the same institutions have been facing trial and probably getting jailed.
When an institution is awash with money and there are no proper checks and balances, and I’m not saying they are stealing the money by the way, we’re talking about application of the money. And whether there are better ways, whether we don’t have better ways of spending the same money especially given the challenge that we have.
We have kids that cannot go to school, we have roads that are not motorable, we have infrastructure that are broken down; so why do we want an agency to spend N19 billion to build its corporate headquarters, imagine what N19 billion can do.
Why do you want to sequester N71 billion for some nebulous stuff that you didn’t even deem right to mention in your budget? We’re talking of billions here.
What about the equity bit of it? How come states that have a population of two million, maybe even 20 million, they are getting less than N200 billion and then one agency whose total staff strength may not be up to 10,000, they are getting this huge amount of money. Where is the equity?
You ask about the staff strength and I said sometimes it’s difficult to know the staff strength. There is a particular agency that I know the staff strength of because they published their annual report, not audited financial report, their annual report and they mentioned the number of staff that they have.
This organisation had 939 staff as of 2021 and in 2021 they spent N43 billion on salaries. That’s the kind of salary that people, even in the private sector, do not earn.
So, there are many questions to be asked. We’re not saying that some agencies should not be well provided for, we’re not saying some of their staff should not be well taken care of because of the kind of job that they do. But we need to ask questions. Are there other ways of managing public resources, because at the end of the day, we’re talking about public resources now and about opportunity cost, we’re talking about needs and the reality of the situation.
Look at what is going on in this country, why should it be the priority of anybody to spend N19 billion to build the corporate headquarters of an agency and you know that there are some agencies that Nigerians do not even know what they do.
They exist?
You have agencies like the Space Agency getting like N24 billion, you have Agency for Nuclear Regulation getting N24 billion, you have raw material something getting N20 something billion and you just say are we getting value for money?
We’re not saying these agencies are not important but given the quantum of money you are throwing into these agencies, if you do a cost-benefit analysis, you can get more impact for spending that quantum of money in other areas.
So, you ask about, what are the things that we need to do? The first thing is that some of these agencies, the way they generate resources, the way they generate internally generated revenue, impose costs.
Do you know that on any ticket that you buy in Nigeria whether domestic or international five per cent of that is a levy that is shared by aviation-related agencies?
And for all the inefficiency of the airports not functioning well, they still take part of the money?
So they take that five per cent. What does that five per cent do to you? It increases the cost of buying tickets and, maybe you say okay maybe there are some agencies that you need to make some money for. But what should it be for? Should it be for them to run their operations or should it be for specific infrastructure?
For example, one of the things we might need to do is to say okay we know that there’s an education tax fund that companies pay and it goes to TETfund. So if you have a seven per cent port levy for example, do you want to reinvest it and say this should go to the development of new ports; we should open up ports in other parts of the country? Don’t use that to pay yourself, don’t use that to do welfare packages and all of those things.
But what about the temptation; like some of the agencies that are supposed to be regulatory but their attention will be more towards revenue generation and then the regulatory is left to suffer?
That’s also something that will create perverse incentive. Whatever is measured, whatever is celebrated is what people will focus on.
Look at Customs, for example, any time Customs talks, what do they talk about? Budget. Part of the responsibility of Customs is to protect our borders, part of their responsibility is to ensure trade facilitation.
But since you are not measuring that, since you are measuring their contribution to the Federation Account and since they also have an incentive to get a portion of that, that is what they are concentrating on at the expense of some other things.
Look at, there’s a government agency Federal Competition and Consumer Protection you know the commission…
I was surprised recently when I saw them talking about the money they are generating but I said look at the poor services people have endured.
They said they generated N56 billion in a year and how do they do that? They imposed fines. So, when you encourage a regulator to be fending for itself, what do you think it will do? It will be looking for the opportunity to maximise.
And make it even more difficult for businesses to operate…
Yes, it doesn’t mean that businesses should not be held in check but we need to decouple regulation from revenue generation.
If we think the functions that they carry out are very important, we should provide for them; we should provide adequately for them.
But don’t ask them to go and be bringing money for the federation because you’re going to create a conflict of interests, you’re going to create perverse incentives. And at the end of the day, it is the consumers that suffer. Any cost you impose on businesses will pass to consumers, so that will affect the welfare of consumers, it will also affect the cost of doing business in Nigeria, at the end of the day, we are shooting ourselves in the foot.
So, my own proposal will be for the ones collecting 4% or 7% cost of collection, it cannot be a fixed figure because in some years that 4% or 7% might not be enough, in some years you are giving them way too much which will open them up for corruption, for patronage, for pressure for instability and all of that which they don’t need. What you should do is to make sure that you reduce the percentage.
So if FIRS collected N171 billion in 2011, why should it go to N356 billion now? Why can’t it be okay maybe there will be an annual increase of like 10% or 20% but not more than 100%.