That Monetisation of Fringe Benefits in the Nigerian
Public Service
By
Mobolaji E. Aluko, Ph.D.
alukome@aol.com
Burtonsville, MD, USA
July 15, 2003
INTRODUCTION
This brief commentary is the recently-released report of the Committee on the
Monetisation of Fringe Benefits in the Public Service of the Federation which
was set up by President Obasanjo on November 11, 2002, under the Chairmanship of
the Secretary to the Government of the Federation, Chief J. Ekaette.
At one level of emotional analysis, monetisation of benefits appears good. At
another level of deep analysis, the jury is out of its benefits.
I have reproduced below the announcement by Secretary Ekaette. It is peppered
with phrases like "It is believed…it is hoped…" - in short, long on wishful
thinking and short on deep analysis.
What a sensible government should do is the following: before announcing this
policy, it should provide a clear ECONOMIC ANALYSIS of the financial benefits
that the policy will have to the country, on a short term and on a long-term
basis, not just wishful thinking.
RELICS OF COLONIALISM
When the colonialists were with us, they provided their EXPATRIATE staff - ie
to the "White" civil service administrators who were ruling the Natives - with
free housing, free transportation, free slaves, etc. The staff did not have to
pay for these benefits from their salaries, which invariably were paid to them
abroad anyway! In fact, it was a HAZARD allowance that they were being provided
for while abroad, since they were in HOSTILE territory, and they were in any
case TEMPORARY workers in a foreign land.
They were generally very few in number compared with the total income that the
colonial government was extracting from the colonies that they were
superintending.
When these colonialists left, the indigenous civil "servants" that took over
also took over those benefits, with the first significant one being living in
GOVERNMENT RESERVATION AREAS (GRA) apart from the other natives.
That is part of the colonial relics that we are talking about. Maybe they never
left us; just that their skin changed to ours.
ARE WE ALSO MONETIZING THE ABUSE OF BENEFITS?
But then came the abuse of the benefits: instead of ONE CAR, our indigenous
civil service "oga" has 10 government cars at his beck and call; has 10
servants; has three government houses (in Abuja, Lagos and Kaduna) because, yes,
each can have more than one wife (the colonialist had only one, if any), rides
in first class plane (there were no planes then, just boats), including for the
week-end to London; has free medical treatment for the entire family (the
colonialist in general had only his wife, if at all) - all while getting a fat
BASIC salary in additional to other allowances.
And the post-colonial officers are many: federal, state and local government
executives, legislators and judges; parastatal and institutional directors and
sub-directors; university lecturers, etc. Although they are only about 2% of
the population of the country, to maintain them requires almost 60-75% of annual
national budget expenditure.
Those benefits are now to be MONETIZED, with the hope that the abuses will not
be monetized along with them.
If the abuses will not be monetized, then that will be ONE AVENUE of savings.
But there is another avenue of savings: SHOULD some of the things that they
were having before be MONETIZED at ALL? That is, should some of the colonial
relics be MONETIZED at all? And if they are, HOW MUCH are we really saving,
bearing in mind:
(1) the immediacy of the cash involvement;
(2) the time value of money.
Those are the real questions. In fact, for those of us who live abroad and earn
our pay, some of the benefits to be monetized look quite funny, and one asks:
why do you earn a salary if part of it is not to buy your own furniture? Why,
for example, give "furniture allowance" (350%!) separately? Why give "leave
allowance", when you will ACTUALLY be paid while you are NOT working during the
leave ? Why can't you save your own money to spend during your leave?
And so on! Where else but crazy post-colonial developing countries do public
officers get these kinds of allowances?
For example, once you MONETIZE, that total sum in effect becomes the SALARY that
each receiver expects to get. If you cannot pay salaries right now, how will
you be able to pay the monetized benefits? Some will get new salaries, while
others will not.
Whether he or she spends it on what you MONETIZED it for is another issue. If
you MONETIZE his house at 300% of his salary, and he spends only 100% of his
salary, what have you done but unnecessarily increase his salary by 200%
EPILOGUE
What would love government to do is the following: go ministry by ministry,
parastatal by parastatal, institution by institution that it is responsible for,
and see over a 1-year horizon and 5-year horizon what it REALLY expects to save
from giving some or all of the benefits that it expects to give.
For starters, I would like the government to just take ONE MINISTRY - say
Transport; one PARASTATAL - say NEPA; one federal institution - say University
of Ibadan, and tell us what the savings are - for the world to know. Or give
the information to an independent consultant to come up with the numbers.
I know that SFG Ekaette has said somewhere that the government would do that.
But the policy began July 1, 2003!
That is putting the cart before the horse.
Best wishes.
______________________________________________________________________
BRIEF ON THE MONETISATION OF FRINGE BENEFITS IN THE PUBLIC SERVICE OF THE
FEDERATION
The Committee on the Monetisation of Fringe Benefits in the Public Service of
the Federation was set up by Mr: President on November 11, 2002, under the
Chairmanship of the Secretary to the Government of the Federation, Chief J.
Ekaette, CFR, mni.
2. Justification of the Programme: The establishment of the Committee became
necessary because over the years, the cost of governance has continued to
escalate, arising mostly, from the burden of providing basic amenities to public
servants by the Government. These amenities include,residential accommodation,
transport facilities, medical services, and utilities such as electricity ,water
and telephone.
3. The merits of monetisation include efficiency in resource allocation, equity
in the provision of amenities and encouragement of public servants to own
personal houses. It also enables public servants to plan for a more comfortable
post-service life. Furthermore, it minimises waste, misuse and abuse of public
facilities. For these reasons, the concept of monetisation has gained worldwide
acceptance.
Even in Nigeria, some organizations such as the Central Bank of Nigeria (CBN),
Nigerian Telecommunication Limited (NITEL), Federal Mortgage Bank of Nigeria (FMBN),
the Nigeria National Petroleum Corporation (NNPC) and most private
sector organisations have adopted it with positive results.
4. In more specific terms, monetisation of facilities, such as housing,
furniture and vehicles will reduce capital cost, maintenance and running costs.
It is also hoped that rent will come down, as public servants who make up over
80% of the tenants, especially in Abuja, will have little money to offer to the
landlords. It will also promote the observance of maintenance culture and
discipline in the use of public utilities since the individuals will now have to
pay for such services, which hitherto were paid for by government. In addition,
the monetisation of medical treatment will go a long way in curbing submission
of spurious bills and delays in processing refund of medical bills. Finally, it
is believed that savings made from monetisation will enable government to
prosecute more capital projects.
5. Some benefits enjoyed by public servants have already been fully or partially
monetized. These include leave grant, entertainment allowance, meal subsidy,
domestic servants allowance and duty tour allowance. Other benefits that are to
be monetized under the programme are residential accommodation, provision of
vehicles, fuelling/ maintenance of vehicles, consumption of utilities including
electricity , water and telephone, provision of drivers and medical treatment.
6. Components of the Programme: After a critical examination of the principles
and justification for the monetization programme, the items recommended as its
main components include residential accommodation, furniture allowance, utility
allowance, domestic servant allowance, motor vehicle loan, fuelling/maintenance
and transport allowance, medical allowance, leave grant, meal subsidy and
entertainment allowance.
Government has already signed into law the "Certain Political, Public and
Judicial Office Holders (Salaries and Allowances etc) Act, 2002" and it was
substantially adopted in making recommendations on the monetization of the
fringe benefits of civil and other public servants not covered under the Act.
(i) Residential Accommodation
Provision of residential accommodation should be monetized at 100% of Annual
Basic Salary as residential accommodation allowance which should be paid enbloc
to enable an officer to pay for accommodation of his choice. In order to avoid
exerting undue strain on present occupants of Federal Government quarters and to
fund the monetisation of residential accommodation effectively, in the first
year of the monetisation exercise,current occupants of Government-owned quarters
would pay 100% of their accommodation allowance as rent for the quarters they
occupy. Also government residential quarters across the country would be sold
off by public auction at the end of the first year of commencement of the
monetization programme with their present occupiers being given the first option
to purchase the houses, but at the price of the highest bidder. In addition,
Government would provide site and services schemes in satellite towns nationwide
in order to assist public servants, who would prefer to build their own houses
acquire land.
ii Furniture Allowance
The payment of 300% of Annual Basic Salary is recommended as furniture allowance
in line with the provision of the "Certain Political, Public and Judicial Office
Holders (Salaries and Allowances etc) Act, 2002".
However, considering the likely problem to be faced in paying huge furniture
allowance of 300% of annual basic salary enbloc, this allowance would be paid
annually at the rate of 75%, which amounts to 300% in four years.
iii. Utility Allowance
.The allowance had already been. monetized in the extant circulars for public
servants as well as the Act for the Political office holders as follows:
GL 01 -06 -N3,600 per annum
GL. 07 -10 -N6,OOO per annum
GL. 12 -14 -N7,800 per annum
GL.15 -17 -N8,400 per annum
Permanent Secretary -N16,800 per annum
( Head of Service -N16,800 per annum
Political Office Holders -20% of annual basic salary
iv. .Domestic Servant Allowance
This allowance has already been monetised for public servants. The provision of
the Act is recommended to be retained for political office holders. The
provisions for domestic servant allowances will be as follows:
GL. 15- 1 domestic servant -Nl19,586 per annum
GL. 16- 2 domestic servants -N239,172 per annum
GL. 17- 3 domestic servants -N358,704 per annum
P S -4 domestic servants -N478,344 per annum HOS -4 domestic servants -N478,344
per annum Political office holder -75% of annual basic salary .
v. Motor Vehicle Loan and Transportation
The provision of motor vehicles to public officers is to be monetized by
provision of motor vehicle loan of 350% of the annual basic salary in line with
the provision of "Certain Political, Public And Judicial Office Holders
(Salaries And Allowances, etc), Act 2002". The loan, however, would be recovered
in 6 years for both public servants and political office holders. In granting
the loan, government would retain the existing interest rate of 4% on motor
vehicle loan. For the successful monetization of this service, Government would
ensure that:
a. No new vehicles would be purchased by all Ministries, Extra-Ministerial
Departments and Federal Government Agencies.
b. Officers currently entitled to Government vehicles would return them to the
Presidency for disposal or pooling in the CVU as may be appropriate.
c. Each Ministry/ Agency would be allowed a specific number, approved by
Government, of utility vehicles, including buses for essential office services (
out-of- station duty tours and meetings).
No Ministry/ Agency will exceed the number without prior approval of Mr.
President.
d. A Committee is to be set up to handle the issue of disposal of vehicles. In
disposing the excess vehicles, an entitled officer would be allowed to purchase
one car for personal use at approved discounted value.
e. Where there is the need to purchase (a) new vehicle(s) by any Ministry,
Extra-ministerial Department or Agency, a request shall be made to Mr. President
for approval.
f. Provision of drivers to entitled officers would be monetized as follows:
SGF/ Minister/HOS -2 drivers -N239,172 p.a.
Permanent Secretary -1 driver -Nl19,586 p.a.
i i Director -1 driver -N119,586 p.a. The allowance will be the same with the
current provision for domestic servants, i.e., total emolument of an officer on
grade level 3 step 8.
g. Service-wide staff buses will be pooled under the management of the Office of
the Head of the Civil Service of the Federation. Staff who utilize the facility
will be made to pay at a rate equivalent to their transport allowance and funds
so generated would be used for the maintenance and fuelling of the vehicles.
This facility will be progressively withdrawn when the public transport service
improves.
h. In addition to (g) above, Government and the private sector will assist in
the provision of urban mass transit at commercialized rates.
On the fate of excess drivers in the system as a result of the new policy, the
following steps are recommended:
i. Those with relevant and adequate qualifications would be retained and
redeployed appropriately.
ii Depending on the need, others will be deployed to drive staff buses under the
Office of the Head of the Civil Service of the Federation.
iii Those that will not be deployable will be rationalized but to be assisted by
the National Poverty Eradication Programme under KEKE NAPEP programme.
vi Fuelling/Maintenance and Transport
In line with current economic realities, 30% of annual basic salary as provided
for in the "Certain Political, Public and Judicial Office Holders (salaries and
allowances etc.) Act 2002" is recommended as Fuelling/Maintenance and Transport
Allowance.
vii Medical Allowance . The provision in the Public Service Rules, Chapter 9,
Section 09203 has been prone to abuse and sharp practices, particularly with
the Submission of fake bills as claims to Government. Government is therefore
proposing the payment of 10% of an officer's annual basic salary as medical
allowance. However, special cases requiring government intervention would be
considered on merit.
viii Leave Grant
The grant had already been monetized through the provision in the Public Service
Rules, chapter 13, section 13213 at 10% of annual basic salary .
ix Meal Subsidy
The allowance had already been monetized through the provision in the Circulars
Nos. SWC.04IVoi IV 1991, dated 5th May, 2000 and SWC.04/S.1/Voi IV /136, dated
l5th, May, 2000, issued by the National Salaries, Incomes and Wages Commission
as follows:
GL. 01 -06 -N6,000 per annum GL. 07 -10 -N~,400 per annum GL. 12 -14 -N9,600 per
annum
GL.15 -17 -N10,800 per annum .Permanent Secretary -.N16,200 per annum
Head of Service -N 16,200 per annum ..
X Entertainment Allowance
The allowance for civil servants had already been monetized through the
provision in the Circulars Nos. SWC.04/Vol IV /991, dated 5th May ,. 2000 and
SWC.04/S.1/Vol IV /136, dated 15th May, 2000, issued by the National Salaries,
Incomes and Wages Commission and the Act stipulates 10% of annual basic salary
for Political office holders as follows:
GL. 15 -N8,400 per annum
GL.16- 17 -N9,600 per annum Permanent Secretary -N27,000 per annum Head of
Service -N27,000 per annum Political office holders-10% of annual basic salary
7. Financial Implications of the Programme: In establishing the total cost
implication of the monetisation programme, data was gathered from the Office of
Establishment and Pension, Office of the Head of Civil Service of the
Federation, the Judiciary , the Legislature, the Police, the Military ,
Para-Military and Parastatals. The number of officers and staff in the Federal
Public Service is 996,744, while the total number of Political office holders is
1,448. The National Assembly, on the other hand, has a combined total of 469 and
the Judicial Officers, 1152. The financial implication is being worked out for
presentation to the Federal Government. The cost of monetizing allowances being
recommended is to be arrived at using step 8 of each grade level in line with
existing practice. It is expected that during the first year, the cost of
monetization of these allowances will be quite substantial but by" the third and
fourth years, the savings made would have positively impacted glaringly on the
economy.
8. Implementation Strategy: For ease of annual budgetary provision and to reduce
the financial burden of the monetisation exercise on government, a self
sustaining revolving fund is to be set up as transport loan. Out of the
aggregate sum which would be worked out as 350% of annual basic salary I 50% is
planned to be released in the first year and 25% in the second and third years
respectively. Once fully injected into the system, the revolving fund would not
need to be replenished after the third year. Further funding will thereafter
rely on repayment of the loan by the beneficiaries. Interested individuals are
to source their motor vehicle loan from the fund. The funding of the revolving
loan is to be sourced through the Supplementary budget.
9. In view of the huge financial cost in paying furniture allowance of 350% of
annual basic salary in the four-year cycle enbloc and its budgetary implication,
the payment of 75% of annual basic salary every year, which also amounts to 300%
in four
years, is recommended.
10. By spreading the total cost of provision of the transport revolving loan
over the first three (3) years instead of providing the total sum (350% of
annual basic salary) during the commencement year only and paying 75% annually
of the furniture allowance rather than 300% every first year of a four-year
cycle, much of the pressure on the budget for the huge sum that would have been
required for funding the exercise for the first year would be substantially
reduced.
11. In addition, Government would, from the first year of implementation, make
some savings under a number of Recurrent and Capital sub-heads on the services
and facilities being monetised in the annual budget which will no longer feature
independently in the budget. This is in addition to the fact that there are a
number of the Federal Parastatals e.g. Nigerian National Petroleum Corporation (NNPC),
National Maritime Authority (NMA), Nigerian Port Authority (NPA), Central Bank
of Nigeria (CBN), etc., which are self-financing and which will not draw from
government annual budget. The economic rent to be realized on Government
properties during the first year and the revenue accruable from the outright
sale of the houses during the second year of implementing will equally ease the
funding of the monetization programme.
12. Reform of the Civil Service: Government is giving serious consideration to
the reform of the civil service which will further impact on the monetization
programme. As part of the effort to reduce cost of governance, the Federal
Government intends to introduce a contributory pension scheme. The exercise on
this has reached an advanced stage.
13. Take-Off Date: It is proposed that the take-off date should be 1 st July,
2003.
