Costing The APC Campaign Promises The 2015 election season is now in full swing - there can be no doubt about that. The parties have picked their candidates, campaigning has kicked off nationwide, and the parties have outlined their manifesto. At least some have. Traditionally, we are used to just reading these manifesto promises and not subjecting same to real academic and realism scrutiny, hence the average Nigerian politician and party have developed the habit of throwing anything and everything into a manifesto without a care in the world if it is affordable or in fact practical for the time and season, or if it fits into a greater plan for the nation. It is to this issue I address this note, picking the APC as at least a party that has given us a working document. The aim is to cost some of these promises as best I can using data from a wide range of sources including the National Bureau of Statistics, the 2014 budget, The National Population Commission and my good friend Google. The figures and outcomes are not set in stone but represent an honest discussion of the likely costs, hoping that it leads us to engage with the political class to either fine tune or discard some of these. The ultimate aim is to derive a set of guiding and affordable principles that will steer us in the right direction as a nation. So, heres how I intend going about this. I will highlight the 12 cardinal principles being promoted by the Buhari/Osinbajo campaign. Contained in that 12 is a promise to fight corruption. I will leave that out and replace it with one from the APC Roadmap - the promise to build one refinery per year for 4 years. Once the 12 are highlighted, I will cost them as best I can using available data, and finally, I will suggest MY funding solutions to each one drawing from savings we can make within current budget structures and re-arranging spending priorities to reflect overall developmental aspirations of the Buhari/APC manifesto. So here I go. THE 12 PROMISES: 1. Free school meals for ALL students in public primary schools. 2. NYSC: Get paid for an additional year after NYSC as you learn business and skills 3. Just Farm, government buys - guaranteed price for food crops 4. 4 million new homes by 2019 5. Universal health coverage for N500 per annum 6. N5,000 each for 25m Nigerians if they enroll children in school and get them immunized 7. Nationwide industrial/technology/outsourcing park with free internet and 24 hours electricity 8. Decentralise power generation to state and local governments and ensure uninterrupted power by 2019 9. 5,000km of roads and 6,800km of railways plus commercial airports in all states of the federation 10. Employ 720,000 Nigerians in the first year of the government 11. Establish a Serious Crime Squad and improve the morale of the armed forces 12. Establish one refinery per year for the first 4 years (taken from the APC Roadmap document, but not yet adopted by the Buhari campaign). THE COSTING 1. Free school meals - The 2006 Education Survey says there are 24million Nigerian children in public primary schools nationwide. Using this figure and assuming this meal will be at a minimum one egg and 2 slices of bread for each student costing N50 each, we can make a simple calculation for the cost of this initiative. 24mx50x39 (number of school weeks per annum). This policy will therefore cost N1.2bn PER DAY; N6bn PER WEEK (5 day week)... N234bn PER ANNUM 2. Paid business learning after NYSC. This policy proposes to support graduates just leaving the NYSC programme for one year after the programme while they learn business skills. The 2014 NYSC budget makes provision for 278,000 corners each receiving allowance at N19,800 per month. This comes to a yearly allowance of N66.2bn. I participated in a very animated online debate where it was argued that instead of this monthly support, the government should give a one-off business start-up grant to each NYSC graduate. I agree. So what will be a sustainable level? Youwin, which can be compared to this approach gives business grants of up to N10m, but has an average award of N1m. This will be a stretch for any government and a mid-range figure of between N500k to N750k should be the target. Opting for N600,000, this policy will cost an additional N166.8bn to implement. 3. Just farm, government buys. This is one that is very difficult to cost. My simple approach is to find out the total figure for agricultural output and work out the cost at farmgate, working back from the retail price index. It will be no more than a guess, but an educated one. The Federal Ministry of Agriculture states on its website that output in Nigeria as at December 2014 was 21m MT of agricultural produce. This cuts across, crops, animals and fisheries. If we average the farmgate prices at N20,000 MT (an unrealistically low base, but a starting point), the cost of government buying the whole harvest of Nigerian farmers will be: N420bn PER ANNUM. 4. 4 million new homes by 2019. This is one policy where the greatest doubt will be raised on first sight, because our minds are programmed to see what is written as houses or flats when in reality majority of Nigerians do not live in either. Luckily for me, I have a project for which I am seeking funding, which aims to reduce the cost of a dwelling unit to 250,000, and it is this figure I will use because I know for a fact its possible. Therefore the cost of this policy over the four years is: N1 TRILLION or N250bn PER ANNUM 5. Universal health coverage for N500. With the best will in the world, this is an impossibility. Just cannot happen at that price. A good gauge to costing for such a policy is looking at HMO cover. I worked as an administrator in a school and was responsible for implementing health coverage for staff. The average cost if HMO cover is N10,000 per annum PER PERSON. How the government hopes to get a family covered for just N500 beats me. For the purpose of this write-up, I will assume 2 things. 1. Average family size of 6, and average cost for a family package at N10,000 (the thinking being government guarantees will force prices down and spur competition). Considering that and working on a population figure of 160m, the cost of this policy will be: 160m/6*10,000 N267bn PER ANNUM 6. N5,000 each to 25million Nigerians. This is one of those policies that either generate excitement or shouts of derision from critics because of the headline figures involved, but a careful studied look reveals an element if thinking behind the figures. To qualify for this handout, beneficiaries must do 2 things. Firstly, enroll their kids in primary school, and secondly, immunize them. This immediately excludes most people above the age of 59 and most under the age of 20 (primary school age is from 5, so even if you had a child at 15, youll be at least 20 to qualify). The NPC 2006 census suggests there are 60m Nigerians between the ages of 20-59. If the target if this policy is 25m, it therefore suggests about 40% of those in this segment, which is understandable considering the policy will be restricted perhaps to one beneficiary per household and excludes anyone in private schools. That being said, this policy is hugely expensive, and will cost: N125bn PER MONTH or N1.5 TRILLION PER ANNUM 7. National Industrial Parks. The cost of building the parks themselves is not an issue, but the cost of the services -electricity and broadband- that is the issue. My belief is that government should do no such thing as providing FREE internet, so I am not even costing this. My main point of interest is providing industrial parks/clusters with 24 hr electricity, which will definitely boost productivity. I have personally done research, which proves that you can develop solar farms generating 1MW of power at a cost of $1.5m. I spoke to a friend in manufacturing, and he suggested that it will make more sense to have clusters with 10MW capacity spread across the nation, and that if there were 10 centers which could each handle 200 medium size industries, this will massively boost production and reduce many a price of consumer products. Using these figures and planning on 10 such clusters nationwide, each will cost $15m or a total of $150m, which at current exchange rates will mean the policy will cost: N27.75bn one-off. 8. Another very difficult policy to price, but considering point 7 above, Federal government can provide match funding of $10m to every state that will create a business hub that will support at least 200 SMEs. Each must provide evidence of their own $5m contribution, the businesses being supported and the number of ADDITIONAL jobs this initiative will support. With 36 States and Abuja, this policy will cost the government a one-off fee of $370m or N68.45bn 9. 5,000km roads and 6,800km of rail tracks and a commercial airport in each state. I for one see no need for each state to have a commercial airport. The current government aeropolis project has already identified and is constructing airports/airfields to support export and movement if agricultural produce. I will therefore not cost such as I dont believe its necessary. So how do we cost this, considering you have different types of roads, and each km will cost differently depending on the type and purpose of the road, the topography of the area where it will be built etc. ROADS: The World Bank estimates that the average cost of unpaved roads worldwide is about $300,000/km. in Naira that equates to N55.5bn or N277.5bn over 4 years. Each year will therefore cost the government: N69.37bn PER ANNUM TRAIN TRACKS: The Chinese just agreed to construct 1,300km of tracks for Nigeria on what is being called to Coastal Rail Line, which will cost Nigeria $12bn and will not be completed before 2019. We can surmise from this that each km will cost $9.21m and the APC promise will come to a whooping $62.7bn or N11.6 TRILLION over 4 year or N2.9 TRILLION PER ANNUM 10. Employ 720,000 Nigerians in the first year. On the face of it, this look like a policy with a one-off cost, but its actually a perpetual cost as these new employees hopefully will be employed for many years. Therefore this has to be costed as an ongoing ADDITIONAL cost to government. Considering that the current strength of the civil service, which consumes 70% of the budget is merely 2.1 million people, adding 720,000 new people will equate to an additional N700bn per annum. That will be the base way of looking at it. But for the purpose of this exercise, Ill assume all these new jobs will be at minimum wage level, which is N18,000 per month. This policy will therefore amount to 720,000*18,000*12: N155.5bn PER ANNUM 11. Security. Supporting the military and boosting the moral of all our security forces is something we should all support. The Lagos State Government has a Security Trust Fund that has been credited with helping to significantly boost crime fighting in the safe, making it safer and more investor friendly. The fund handles a budget of N25billion a year, and is managed in collaboration with the contributors. I suggest replicating this type if arrangement in ALL the States of the Federation and Abuja. On average, most governors have security votes of about N700m a month. If they reduce this by 50%, that alone will raise N155.4bn for the fund per annum. The federal government should only commit to funding a third of the cost, while the private sector is invited to provide the rest. The total needed if you replicate the Lagos model will therefore be: N925bn, which will make the governments commitment: N305bn PER ANNUM 12. This is one area I have included because its on the APC Roadmap, but not yet a commitment if the Buhari/Osinbajo team. This area intrigues me because it can actually be done and made affordable. Obviously, when one first think of this we think about Dangotes upcoming refinery, which is costing him $5.6bn with a capacity for 400,000 barrels. But I think thats not the only option. A modular refinery with a capacity to refine 20,000 barrels per day costs $300mn and can be assembled and in place within 9-12 months. Using $6bn, the country can acquire 15 of these, which will refine 300,000 barrels a day, and coupled with the Dangote 400,000, END product importation before 2019, which currently costs the government N1TRILLION PER ANNUM OR $5.4bn The cost of this policy will therefore be $6bn/N1.1TRILLION (one-off) with a SAVINGS over 4 years of $15.6bn If implemented as costed, the Buhari/APC manifesto will cost Nigeria an additional N6.031TRILLION PER ANNUM on top if current government commitments, which stand at just over N4TRILLION. Taken together, this comes to a government yearly spending commitment of N10TRILLION. On the face of it, this all looks totally unaffordable, but I dont think it is. There are means and way this new N10trn annual budget can be funded, without significant increase in the current deficit levels, and it is to these I turn as a whole. Nigeria currently operates a dual system budget, which means there is a separate annual budget of $13bn which takes care of about 12 MDAs of government. That $13bn equates to N2.4TRILLION, which should immediately come within the control of the FG. This will reduce the shortfall to about N3.7trillion. Working through the 2014 budget alone, there is a section under the Federal Ministry of finance, which is called the Service Wide Votes. Many a report has identified his sub-head as an easy avenue of corruption. I have done a line by line analysis of this subhead and it contains on its own over N585bn of double entries or unexplained funding commitment including things like N178bn for pension (when every dept already budgets for their own pension), security votes, payment for maturing bonds (the government already sets aside for all interests on domestic debts N660bn) etc. Also, the implementation of the Oronsanya report is said to save Nigeria N862 over 4 years or N215bn per year. There is also the Ecological Fund, Petroleum Stabilisation fund and a myriad of other such funds, which the NEITI report says cost Nigeria over N500bn in a 4 year period. Scrapping these funds will raise an additional N125 billion per annum. So, from just these 3 areas, Government can bring in another N1TRILLION, leaving a deficit of about N2.8TRILLION/$15bn. I personally believe that $10billion should be drawn down from the foreign reserve to: 1. Pay for the $6bn cost of these modular refineries. The logic is simple. This is a scheme that will cost us an upfront amount of $6bn, but would have saved the nation $21.6bn in subsidy payments over a four year period. This will also mean the country needs $5.4bn less in foreign currency per year, which was the cost of importation of fuels, therefore reducing the pull on the reserve and conversely strengthening the Naira. 2. For so long the government has talked about diversifying the economy. To be fair to this government, they have grown non-oil receipts from N1.6trillion when they took over to about N2.9trillion now, but this is not enough. An analysis of the problem we have as a nation is massive importation of goods with a resultant negative impact on the foreign reserve and a weak Naira. We either need to import less or export more. Ireland, a country with a very functional and strong economy despite its recent troubles has a foreign reserve of just $1.6BILLION. Thats it. Nothing more, but it survives because its able to balance its imports and exports expertly. Now, I would suggest that the balance of $4bn drawn down from the reserves should be used to set up mineral resources development initiatives, but not in the way we have become accustomed to. Kogi Iron Ore Company an Australian Company exploring iron ore in Kogi State, estimates that their site has reserves of about 300million MT of iron ore. Kogi State alone has 6 iron ore deposit sites. The company estimates that if it fully exploits its site, it can generate incomes of about $600m/annum. Now it currently has a contract which says it owns whatever it mines from that site (whoever signed such a contract should be shot). If I were government, we could make available $100m from this fund not just to support the mining activities from this site, but to establish a processing plant on the site to convert the ore into ferris metals, which have a much higher price in the international market that ores. In exchange for the investment, e nation claims back its rights to the economic value from the let all in a percentage favour able to both parties. Using another example, government could take $300m and build a coal power plant in Enugu, plus lay rail track from the coal mining area direct to the power plant. This one initiative can generate enough power to ensure at commercial areas like NNEWI, Aba etc are covered with 24/7 electricity, which will boost production and increase employment. We have about 10 or so solid minerals that if we established in partnership win international investors processing plants for, we will revitalize communities and industries in a very short space of time. This leads me to one last issue. Our foreign policy must match our economic objectives. Over the up years we have over relied on the US, UK and western nations. Nothing wrong with that. But the world is changing and we too much change to find a place for ourselves in this bright new world. If we are moving to processing of our natural resources for export and employment generation, we must as a deliberate principle of state move to establish closer bilateral relationships with Australia - a world leader in processing in just too many minerals to mention. Part of that drawn down fund should be used to support Australian companies coming and establishing processing plants for at least 10 commercial solid minerals for which we have comparative advantage. Over e long run, this will pay for itself in increased employment and taxable income to the government. Finally, TAXES. No country anywhere in hone world developed without taxing its people adequately. Outlined above are policies that will boost consumption, employment and services and expand our economy. The government must be mindful at all stages to have an appropriate tax regime to maximise incomes. The UK does not have natural resources, but generates so much tax to be in the leading 10 economies in the world. As more people get employed through implementation of these policies, they must contribute to the tax base. More companies should be made to pay as they develop and process our resources. We will be deceiving ourselves if we think we can be a middle income nation without a sound tax policy. This is fallacy. So, in the final analysis, I do believe there are some very sound policies contained in the APC manifesto, and yes, they can be funded given the right mixture of political will, innovation and focus. These are my thoughts. I will like to know what you think and lets have an open discussion. Nigeria will surely benefit. Written by Wole Solanke
Posted on: Tue, 13 Jan 2015 07:24:22 +0000
Trending Topics
Recently Viewed Topics
© 2015