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How Federal And State Governments Can Afford To Pay Civil Servants A Living Wage

April 10, 2011

Through the years, Federal and State Governments have continually complained about their inability to pay a living wage to civil servants. Things have recently got to a head as the Federal Government has failed to fully implement the N18,000/month minimum wage agreed with the NLC. In the same vein, State governments have complained aloud about their inability to pay this amount to civil servants in their states.

Through the years, Federal and State Governments have continually complained about their inability to pay a living wage to civil servants. Things have recently got to a head as the Federal Government has failed to fully implement the N18,000/month minimum wage agreed with the NLC. In the same vein, State governments have complained aloud about their inability to pay this amount to civil servants in their states.

However, we have recently witnessed some state governments promising to pay, even after complaining previously about their inability to pay. Any discerning mind will know that these are just election time promises. The most disingenuous recent statement about this issue came from the ANPP Presidential candidate, the smooth talking Ibrahim Shekarau. He was reported to have said that he regretted promising to pay the N18,000 minimum wage to Kano State civil servants. This statement only goes to show that he is comfortable with the status quo and he is not considering new ideas to make it possible for the government to pay civil servants a living wage without breaking the bank. If he is regretting his promise to Kano State civil servants, one wonders what he will or will not do when he becomes President. This is definitely a negative for him and I hope, he, alongside the other leading presidential candidates who have maintained a suspicious silence on this issue, is reading this.

To be able to proffer any solutions, one needs to understand the reasons for this problem.

The number one reason is the archaic public sector financing policies of both the federal and state governments. For the purposes of this write up, I will limit my analysis to health and education financing. The penchant of governments in Nigeria to directly pay salaries of all civil servants is the biggest reason for the obscenely high recurrent expenditure profile of governments in Nigeria. Another issue to consider is the total inability of governments to tie funding to specific programs. I am considering these two issues together because they are two sides of the same coin. For example, the Ogun State government currently pays out over N100m monthly as salaries to staff of the Olabisi Onabanjo University Teaching Hospital (OOUTH). This amounts to over N1.2b annually for one government agency for just one year! One can only imagine what the bill will be when you add the General Hospitals and other agencies. This does not make sense, when one considers the fact that just re-allocating this enormous amount of money into a public health program that will provide free and affordable health care will amount to killing two birds with one stone. On one hand, ensuring access and quality and on the other hand providing OOUTH a guaranteed revenue source for it become self-sustaining.
Another reason which is well known to every Nigerian is embezzlement of state funds by politicians. I intentionally did not use the word “corruption” because it is already a corrupted word, as it is now synonymous with being “smart” or “sharp” in Nigeria lingo.

Another huge reason is the sheer apathy of Nigerians, including the Nigeria Labour Congress towards governance, especially in our contributions towards building strong institutions in healthcare and education. The most depressing outcome of this apathy is that, middle class Nigerians (which I believe still exists, because I fall in this category) spend a disproportionately high percentage of our income to access basic health and education services, compared to countries in the developed world. For instance, a routine trip to a private clinic for out-patient service, depending on which part of the country you live, will set you back by at least N10,000. It cost between N100,000 and N500,000 for maternity services depending on which private clinic/hospital you go to. In education, yours truly will have to pay N450,000 this year to put my 3 year old through “Jeleosimi” private nursery school in Lagos. A friend of mine pays over N1.5 m annually to send his two daughters to a private primary school in Ibadan! When people in the middle class spend these enormous amounts of money to access basic services, it has an on-going negative effect on the economy, because it limits our ability to have any real disposable income to procure goods and services, which is necessary to drive production.
Now, let’s consider the alternative. The first step is for the state and federal governments in Nigeria to perform a radical and wholesale reform of the way we finance our health and education sectors. It is a shame that political office holders in Nigeria still find it necessary to act like emperors at this time in the history of the world. Governments must start focusing on funding/investments in programs, rather than misapplying public funds to pay salaries. Here is an example. I mentioned earlier that the Ogun State government pays close to N1.2b annually in salaries to Olabisi Onabanjo University Teaching Hospital (OOUTH) staff. What the government needs to do, for example, is to take this money and use it to set up a Community Health Insurance program within OOUTH’s catchment area. This is essentially modeled after the Medicare and Medicaid system in the US. This program will provide free healthcare for children, the elderly and indigent families who cannot afford to pay for their healthcare. It will also provide affordable healthcare for the working class, who can afford to buy into the program, through affordable premiums which could be as low as N2,000 annually (N166 monthly premium). Everyone enrolling in the program will be means-tested to determine their ability or inability to pay. People who try to game the system should be severely punished as a deterrence to others who may want to do same. An investment of about N10m in information technology will provide a platform to effectively manage the program. Everyone enrolled in the program is issued a patient card with truly unique medical record numbers, and all of their medical information is maintained electronically.

Essentially, this program will create a great source of revenue for OOUTH through reimbursement payment from services rendered. These payments will come from the Community Health Insurance Fund. So, instead of spending the N1.2B on staff salary, the money is tied to the Fund used to pay OOUTH for its services through a reimbursement process. With this expanded revenue source, OOUTH can then be responsible for paying the salaries of its staff, while maintaining quality care. This, like I mentioned earlier, is like killing two birds with one stone. Putting this plan in place will move OOUTH from a cost-recovery institution, to a fully self-sustaining institution. It will also force the management of the hospital to be more innovative in improving their operations, because their staff salaries depend on the services the hospital renders to the public. Staff unions will also be able to hold their Board and Management responsible when salaries are not paid, rather than blaming the government all the time.

To any right thinking politician, the political benefits from instituting a program that provides free and affordable healthcare to people, while ensuring that government hospitals providing these services are paid on time, will be enormous. This can be achieved by just re-allocating money from the current salary account to fund specific programs.

This particular reform in health financing will also help to reduce the incidents of ghost workers. Ghost workers will exist when government has an unwieldy and centralized payroll system.

This reform can also be applied to the education sector. Albeit, in a slightly different way. This is the time for governments in Nigeria to be creative and think about what is possible, rather than always complaining about what they cannot do.  To all newly elected officials, a word is enough for the wise. 2015 is just around the corner.


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