Of Salaries, Pension and Unemployment in Nigeria

CONTENTS:
 
THE SALARIES
 
SALARY PAYMENT PROBLEMS
 
PENSION ISSUES
 
GOVERNMENT (UN)EMPLOYMENT
 
IMPACT ON THE BUDGET
 
SOME REMEDIES PROPOSED
 
A CAUTION
 THE SALARIES
 
From all available indications, Nigerian federal state, and local government workers and legislators, all comprising a mere 2% of the Nigerian population,  are now doing very well salary-on-paper-wise, thank you,  with some salaries doubling or even tripling over the past two years. 

In fact, that development  - galloping salaries  - has been one of President Obasanjo’s undeniable “dividends of democracy” to the public sector.   A State Chief Justice told me not too long ago that his monthly salary had surprisingly tripled – and that he really did not need such a big increase in Nigeria.  A university lecturer confessed to me that she was doing quite nicely now, thank you, and that I should now consider coming back home to the university system.   President Obasanjo not too long ago admonished a University lecturer in Calabar who was asking him about the slow pace of economic development in the country, reminding him (that is the lecturer) of his salary increase since his (that is Obasanjo’s) assumption of office since May 1999.  In his latest BBC speech, the president also said that the salaries of policemen (a force of roughly 120 – 150,000) had been “doubled.”

QUOTE

http://allafrica.com/stories/200202110535.html

Among the government efforts [FOR THE POLICE] is a special salary scale /package. The intention is to avoid lumping policemen together with staff of federal government ministries. With this package, a newly recruited policeman or constable as they are technically, called earns about N9,000 per month. It is a lot of improvement on what it used to be. ……..Quite recently, the president disclosed that his police driver whose take home package was a meagre N4,000 before May 29, 1999, now earns N14,000 monthly salary. So, by inference policemen have to appreciate the nascent democratic rule because it is a watershed of their improved conditions of service. And such appreciation should reflect in hardwork and dedication to duty.

UNQUOTE

Table 1 shows roughly the present situation, for various workers, and Table 2 shows that president and some other public officials in the Executive and Judiciary are not doing badly themselves.

TABLE 1:  A QUICK COMPARISON OF MONTHLY SALARIES OF ARMY, POLICE AND CIVIL SERVANT ON  SIMILAR PAY GRADES
 

                           Army                   Police                  Fed. Civil Servants    State Civil Servants

Minimum Wage    N7,628                N7,500                 N7,500                            N5,500

Brigadier-General - N90,992    AIG  - N89,494      Civil Servant  - N67,895

(Army Scale 17)                         (Police Scale 16)    (Civil Service Scale 17)

Colonel  -           N85,835              COP - N85,023

Lieutenant - N35,952                    PS  - N34,935

Warrant Officers -  N17,234        PI -   N16,172

Private - N9,497                             PC - N9,075

AIG – Assistant Inspector-General of Police;   COP – Commissioner of Police

PS – Police Superintendent   PI – Police Inspector;  PC – Police Constable

Source: http://www.postexpresswired.com/postexpress.nsf/24c35a000fe637798525691a0076c2cb/7146ce05ed83482985256900005452b0

TABLE 2: SALARIES OF MEMBERS OF THE EXECUTIVE & SOME OTHERS

                             Annual Salaries                                             Monthly

President - N1.405 million                                                           N117,083

              Constituency allowance -  250% of  basic salary  

              Severance package - N4.218 million   

Vice-President -  N1.212 million per annum                              N101,000

              Severance package  - N3.638 million                           

Chief Justice of the Federation - N1.346 million                        N112,167

Secretary to the Federal Government  -  N794,085.00            N  66,174

Federal Ministers - N794,085.00                                                 N  66,174

Federal Ministers of State -  N783,032.00                                  N 65,253

Special advisers to the President - N777,150.00                      N 64,763

Chairmen of federal commissions - N777,150.00                      N 64,763

Members of federal commissions - N771,752.00                       N 64,313

Auditor-General of the Federation  - N770,346.00                      N 64,196

Chairmen of area councils in Abuja - N454,156.00                    N 37,846

Vice-chairmen - N426,528.00                                                        N 35,544

Supervisory councillors -  N404,650.00                                         N 33,721

Secretary to the council -  N370,729.00                                         N 30,894

Sources:

http://allafrica.com/stories/200111290692.html  and http://allafrica.com/stories/200111290195.html

Recently, after some drama between the President and the legislators,  during which the salaries of the legislators (360 House of Reps and 109 Senators) became an issue, we learnt as follows:

QUOTE

http://allafrica.com/stories/200202150503.html

THE salary/allowances of a member of the House of Representatives which is the source of the current face-off between President Olusegun Obasanjo and the House stands at N418,423 per month, Vanguard can now reveal……Each Rep's pay is N64,879 less that of a senator.

UNQUOTE

Table 3 spells the structure out in more detail:

TABLE 3:  THE NIGERIAN NATIONAL ASSEMBLY SALARY PACKAGE
 

                                                House of Reps                  Senate

Basic allowance -                        N 88,724.20k                            Basic allowance- N64,546.67k

Utilities -                                     N 13,234.75k             Taxable additions - N127,386.00k

Entertainment -                           N   6,617.37k             Gross taxable - N194,932.67k

Domestic staff -                          N 49,630.32k                           Net pay - N186,904.30k

Vehicle maintenance -                N 19,852.13k                          Non-taxable allowances - N328,852.02k

Constituency -                             N 66,173.75k

Constituency basic -                   N108,016.00

               Speaker of the House N990,844.00k          Senate President -N993,697.00k  

Source: http://allafrica.com/stories/200202150503.html

Bottom line from Table 3? Again, our elected officials are also not doing badly themselves!  In fact, back in September 2000  [“SUNDAY MUSINGS: Our Expensive Democracy, Our Corruptible Democracy” ] when these salary structures were yet just mere proposals, I had done a back-of-the-envelope calculation to show that we would need rough $12 billion annually to pay the salaries of just these roughly 10,800 top government workers in the Executive, Judiciary and Legislature.

What about our Armed Forces, which is roughly 76,500 in size?   Its basic salary structure  is given in Table 4, according to a recent TELL magazine edition, and compared with that of the United States (as I had done back in September 2000).

TABLE 4: A COMPARATIVE ANALYSIS OF ARMY SALARY STRUCTURE (NIGERIA, US)

                      NIGERIA                    UNITED STATES                     Equivalent Rank in US

                     Step 1 Salary              Step 1 Salary                             Navy                                    Air Force

                         In Naira                       In US $

General                149,312                        8,518.80                                  Admiral                                        General

Lt. General          134,487                        7,550.10                         Vice-Admiral                              Lt. General

Maj. General       121,862                        6,838.20                          Rear-Admiral                           Maj. General

Brig. General        91,641                        5,682.30                           Rear Adm/Commodore                 Brig-General

Colonel                 85,802                        4,211.40                            Captain                                      Colonel

Lt. Colonel           67,937                         3,368.70                          Commander                              Lt. Colonel

Major                    53,236                        2,839.20                           Lt. Commander                           Major

Captain                 44,545                         2,638.20                   Lieutenant                                 Captain

Lt.                         42,280                         2,301.00                             Lieutenant (JG)                           1st Lieutenant

2nd Lt.                   31,538                         1,997.70                             Ensign                                   2nd Lieutenant

Chief Warrant O.      -                              2,688.00 W4

A Warrant Off.    31,852                          2443.20 W3

MMO                   23,253                         2,139.60 W2

Warrant Officer   19,845                         1,782.60 W1

Sergeant 1st Class     -                              1,831.20

Staff Sergeant      16,557                         1,575.00                               Petty Officer, 1st Class                  Master Sergeant

Sergeant               13,452                         1,381.80                               Petty Officer, 2nd Class                  Staff Sergeant

Corporal              10,904                          1,288.80                          Petty Officer, 3rd Class                   Sergeant/SenAir

Lance Corporal     9,417                          1,214.70                           Seaman                                             Airman 1st Class

Private                   8,939                          1,169 (max)                    Seaman Apprentice                       Airman

Recruit (4 mth+)     -                                1,042.80

Recruit (<4 mth)     -                                   964.80

Cadet                     5,538                             699.30 (max)                 Midshipman                                   Cadet

Source for Nigeria:  TELL Magazine, January 21, 2002; Pages 32-33

Source for the US:   http://www.dtic.mil/comptroller/fmr/07a/index.html; see also “The World Almanac and Book of Facts 2002”

If these numbers for the Nigerian Army are confirmed, one could also say “Not too bad a package either!”

However that Army pay structure is a little bit worrying in this department: a whopping 33% jump in salary from Brigadier-General to the next pay grade Major-General!  Furthermore, an Army Major that plans a successful coup and becomes a Major-General overnight instantly has an almost doubling in his salary, a situation quite similar to that of the US. 

Let us compare the US situation a little bit more, however.  The US is about two-and-half times Nigeria’s population of about 120 million.  At N130 to $1, the US General earns about 7.5  times the Nigerian General;   the US Major about 6.9 times that of the Nigerian Major; the US Sergeant 13.4 times the Nigerian Sergeant;  while the US Private earns 17 times that of Nigeria.  Yet the US Army is more than 16 times the size of Nigeria’s, and the US’s annual budget (latest figure was $2.3 trillion!) is about 300 times that of Nigeria (at last count about $8 billion)!  The salary ratio between US Private and US General is a mere 7.3, while that of Nigeria is more than double of that:  16.7!

Is that an invitation to coup or what?  Quite frankly, I believe that the jumps in salaries between ranks of our military forces are simply too high, and should be somewhat more constricted.

SALARY PAYMENT PROBLEMS
 Paying salaries in Nigeria, of course, is another matter.   Some Nigerian Police Force members, for the first time ever, went on strike recently; a few of them are still being hounded for it, even after the government QUICKLY rushed in N1 billion to assuage their complaints about back pay.  

QUOTE

http://allafrica.com/stories/200202200713.html

Despite warning signals and widespread rumour of dis-content over welfare, which started since last year, the police authorities assured President Olusegun Obasanjo that their men would not go on strike February 1. But the junior policemen did the unexpected when they embarked on what has turned out to be the first police revolt in the country's 42 years of independence. The junior policemen kept faith in accordance with leaflets the national union of policemen, NUP, had earlier distributed and faxed to different stations…..The fax message, which was circulated to all police commands in the country, reeled out the grievances of the policemen who were chiefly protesting the 12 months non-payment of their rent allowance….…Since September last year, more than 150,000 policemen were reportedly restless over the non-payment of their lodging (housing allowance). Each of the policemen is entitled to 30 percent of his or her basic salary every month. The allowance is for those living outside the barracks. This may have been an embarrassment to the police high command, which was daily being inundated with complaints from subordinates over non-payment of the accommodation allowance, through various police radio messages across the country.

UNQUOTE

Several other workers in Nigeria have not been paid on time.  Embassies and other missions abroad are often-times objects of pity, as many of the workers are not paid on time, and they face threats of eviction in their homes as well as cut-off in electricity.

PENSION ISSUES
 The third issue is PENSION.  That one stops work does not mean that one stops “chop”.  Pension is that reward, that “thank-you” in your sunset years for hard work that you put in your sunrise years. 

In Nigeria, the payment of pension is what late Chief Bola Ige once disclosed, in private conversation to be our “ticking time bomb”  - because the bill is choking the country!  Let us read Finance Minister Ciroma,  Defence Minister Danjuma and Chief of Defence Staff, Admiral Ibrahim Ogohi:

QUOTE

http://www.thisdayonline.com/news/20020227news12.html

Pension Arrears Hit N242bn Mark
 
Despite the release of about N25 billion by the Federal Government for the payment of pensions, the Government still has an overhang of N242 billion to grapple with.  This was disclosed yesterday by the Finance Minister, Mallam Adamu Ciroma, who was represented by his Permanent Secretary, Alhaji Haruna Sanusi, while testifying before the Senate Committee on Public Accounts. He said the country was fast reaching a point where 50 per cent of the country's resources will be committed to the payment of pensions.
Painting a grim picture, the Minister said the total arrears of both civilian and military pensions of N242 billion was as a result of a lack of seriousness to address the pension problem by successive governments.
The minister however said an inter-ministerial report will soon be forwarded to the National Assembly for a legislation on the formulation of a pension policy. The only cheering news given by the minister was that projections now reveal that whereas it had been predicted that at least N3.2 billion would be required monthly to pay military pensions, less than N400 million was actually needed. Stating that contrary to public opinion, the Ministry of Finance was not insensitive to the plight of pensioners, the Minister said inadequate funds to match proposals were actually the main cause of the problems associated with the payments of pensions.

UNQUOTE

QUOTE

http://allafrica.com/stories/200202200197.html

Defense Minister, Lt. General Theophilus Danjuma (rtd) yesterday disclosed that the Federal Government Monday released N15 billion for the payment of military pensions and gratuities. He also said that retired Biafran soldiers who served in the Nigeria Army for 15 years would be paid their pensions and gratuities. Testifying before the Senate Committee on Public Accounts, Danjuma said N10 billion was earlier released by the Federal Government last month for the payment of pensions to ex-service men, thereby making a total of N25 billion released this year so far to address the problem of payment of pension arrears. Commenting on the new method of payment of pensions through banks, Danjuma indicted Ministry staff for appointing banks which had no large network of branches without his knowledge. Stating that at least N3.2 billion is required monthly to settle pensions and gratuities, Danjuma said it was obvious that the pension burden is increasingly becoming a heavy one for the Federal Government to bear alone with the result that pensioners live from hand to mouth. Danjuma cited 600 per cent increases in pensions during the past six years without corresponding increase in appropriation as well as the thriving industry of fraud within the system as some of the numerous problems hampering the payment of pensions and gratuities.

UNQUOTE

QUOTE

http://www.ngrguardiannews.com/magazine/mz850407.html

Explaining the large number of military pensioners, Ogohi stated that "the large number is as a result of the increase recorded four years ago. Initially, because of the small amount of money being paid as pensions many retired personnel never bothered to be documented for pensions. Those who thought pensions were too small didn't want to come and register. After the increase in pensions through the harmonisation exercise, they all came out. And the Directorate of Military Pensions had no choice but to compute the arrears of their pensions." The result was that by the year 2000, the list of military pensions was at its peak of about 121,000. Alarmed at the number and cost, Danjuma, who as Chief of Army Staff implemented the mass demobilisation of soldiers who served during the civil war between 1975 and 1979, ordered for an accurate figure. A verification exercise brought the figure down to about 114,000. Another verification exercise last year put the number of legitimate pensioners at about 98,000.

UNQUOTE

Notice that while Danjuma and Ciroma cannot seem to agree on the MONTHLY BILL for the military pension, with their numbers differing by a factor of 3.   Furthermore, a whopping downward revision by 30,000 of those in the pension rolls have been effected.  More importantly, it is the UPWARD REVISION of pensions themselves –   probably to match to  within 30% the salary levels of those currently working at the same level at which the pensioners retired  –   has now  led to renewed interest in both legitimate and illegitimate pensioners coming forward to claim their pensions.

To compound matters, there is apparently no “contributory retirement scheme” for previous workers, and if there is, it is in jeopardy.

QUOTE

http://allafrica.com/stories/200202200652.html

NIGERIA yesterday began counting its losses arising from Monday s liquidation of Savannah Bank with revelations that a huge amount of money meant for the settlement of accumulated pensions of military retirees, and another N500 million belonging to the liquidator of the bank Nigeria Deposit Insurance Corporation (NDIC) were trapped in the distressed financial organisation……..Enumerating the problems in the military pensions system, Gen. Danjuma said the pensions roll had increased by more than 300 per cent in recent years without corresponding increase in appropriation. Many of the names, he said, were fictitious and some were of those of dead personnel. "In Nigeria, nobody dies, pensions are not transferable," the minister deposed.  Warning that the country faced a crisis in its inability to look after its retired work-force, he advocated a contributory retirement scheme for present workers. He also identified early retirement as another factor in the emerging pensions crisis, and referring to himself, he stated that he retired as a general at the age of 42. He said he had claimed pensions for almost the same length of his service life.

UNQUOTE

IMPACT ON THE BUDGET
 Even before now (and certainly after now) all of the issues outlined have led to the galloping increase in the RECURRENT EXPENDITURES and budget deficit in our annual budget, viz Table 4:

TABLE 4:  BUDGET EXPENDITURES AND DEFICITS (IN BILLIONS OF NAIRA)
 

                      FEDERAL BUDGET ESTIMATES                                             Actual*

     Year     Total            Capital Exp.          Recurrent          Total                Budget Deficit

                   Revenue     Expenditure           Expenditure      C + R

      1999       667.7            89.5                      211                 300.5                 359.6 ?   (8.4% GDP)

      2000     1260.0          170                         300                 470.0                 103.8     (2.9% GDP)

      2001     1689.2          480                         414.2              894.2                 259.379

      2002      1156            297                         483                 780.0                 Not applicable

·         As computed by Central Bank
Thus we have an annual WAGE BILL that has TOO RAPIDLY increased without commensurate increase in revenue; an annual government PENSION BILL that threatens to choke the nation; and BUDGET DEFICITS to satisfy unanticipated bills  – all for the benefit of only a small fraction of the population of the nation.

GOVERNMENT (UN)EMPLOYMENT
 
The total number of people working for all levels of government in Nigeria as a percentage of our total population is not outrageous compared to other countries, including the United States:  although difficult to confirm, it is estimated to be about 2% (roughly 1% federal, 1% all other levels). On the other hand, the United States has about 2.7 million civilian Federal workers alone  (payroll bill: $10.5 billion)  and 1.34 million active-duty armed forces members, making a federal workforce of about 1.5%. On average, another 14.5% work at the US state and county levels of government (see Table 5), making government employment to be roughly 16% for the US.  The US Veterans Compensation and Pension case size (deceased and living) is about 3.2 million, with an annual budget of about $21 billion.  [In  Fiscal 2000, the annual budget for the US was roughly $1.788 trillion.]

However, the percentage of Nigeria’s budget that goes to maintaining such a small number of our government employees and pensioners compared   with the size of our country is enormous, and will continue to cause a serious distortion in our polity if not checked.

Thus I believe that it would have been a better policy for government to employ MORE PEOPLE , but pay them LESS SALARY and have them contribute MORE towards their pension. .  For example, rather than double salaries and build stadiums, would it have been more expedient to employ more people at or about the old salary level?  At the same time, government should take steps to DIVERSIFY the economy and create an ENABLING ENVIRONMENT for private enterprise to flourish

TABLE 5: UNITED STATES: STATE-WISE PERCENTAGES OF THOSE EMPLOYED THAT ARE EMPLOYED IN GOVERNMENT/UNEMPLOYMENT RATE

Alabama    18.3/4.6                          Alaska – 26.1/6.6                     Arizona – 16.4/3.9                     Arkansaa – 16.6/4.4

California – 16.0/4.9                      Colorado – 15.4/2.7                  Connecticut – 14.4/2.3                Delaware – 13.5/4

Florida – 13.8/3.6                  Georgia – 15.2/3.7                Hawaii – 20.2/4.3                   Idaho – 19.3/4.9

Illinois – 13.7/4.4                  Indiana – 13.9/3.2                 Iowa – 16.3/2.6                   Kansas – 18.1/3.7

Kentucky – 17.2/4.1                Louisiana – 19.1/5.5                Maine – 16.5/3.5                   Maryland – 18.3/3.9

Massachusetts – 12.7/2.6                Michigan – 14.9/3.6                Minnesota – 14.7/3.3                Mississippi – 20.7/5.7

Missouri – 15.6/3.5                Montana – 20.4/4.9                Nebraska – 17.2/3                Nevada – 11.7/4.1

New Hampshire – 13.1/2.8 New Jersey – 14.8/3.8   New Mexico – 24.4/4.9   New York – 16.8/4.6

North Carolina – 16.2/3.6   North Dakota – 22.1/3                 Ohio – 14.0/4.1                   Oklahoma – 19.4/3

Oregon – 16.7/4.9                Pennsylvania – 12.8/4.2                 Rhode Island – 13.4/4.1                South Carolina – 16.9/3.9

South Dakota – 18.6/2.3                Tennessee – 14.5/3.9                Texas – 16.4/4.2                   Utah – 17.2/3.2

Vermont – 16.6/2.9   Virginia – 17.5/2.2                Washington – 17.8/5.2                West Virginia – 19.3/5.5

Wisconsin – 14.5/3.5                Wyoming – 24.7/3.9                District of Columbia – 34.0/5.8

Source: “The World Almanac and Book of Facts 2002

 SOME REMEDIES
 
At this point, there are a number of obvious remedies:

1.        There must be a FREEZE on salary and pension increases for the foreseeable future.  We should also SIGNIFICANTLY reduce allowances.  With our economy, we simply cannot sustain higher and higher salaries and pensions, nor maintain the present level of allowances (which are often more than double the salaries themselves!).

2.        Our budgeting process appears to be a riot.  We should fix by the law the percentage by which the budget will increase or decrease year by year!  A 20 – 30% reduction in a nation’s budget is ridiculous!  Many of us would be out on the streets if our salaries reduced by 5%, not to talk of 30%.

3.        We should fix the percentage of budget used on recurrent expenditure – largely salaries and allowances – which means periodically letting government workers go - and use the savings to improve the enabling environment for private sector to flourish.

4.        Legislators should require quarterly budgets from the executive and mid-year budget expenditure reports.  This will make for more timely accountability.  Who should be held accountable for lapses? The  Accountant-Generals and Auditor-Generals (state and federal) should get SUED and/or be fired for lack of delivery of reports  - after all, that is their job.  This is preferable to the legislators going for the jugular of the President and State Governors, who are protected by Section 308 anyway, and whose impeachments appear to be nigh-impossible!

A CAUTION
 
One cannot fail to ask:  was there any analysis done to assess the impact of these increases in salaries and pensions on the budget and the economy?  Is a righteous policy – increase in salaries and pensions – good if by its implementation, it could actually cripple the economy?  Are there no persons taking a holistic view of government policies?

If we continue along the path that we are going without remedies, we may eventually end up have 70 – 80% of our budget on recurrent expenditures, with 70-80% of that on salaries and pension alone!  It will then no longer be Obasanjo’s headache – but that of his successors!

And that is scary.

BIBLIOGRAPHY

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Senate Okays N1.405m Annual Pay for Obasanjo

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Obasanjo to Earn N1.4m Basic Salary

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Each Rep Gets N418, 423 Per Month - House Orders Probe of National Treasury

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What is Policeman Worth?

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Our Case for a Strike

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'Military Funds Trapped in Savannah Bank, We'll Deploy the Army'

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N15bn Released for Military Pensions, Says Danjuma

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N600m Needed to Off-Set 142 Per Cent Pension Increase in Ekiti

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Budget Deficit Hits N259b; Rights Groups Protest

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Mobolaji Aluko  December 10, 2001