Personal Finance and the Cost of Governance
Brilliant Citizen: Hello, my Economist, I enjoyed our last conversation on Africa the last time.
Economist: Glad you did! How are you doing?
Brilliant Citizen: I am doing ok. Just thinking about my finances… I need to do better but I am not sure what to do.
Economist: I can relate, this season, everyone is learning to manage their finances better. Usually, you can do two things — either increase your revenue or reduce costs. Sometimes, you need to do the two so you can save and invest even more.
Brilliant Citizen: Today, leave making more revenue. I have tried a few but did not get as much. Tell me more about cutting costs. I “don” try to cut, make I no go cut important things “ooo”.
Economist: Like you, many individuals and even government is looking to cut costs in different ways. It is an intentional effort and can be painful.
Brilliant Citizen: (looking at her with side eye) Which government is trying to cut costs? Have you seen the number of assistants some Nigerian states are getting? Even this is the largest number of ministers we have in Nigeria. Please tell me something else!
Economist: Remember, we now discuss beyond Nigeria. Let’s look at an African country that is cutting costs.
Kenya:
The country is experiencing many economic challenges due to increasing debt repayments, rising interest rates and higher taxes that have limited consumer demand. Recently, the government is cutting operational expenses across Ministries, Departments and Agencies (MDAs) by 10% and cancelling non-essential foreign travels. Also, it has reversed a deal to purchase 60% of a telecommunications company — Telkom Kenya. This deal would have cost the government $40.43 million.
Brilliant Citizen: This sound interesting. It is good to see an African country cutting costs this period.
Economist: It is laudable work and should build confidence in the government. Citizens need to be reassured they are not the only ones cutting costs.
Brilliant Citizen: Fair enough. However, we don’t want any government official complaining that they can’t provide the basic services because of cost cutting. It is already cumbersome to get some government services, we do not want it to get harder.
Economist: Yes, you are correct. Cost cutting must not negatively impact efficiency in service provison. It is essential to look beyond the quantity to the quality. Governments need to improve their efficiency in providing services required to grow the economies.
Brilliant Citizen: I am not sure how they can do the two (cut cost and improve efficiency) at the same time…
Economist: It is possible to cut cost and still increase efficiency via use of technology to streamline processes and reduce the paperwork. Let’s look at Rwanda.
Rwanda is recognized as a model of efficient governance in Nigeria. The country has invested in ICT and is leading in the use of e-government platforms. This has reduced the physical bureaucracies and enhanced public sector delivery. It has an “Irembo” platform providing over 80 public services online.
Brilliant Citizen: Wow, I have seen the difference the introduction of technology does in the private sector. It is great to see it working in the public sector.
Economist: Talking about the private sector, another way government can reduce cost but still be efficient is by working with the private sector in the implementation of high-cost capital projects/ infrastructure development. We have seen Rwanda and many other African countries utilize Public Private Partnerships (PPP) to reduce their infrastructure gaps.
Brilliant Citizen: I agree, after all the private sector needs these amenities to grow so they can be part of it.
Economist: There are many other ways government can save costs and yet increase efficiency but let me end by emphasizing the need to curb corruption within the continent. Corruption continues to steal from the African continent in severe ways.
Brilliant Citizen: You can say that again and again. I am looking for countries with low corruption, maybe I will add that to deciding where I will “japa” to. I cannot move to another country with high corruption.
Economist: Do not worry there are some African countries with low corruption rates — Botswana, Namibia, and Rwanda. I hope our discussion helps in your personal finances too.
Brilliant Citizen: Yes, it does. I am going to identify some things I can cut that won’t impact my productivity. Also, for big projects I will do it with my friends and family. Lastly, I will look out for those that want to cheat me and cut off from them immediately.
Economist: Wow, I love how you have personalized the macro issues. You are truly a brilliant citizen!
Sources:
Reuters
Corruption Perception Index report 2021
Special thanks to Abraham Afariogun for his contribution to this article.
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