NIGERIA CIVIL SERVICE RENEWAL PROJECT

1. NIGERIA CIVIL SERVICE RENEWAL PROJECT Mike Stevens Consultant May 4, 2004

2. Background to Project • Nigeria is a federal country, FGN has both traditional federal responsibilities and overlapping state/federal ones. • 4/5th revenue comes from oil, TR equivalent to 40-50% GDP. Lion’s share (c. 25% GDP) goes to FGN. • Spending has ratcheted upward with each oil price surge, debt has increased when it has fallen. • Despite resources, CS salaries are low, overheads inadequate, and capital projects are seldom completed. CS unable to deliver services reliably.

3. Background contd. • Nobody knows real CS numbers. c 160,000 in CS, 800,000-1.2m in Public service. • Believed to be many ghosts, double dippers, over-age, fraudulently appointed staff. • Window of opportunity with new economic team, determined to improve governance. • Unusual configuration of project. Driving force is economic team, whose ministries/agencies will be “pilot” ministries undergoing restructuring and rightsizing.

4. Background contd • OHSF ambivalent about reform – rhetorically in favour, many believe it prefers to manage the status quo. • PRSP Bureau (PIU) is under OHSF. • Suspicion of WB support for CSR – equated with downsizing. Legacy of military and SAP. • Pool system. Ministries can hire/fire lower grades, but middle and higher civil servants belong to centrally posted “pools”.

5. Inflated salary/allowances Unauthorized hiring Forged qualifications Accelerated promotions Ghost workers Payroll staff collusion Working pensioners Multiple employments Leave with(out) pay Diversion of vote funds Deductions waived Transfers Source: Payroll and Personnel Controls, Public Sector Reform Program, Nigeria, Adam Smith International Typical Fraud Types

6. Project Design • Restructuring, re-equipment and re-sizing of pilot ministries/agencies. • CS wide changes in rules. • Redefinition of roles of OHCF, FCSC., FCC and capacity building. • C. $75 million. • “Pilot” project status.

7. How does Nigeria stack up against seven design challenges? • Big Bang or institutional reforms: can’t do big bang because uncertain of existing numbers. Process reform to generate better numbers and flush out fraud. • Adequate Planning: Legal implications clear – FGN has a right to retire civil servants, but must pay heavy compensation. Difficult to estimate fiscal impact without retrenchment numbers.

8. Design Challenges cont’d. • Addressing sources of resistance: vested interests in status quo. Change management strategy. • Sequencing: critical need to first create effective personnel and establishment controls – risks of sabotage. But public service re-entry remains a risk. Special problem of “pool” staff. • Targetting reductions: actual downsizing of pool staff will come later, after stronger controls put squeeze on existing fraud. No firm decision on method of downsizing. Lower grades easier.

9. Design Challenges cont’d • Facilitating re-entry: no firm decisions, FGN considering special credit schemes, resettlement etc. Risks that schemes become • Making severance cost effective andacceptable: bad record of military, resistance to loss of informal earnings, public realizes CS is “bloated”, but many families have a relative within the system. Surveys of pilot agency staff planned.

10. To Summarize • Window of opportunity to address dysfunctional government. • Change management is crucial. • Start with payroll and personnel controls. • Reform will take a long time.