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Cost of Governance

Cost of Governance. “COST OF GOVERNANCE” TESTS STRUCTURE AND CONTENT OF PUBLIC FINANCE . C. Budget Cycle . A. PFM Out-turns. Policy-based budgeting. B. Key cross-cutting features. Credibility. Budget Execution. External Scrutiny and Audit. Comprehensiveness Transparency.

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Cost of Governance

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  1. Cost of Governance

  2. “COST OF GOVERNANCE” TESTS STRUCTURE AND CONTENT OF PUBLIC FINANCE C. Budget Cycle A. PFM Out-turns Policy-based budgeting B. Key cross-cutting features Credibility Budget Execution External Scrutiny and Audit Comprehensiveness Transparency Accounting and Reporting

  3. How does our National Income per person compare to others? Gross National Income per Capita ($) Source: World Bank 2012 Nigeria’s Federation revenues from oil and non-oil taxes per capita still pales compares to other African countries due to our large size of population.

  4. Understanding The Context Income per capita , 2011 ($) 50,000 “Our own paltry $1,500 income per capita helps drive home the point that we have been left behind many times over by every one of those other countries…. How did these nations steer and stir their people to achieve such economic performance over the last five years? ” 22,000 13,000 14,000 10,000 1,500 “What happened to Nigeria? Why did we get left behind? Why did we get left behind? How did these nations become productively wealth over the last fifty years while Nigeria stagnated” Nigeria Poverty Figures (m) “ The Nigeria is a paradox of the kind of wealth the breeds penury is widely known as the fact that the world considers us a poster nation for poor governance wealth from natural resources”.

  5. Our Staggering Poverty Trend: Enough to Prick Conscience We have a staggering size of our population to lift out of poverty. According to the National Bureau of Statistics, 69% of Nigerians live below the poverty ticker. Almost $600 billion USD in oil revenue since the discovery of oil in 1959, Nigeria ranks 159th out of 177 on the UN Human Development Index. Nigeria Poverty Figures (m) Source: National Bureau of Statistics

  6. Understanding The Context Life expectancy (years ) “The common wonderment of these poor citizens – whether east, west, north and south- is “why would more than half the population of a country that earned nearly one trillion dollars in oil revenue since the Oloibori discovery of crude oil; continue to wallow in poverty?” 95% 80% “Well, economic evidence shows that the answer which we must all ponder deeply is that oil wealth entrenched corruption and mismanagement of resources in government and warped the incentive for value added work, creativity and innovation in our public, private sectors and wider society.” Percentage of our National Budget contributed by oil Percentage of foreign exchange contributed by oil 5 18% Cycles of boom in the 70s, 80s , 90s, 2000s &2010s Percentage of Manufacturing in Nigeria’s GDP Matrix

  7. Why Has Nigeria Lagged these Other Countries? Even some Oil-based economies have diversified and become more competitive, whilst Nigeria has lagged… WEF Global Competitiveness Rankings Most of all on issues related to governance… Control of Corruption (2010)

  8. $1.6bn Without enough to go round, there are still a lot of leakages on the revenue side OILTHEFT FUEL SUBSIDY UNREMITTED FUNDS N232bn $4.84bn Yet-to-be recovered Overpayments made to “fraudulent” oil marketers *NgoziOkonjo-Iweala Estimate of amount lost to oil theft bunkering yearly due to Nembe line shutdown *SPDC NLNG dividends not remitted to the Federation Account by NNPC. *2009-2011 NEITI Report INDEPENDENT AGENCIES Revenue Loopholes Poor Reconciliation across Agencies. Exchange Rate Differentials Overly poor Remittance by Independent Revenue Agencies 4. Lack of Metering at Oil Terminals N12.24trn • Funds generated by the independent agencies between 2009-2011. • They only paid N264.74bn to the government • *NABRO

  9. N307bn (7%) 2012 FG Actual Expenditure Profile N744bn (18%) N1.81tn (44%) N679bn (16%) Recurrent Expenditure (Debt, Non Debt & Transfers) N3.38trn (82%) Source: Budget Office of the Federation N590bn (14%) In actual expenditure of government (not the budget), 82% of expenditure goes to recurrent component while 18% ends up in capital expenditure.

  10. Statutory Transfers National Assembly has been allocated N1tn since 2005 Source: Federal Ministry of Finance According to a research by The Economist, Nigeria lawmakers basic pay at $189,500 is the highest salary in the world.

  11. Debt Service Our domestic debts has risen. We use 15.2% of our national budget to service debts making the banks profitable. A quest of debt accountability. Source: Budget Office of the Federation However, YerimaNgama said Federal Government has paid N699 billion to banks as interest on borrowings last year alone. *ThisDay August 7, 2013

  12. Personnel Costs 44% of Actual Revenues goes to Personnel Costs of Government Workers and Public Service Officers Duplication of Duties and Functional Overlaps The White Paper of the Steve Oronsanye Recommended that only 321 out of 541 government agencies. Since the public disclosure on June 12, 2013, glaring steps have not been taken to actually streamline the agencies. Ghost Workers 46,821 ghost workers have been found in 215 of its ministries, departments and agencies where IPPIS has been introduced. This has saved the government N119bn. There are 321 agencies still yet uncovered. Who knows how many faceless people still draw funds from government treasury?

  13. COVERING ALL GROUNDS ON PFM • PFMS Comprises the legal and organizational framework for supervising all phases of the budget cycle • Planning • Preparation of plans and strategies • Fiscal projections and costing • Budget preparation - conception and formulation • Budget execution and implementation, including procurement • Budget monitoring and reporting, including recording and reporting • Internal controls, including internal audit • External scrutiny and oversight, including external audit • Legislative follow up on audit findings • Post implementation project evaluation

  14. Objectives & Relevance of PFM • Supports responsible management to promote availability of benefits to the greatest number of citizens possible • Supports good governance • Facilitate attainment of the 3 budgetary goals of • Aggregate fiscal discipline • Effective allocation of resource allocation to priorities • Efficient service delivery services

  15. Budget Realism: Is the budget realistic, and implemented as intended in a predictable manner? Accountability and Transparency : Are effective external financial accountability and transparency arrangements in place? Six core objectives of PFM system Comprehensive, Policy-based, budget: Does the budget capture all relevant fiscal transactions, and is the process and composition giving regard to government policy for benefit of the poor in particular? Control : Is effective control and stewardship exercised in the use of public funds? Comprehensive fiscal risk oversight : Is oversight of fiscal risk arising from public enterprises and sub-national governments adequate? Information: Is adequate fiscal, revenue and expenditure information produced and disseminated to meet decision-making and management purposes? MEASURING WHAT PERFORMANCE? The questions the PFM performance indicators seek to answer

  16. SO WHAT CAN WE DO AS EFFECTIVE CITIZENS OF NIGERIA? • Set and monitor the benchmark of what levels of performance/results we expect from governance and hold everyone involved accountable. • Build a system of massive link up of budget analysis to “everyday citizen’s need to know” profile. • Sustain the scrutiny on how resources are allocated and spent across the arms and levels of government. • Link demand for governance Results to all other advocacies especially political and electoral reforms. • Demand that government hosts a stakeholders mini national debate on Oronsanye’s report with cost/benefit presentation on all recommendations. • Pick an “Anchor Citizens' Demand” from this Conference– “Fix Education Now”!

  17. STRUCTURAL TRANSFORMATION IS THE ANTIDOTE TO OUR OIL ECONOMY ENTRAPMENT. • HUMAN DEVELOPMENT • PHYSICAL INFRASTRUCTURE • RULES-RESPECTING SOCIETY • POLICIES • INSTITUTIONS • INVESTMENTS (The sad story of our Public Budgets)

  18. YET OUR EDUCATION IS PRESENTLY OUR WEAKEST LINK The result of the diagnostics that we produced on the state of our education system and sector was so heart wrenching that I was filled with angst at how low we had sunk educationally. Deciding to channel the angst positively, we built a strong team that articulated some three hundred and sixty eight ‘root and branch’ reforms measures across the six levels and aspects of education

  19. THE AMARTYA SEN COUNSEL (1) • Why is China ahead of India? One answer is that India has paid inadequate attention to the lessons of Asian economic development, which gives a crucial role to the rapid expansion of human capability as a part of pursuing fast economic growth.

  20. THE AMARTYA SEN COUNSEL(2) • A critical part of the Human Capability for Economic Growth Strategy is “the use of public revenue, itself expanded by economic growth, to remove huge deficiencies in social, educational and health services……….”

  21. THE AMARTYA SEN COUNSEL(3) • Finally, a critical part of the Human Capability for Economic Growth Strategy is “to meet the growing demands of social and physical infrastructure, while making public services more accountable and efficiently organized”.

  22. THE AMARTYA SEN COUNSEL (4) • You should not dig holes and fill them up, you should build schools! • You can't skip public health care & education to focus on growth. That's main lesson for India to learn! (Even more so a lesson for Nigeria to learn!!)

  23. AVERAGE GDP GROWTH RATE OF 7% OVER A DECADE-OVER 24% UNEMPLOYMENT RATE AND ABOUT 40% UNEMPLOYMENT RATE AMONG THE YOUTHFUL POPULATION ECONOMIC GROWTH- JOBLESSNESS DICHOTOMY IS ALL ABOUT INEQUALITY OF OPPORTUNITIES CREATED BY A FAILED EDUCATION SYSTEM!!!

  24. 2010 2000 $194 billion $46 billion PLACING OUR GDP SIZE IN PERSPECTIVE GDP at Current Prices: • How much the pharmaceuticals industry will profit from the Swine Flu vaccine in one year: $50 billion • Bell Atlantic purchase price of GTE (2000): $65 billion • Amount of credit granted by banks in Dubai in the first six months of 2004: $69 billion • Nestle’s revenues in 2000: $72 billion • How much teenagers spend annually: $208 billion • Decrease in net worth of India’s 40 richest people due to the recent global financial downturn: $212 billion • Amount wasted each year on advertising campaigns that do not reach their intended audience—or reach no one at all: $220 billion • Exxon Mobil’s market cap: $407 billion • Apple corporation’s current market cap: $544 billion

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