Challenges of Nigerian Budget Reform: From Complexity to Coordination

1. Collaborative African Budget Reform Initiative2nd Budget Reform SeminarManaging Complexity: From Fragmentation to Coordination 30 November, 1 and 2 December 2005 Maputo, Mozambique

2. THE NIGERIAN COUNTRY CASE STUDY The Implications for budget management of emerging from the previous regime into a democratic state, including technical, political economy and institutional complexity and challenges Unrealistic budgets lacking fiscal prudence. Short-term outlook for government spending. No predictability in government spending. Poor budget planning framework …Government spending scarcely reflected her priorities. No political buy-in. Weak monitoring, low accountability and transparency and no value for money. Dated legal framework.

3. The Impact of Revenue Complexity on Budget Management • Boom and Burst – depends on forces outside the control of Government. • When revenue goes up, expenditure goes up, when revenue goes down, expenditure goes down. • Revenue made up of: • Crude oil sales. • Oil taxes. • Non-Oil taxes. • Independent revenue.

4. Embraced certain fiscal rules. • Use sustainable oil price for planning. • Save earnings resulting from favourable crude oil price variance. • Distribute 50% of savings in year (t) in year (t +1) • Spend FGN share in year (t +1) on clearly identified projects. • Phase out distribution to avoid overhauling the economy • Limit deficits to such levels as is sustainable and can be financed. • Level out government borrowing. • Exit from Paris Club.

5. The Impact of a Complex Federal System on Budget Management • System of Revenue allocation between Federal, State and Local Government. • Among States and Local Government. • Each tier’s budget is independent of each other constitutionally. • Hudge policy problem.

6. Powerful Legislature and Budget Management • Budget process does not start on time. • FEC and NASS are not engage on time. • NASS sees the budget as Mr. President’s budget that does not take into account their yearning. • Add their own spending. • Capital Votes are not released on time.

7. Issues around donor coordination • National Planning Commission – Aid Coordination. • FMF – Loans coordination. • Donor Funds insignificant in the budget process. • Donor funds are not reflected in the budget.

8. Issues around clarity of roles and responsibilities between State Institutions • Budget Office has moved from NPC to FMF and vice versa over the years. • Multiple Agencies are involved in project monitoring and evaluation. • BOF is in the Ministry of Finance and reports through the Minister of Finance.

9. The Difficulties associated with a complex legal framework and multiple funding channels for State Expenditure • MDAs get funding directly from Donor. • BOF provide counterpart funding. • Executive Prepare budget and submit to National Assembly. • National Assembly alters budget as deemed necessary. • MDAs go and lobby with National Assembly. • It creates corruption in the system. • Approval process is delayed. • Implementation of budgets are delayed.

10. The Role of and Challenges for Budget Framework, Transparency, and the Budget Process associated with these issues • Makes preparation of the budget framework difficult. • Lack of transparency and openness in the process. • Budget preparation and implementation is delayed. • Breeds mistrust between Executive and Legislature. • Counterpart funds are not always adequately provided in the budget.