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Cost of
Governance
2
“COST OF GOVERNANCE” TESTS STRUCTURE AND CONTENT OF PUBLIC FINANCE
C. Budget
Cycle
A. PFM Out-turns
Policybased
budgetin
g
External
Scrutiny and
Audit
B. Key cross-cutting
features
Comprehensiveness
Transparency
Accounting
and
Reporting
Budget
Execution
Credibility
How does our National Income per person compare to others?
Gross National Income per Capita ($)
11630
7610
4,580
3000
1,430
Nigeria
South Africa
Egypt
Brazil
Angola
Source: World Bank 2012
Nigeria’s Federation revenues from oil and non-oil taxes per capita still pales
compares to other African countries due to our large size of population.
Understanding The Context
Income per capita , 2011 ($)
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
Singapore
South
Korea
Malaysia
Brazil
Chile
Nigeria
“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)
112.47
34.5
39.2
1985
1992
67.1
68.4
1996
2004
17.1
1980
2010
“ 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”.
Our Staggering Poverty Trend: Enough to Prick Conscience
Nigeria Poverty Figures (m)
67.1
34.5
39.2
1985
1992
112.47
68.4
2. 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.
17.1
1980
1. 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.
1996
Source: National Bureau of Statistics
2004
2010
Understanding The Context
Life expectancy (years )
80
80
78
73
72
51.4
Nigeria
“The
Singapore South Korea
80%
Percentage of our
National Budget
contributed by oil
18%
Percentage of
Manufacturing in
Nigeria’s GDP Matrix
Chile
Malaysia
95%
Percentage of
foreign exchange
contributed by oil
5
Cycles of boom in
the 70s, 80s , 90s,
2000s &2010s
Brazil
common wonderment of these poor
citizens – whether east, west, north and southis “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?”
“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.”
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
Country
Ranking
Qatar
14
Saudi Arabia
17
United Arab Emirates
27
Kuwait
34
Bahrain
37
Azerbaijan
55
Iran, Islamic Rep.
62
Nigeria
127
Most of all on issues related to governance…
Control of Corruption (2010)
Without enough to go round, there are still a lot of leakages on
the revenue side
OIL THEFT
FUEL SUBSIDY
$1.6bn
Estimate of amount lost to oil theft
bunkering yearly due to Nembe line
shutdown
*SPDC
N232bn
Yet-to-be recovered
Overpayments made to
“fraudulent” oil marketers
*Ngozi Okonjo-Iweala
INDEPENDENT AGENCIES
N12.24trn
Funds generated by the independent
agencies between 2009-2011.
They only paid N264.74bn to the
government
*NABRO
UNREMITTED FUNDS
$4.84bn
NLNG dividends not remitted
to the Federation Account by
NNPC.
*2009-2011 NEITI Report
Revenue Loopholes
1. Poor Reconciliation across Agencies.
2. Exchange Rate Differentials
3. Overly poor Remittance by Independent
Revenue Agencies
4. Lack of Metering at Oil Terminals
Capital
Expenditure
N744bn
N307bn (7%)
Statutory Transfers
2012 FG Actual Expenditure
Profile
(18%)
Personnel Costs
N1.81tn
(44%)
Debts Service
N679bn
(16%)
Recurrent Expenditure
(Debt, Non Debt & Transfers)
Source: Budget Office of the Federation
Overhead Costs
N590bn
(14%)
N3.38trn
(82%)
In actual expenditure of government (not the budget), 82% of expenditure goes to recurrent
component while 18% ends up in capital expenditure.
Statutory Transfers
National Assembly has been allocated N1tn since 2005
National Assembly Budget (N bn)
158.92
104.83
54.79
54.79
150
150
150
2011
2012
2013
114.39
66.4
2005
2006
2007
Source: Federal Ministry of Finance
2008
2009
2010
According to a research by The Economist, Nigeria lawmakers basic pay at $189,500 is the
highest salary in the world.
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.
632.8
485.01
375.76
322.2
199.1
2005
214.5
155.9
2006
130.5
2007
2008
2009
2010
2011
2012
Source: Budget Office of the Federation
However, Yerima Ngama said Federal Government has paid N699 billion to banks as interest on
borrowings last year alone.
*ThisDay August 7, 2013
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?
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
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
MEASURING WHAT PERFORMANCE?
The questions the PFM performance indicators seek to answer
Budget Realism:
Is the budget
realistic, and
implemented as
intended in a
predictable manner?
Comprehensive, Policybased, 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?
Comprehensive fiscal risk
oversight :
Is oversight of fiscal risk
arising from public enterprises
and sub-national
governments adequate?
Accountability and
Transparency :
Are effective external
financial accountability
and transparency
arrangements in place?
Six core
objectives
of PFM
system
Control :
Is effective control and
stewardship exercised
in the use of public
funds?
Information:
Is adequate fiscal, revenue and expenditure
information produced and disseminated to meet
decision-making and management purposes?
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”!
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)
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
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.
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……….”
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”.
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!!)
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!!!
PLACING OUR GDP SIZE IN PERSPECTIVE
GDP at Current Prices:
2000
$46 billion
• How much the pharmaceuticals industry
will profit from the Swine Flu vaccine in
one year: $50 billion
2010

• 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


$194 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