Publications

The federal government fiscal operations in 2017 shows that there were deficits for the four quarters recorded. The CBN report reveals that the federal government spent a total of N147.11 billion on capital expenditure in the four quarters (including a 2016 fiscal year roll-over due todelay in approving the 2017 budget), and N3.64 trillion as recurrent expenditure in 2017. Capital releases suggest that only about 6.6 percent of budgetary amount of N2.24 trillion was spent in the fiscal year, while recurrent expenditure represented 72 percent of N5.06 trillion budgeted for the year. Nigeria’s recurrent expenditure has always exceeded capital expenditure for infrastructure, however, the delay in the passage of the 2017 budget (in June 2017) may have triggered the slow-down in capital releases. Nonetheless, the 2017 budget is still being followed, given that the 2018 budget has not been passed. Going forward, the process of the 2018 budget release should be expedited, as delay in budget sends negative signals to foreign investors which could make them divert capital investment to other countries.

The national accounts for 2017Q4 show that the aviation sector grew year-on-year by 4.7 percent in real terms - significantly higher than the 0.48 percent in preceding quarter but significantly lower than the 13.3 percent in the corresponding quarter of 2016 Drawing from the data recently provided by the NBS, it can be inferred that the increase in the number of both domestic and international passenger traffic in the fourth quarter (by 4.9 percent YOY to 3.7 million passengers) may have partly driven the YOY real growth in the sector. This is in addition to remarkable increases in aircrafts and mail movements – by 4.6 percent and 229.6 percent respectively.

Recent media highlights suggests that the Federal Government made a non-oil-based revenue of N1.27 trillion from operating surpluses between 2007 and 2016¹. The period which covers the years of operation of the Fiscal Responsibility Act, shows a list of agencies and government organizations that paid the operating surpluses (revenues above approved budgetary expenditure at the end of each year) to the federal government.  Notably, the annual remittances shows year-on-year increases. This is likely attributable to the improved monitoring and intervention activities of the Fiscal Responsibility Committee over the years. There is greater scope for operating surpluses from public corporations with intensified efforts at monitoring the implementation of the template for calculating operating surplus liabilities across scheduled corporations.

Nigeria’s debt profile reached unprecedented high levels at the end of the year 2017. Figures obtained from the debt management office reveals that debt stock increased Year-on-Year by a significant 42.6 percent and Quarter-over-Quarter by 6.6 percent to N21.73 trillion as at December 2017¹. Domestic and foreign components of the debt profile grew to N3.35 trillion and N18.38 trillion respectively. The increased debt profile may have been triggered by domestic and foreign borrowings to fund Nigeria’s budget deficit, and excessive debt servicing costs – Nigeria serviced domestic debts to the tune of N1.48 trillion in 2017², about 29.13 percent of its total budget revenue. Implicatively, Nigeria’s debt to GDP ratio continues to increase, from 18.6 percent in 2016 to 21 percent

According to data released by the National Bureau of Statistics, states generated about N931.2 billion altogether in 2017 fiscal year¹, representing 12 percent above the N831.2 billion generated in 2016. Further breakdown shows that 31 states recorded increases, while only about 5 states recorded slight declines in revenue generated internally; Lagos state generated 36 percent of total internally generated revenue (IGR). Notably, with a net FAAC allocation of N1.7 trillion, total revenue available to states stood at approximately N2.7 trillion in 2017. However, the states are still burdened with debts, given the N3.2 trillion and $4.1 billion owed as domestic and foreign debts respectively as at the end of December 2017. Going forward, improvements in tax collection and administrative capacities of revenue-generating agencies of other states, beyond Lagos, can further improve overall IGR.

The World Economic Outlook report, recently released by the World Bank, reduced its growth projection for Nigeria to 2.1 percent in 2018¹, from 2.5 percent². The new growth projection is considerably lower than the 3.5 percent 2018 growth rate projected by the federal government of Nigeria. However, at 2.1 percent, the growth is a significant improvement from actual 2017 growth rate of 0.83 percent; and this outlook has been hinged on improving oil prices, revenue and production, and foreign exchange measures that contribute to better foreign exchange availability.

Consumer Price Index, the measure for inflation rate, declined (Year-on-Year) for the fourteenth consecutive month in March 2018. Headline inflation dropped to 13.34 percent¹ – representing a marginal 0.99 percentage-points decrease, and lowest inflation rate in two years. The sub-indices moved in tandem with headline inflation as food inflation fell from 17.59 percent to 16.08 percent, while core inflation moderated to 11.20 percent, down slightly from 11.70 percent. The year-on-year decline is attributable to base effects of higher prices in corresponding month of 2017. Additionally, stable exchange rate moderated the impact of imported consumer goods prices². Going forward, to stimulate further decline in both food and core inflation rates, it is necessary to promote investment in the agriculture sector as well as  to foster policies that promote forex reserve growth and exchange rate stability.

Nigeria’s Apex bank held the first meeting of its reconstituted Monetary Policy Committee (MPC) for the year 2018. Following a detailed review of domestic macroeconomic events, the MPC deemed it fit to retain all rates: MPR at 14% (which has remained at a record high of 14 percent since July 2016), CRR 22.5%, Liquidity Ratio 30% and Asymmetric corridor at +200 and -500 basis points around the MPR¹. The unchanged monetary policy can be attributed to the MPC’s satisfaction with the continued moderation in economic indices as well as the gradual return to macroeconomic stability. Going forward, fiscal policy authorities should consolidate these positive outcomes given monetary policy inaction.

Overview

The International Budget Partnership (IBP), on January 23, 2013, released the results of the Open Budget Index (OBI) for 2012 in which about 100 countries were surveyed. The OBI measures the state of budget transparency, participation, and oversight in the budget process. In the outcome of the survey, Nigeria’s overall score was only 16 out of a maximum 100, a lower score when compared with the previous years. Specifically, and as shown in Figure 1, Nigeria’s score has been consistently on the decline from 20 in 2006 to 19 in 2008 and then to 18 in 2010 while dropping further to 16 in 2012. This implies that there are still challenges with respect to fiscal transparency and consolidation in Nigeria despite the passage of the Fiscal Responsibility Act (FRA). Therefore, the inability of Nigeria to improve its performance in the OBI means that the government is seen to be providing the public with little information on the budget.  

Figure 1: Nigeria’s Open Budget Index Scores 2006 – 2012

Source: Open Budget Index 2013   In arriving at the respective scores for each of the surveyed countries, the IBP requires the publication of eight documents on the budget. In the case of Nigeria, six of the required eight documents were produced as shown in Table 1. The documents that were provided by the Nigerian fiscal authorities include pre-budget statement, the executive’s budget proposal, enacted budget, in-year budget report and year-end budget report. The documents that were produced but not made available to the general public are mid-year budget review and audit report. However, the citizens budget which aims to provide a ‘nontechnical’ report to the public is reportedly not made available. While most of the documents were made public, the scanty nature of the information provided, coupled with the production of two of the documents for internal use and ‘nonproduction’ of the citizens’ budget, resulted in the relatively low score of Nigeria in the OBI. On a positive note however, the survey noted the improvement of Nigeria’s oversight institutions in the budget process. Specifically, the legislative strength as well as the supreme audit institutions’ strength was accorded a ‘strong’ status even though public engagement was regarded as weak.   Table 1: The Key Budget Documents

Description of Document	Status
Pre-Budget Statement: Provides information that links government policies and budgets and typically sets forth the broad parameters that will define the budget proposal that is presented to the legislature.	Published
Executive’s Budget Proposal: Presents the government plans to raise revenues through taxes and other sources and spend these monies to support its priorities, thus transforming policy goals into action.	Published
Enacted Budget: The legal instrument authorizing the executive to raise revenues, make expenditures, and incur debt.	Published
Citizens Budget: A nontechnical presentation to enable broad public understanding of a government’s plans for raising revenues and spending public funds in order to achieve policy goals.	Not Produced
In-Year Reports: Periodic (monthly or quarterly) measures of the trends in actual revenues, expenditures, and debt, which allow for comparisons with the budget figures and adjustments.	Published
Mid-Year Review: An overview of the budget’s effects at the midpoint of a budget year and discusses any changes in economic assumptions that affect approved budget policies.	Produced for internal use
Year-End Report: Information comparing the actual budget execution relative to the Enacted Budget	Published
Audit Report: Independent evaluation of the government’s accounts by the country’s supreme audit institution. It typically assesses whether the executive has raised revenues and spent monies in line with the authorized budget, and whether the government’s accounts of its revenues and expenses are accurate and provide a reliable picture of the fiscal situation.	Produced for internal use

Source: Open Budget Index 2013   In relative terms, Nigeria’s OBI 2012 score of 16 in 2012 is well below the average score of 43 for all the 100 countries surveyed. Also, the score is lower than those of some African countries such as Ghana, Kenya and Angola, all of which attained 50, 49 and 28 scores, respectively. Similarly, when compared with the BRICS (Brazil, Russia, India, China and South Africa)Download File" name="_ftnref1">[1], it is clear that Nigeria’s score is much lower, with the exception of China, as shown in Figure 2. The BRICS are distinguished by the large and fast growing economies and Nigeria has been touted to be in this league in the near future.  

Figure 2: Nigeria’s OBI Vs Selected Countries

                                           Source: Open Budget Index 2013  

Policy Implications and limitations of the Index

The OBI has thrown light on the need for the Nigerian government to do more in terms of improving the transparency of the budget process. In other words, the continuous decline in Nigeria’s score since 2006 shows that there are still ambiguities in the process even though progress is being recorded in some areas. The oversight activities of the legislature are a case in point. However, the OBI survey has some limitations. First, it is observed from the report that the Nigerian government does not produce or publish a ‘nontechnical’ report called the ‘Citizens Budget’. Second, the report also notes that the mid-year budget review is only produced for internal use (see highlighted sections in Table 1). Conversely however, the Budget Office of the Federation has a publication on its website called ‘A Citizens Guide to the Federal Budget’Download File" name="_ftnref1">[2] while it also produces for public consumption detailed quarterly reviews of the budget.Download File" name="_ftnref1">[3] For these reasons, better scores in these two areas should increase Nigeria’s overall score though not significant in relative terms. In conclusion, apart from the website/internet channel, the Nigerian fiscal authorities may want to devise other means by which budget documents are made public (for example through town hall meetings) given that the number of internet users in the country is estimated at only 46.2million or 28.8% of the total population.