EXECUTIVE’S ROLE IN CHALLENGING THE BUDGET: THE NIGERIAN EXPERIENCE Presentation by Mr. C.D. Gali, Director Expenditure, Budget Office of the Federation, Nigeria 29 November 2006 BOF 29 NOVEMBER 2006

OUTLINE The problem stated Challenge framework and tools adopted by the Executive in Nigeria Fiscal Rules and Limits Establish Linkages Value for Money Reporting, Monitoring and Evaluation Transparency Impact of framework and tools on the budget BOF 29 NOVEMBER 2006

THE PROBLEM STATED Unsustainable spending Large government deficits financed by monetary growth Large recurrent spending and debt service costs Poorly conceived projects and programs Spending not properly linked to developmental priorities Low implementation of the capital budget Weak monitoring, auditing and reporting BOF 29 NOVEMBER 2006

THE PROBLEM STATED In Nigeria the Executive has developed a framework to guide, challenge & align budget proposals of spending agencies & provide information, with which budgets may be monitored & evaluated. The framework adopted in Nigeria is presented here in the slides that follow. BOF 29 NOVEMBER 2006

FISCAL RULES & LIMITS USE OF FISCAL RULES & LIMITS TO MANAGE GOVERNMENT SPENDING Oil price based fiscal rule Deficit/GDP limit Aggregate expenditure limit Limits by major expenditure heads MDA limits (Envelopes) BOF 29 NOVEMBER 2006

FISCAL RULES AND LIMITS MEDIUM-TERM REVENUE FRAMEWORK Agree - Key assumptions and targets Revenue framework MEDIUM-TERM EXPENDITURE FRAMEWORK Aggregate expenditure limit Level of deficit and financing of deficit Limits by major expenditure heads (that is, Statutory Transfers, Debt Service & MDA Expenditure) BOF 29 NOVEMBER 2006

ESTABLISH LINKAGES BOF 29 NOVEMBER 2006

ESTABLISH LINKAGES LINKING ANNUAL BUDGETS TO LONG TERM STRATEGIES AND MEDIUM TERM SECTOR STRATEGIES MEDIUM TERM OUTLOOK TO PLANNING Medium-Term Revenue Framework Medium-Term Expenditure Framework Fiscal Strategy Paper Medium Term Sector Strategies Annual budgets with projects and programmes linked to medium term plans BOF 29 NOVEMBER 2006

ESTABLISH LINKAGES FISCAL STRATEGY PAPER Prepare Fiscal Strategy Paper which documents/sets out - Medium-Term Revenue Framework Medium-Term Expenditure Framework Medium-Term Sector Strategies (summarized) Governments fiscal policy direction MDA Expenditure Envelopes BOF 29 NOVEMBER 2006

ESTABLISH LINKAGES MEDIUM-TERM SECTOR STRATEGIES Agree MTSS with MDAs This entails assisting MDAs to align their goals, objectives and strategic initiatives to: National Economic Empowerment and Development Strategies (NEEDS) Millennium Development Goals (MDGs) Long-Term Sector Strategy Other strategic policy direction of Federal Government BOF 29 NOVEMBER 2006

ESTABLISH LINKAGES MEDIUM-TERM SECTOR STRATEGIES Assist MDAs to: Understand how NEEDS, MDGs and other high-level policy goals of the Federal Government should impact their goals and objectives Set medium-term goals and objectives that are properly aligned with NEEDS, MDGs, etc. Identify key initiatives (programs and projects) that they need to embark upon to achieve their goals and objectives as aligned with NEEDS and the MDGs. BOF 29 NOVEMBER 2006

ESTABLISH LINKAGES MEDIUM-TERM SECTOR STRATEGIES Assist MDAs to: Cost each initiative and phase them over the medium-term bearing in mind the indicative expenditure envelope of the MDA for the same period set out in the Fiscal Strategy Paper. Define outcomes and outputs to be delivered to Nigerians in clear measurable terms Agree how performance will be monitored & reported to Nigerians Document all these in a MTSS Document. BOF 29 NOVEMBER 2006

ESTABLISH LINKAGES MEDIUM-TERM SECTOR STRATEGY This was done using a four stage process, namely – Preparatory Strategy Sessions Documentation Review and “Defence” BOF 29 NOVEMBER 2006

ESTABLISH LINKAGES MEDIUM-TERM SECTOR STRATEGIES This was done working with – Sector Staff led by Minister and/or Permanent Secretary Civil Society Representatives of the Organised Private Sector Consultants Sector Experts Relevant Committees of National Assembly “MTSS Team” - BOF/FMF, OSSAP MDG, NPC, BPMIU, Women Affairs Ministry Development Partners (UNDP, World Bank, DFID) BOF 29 NOVEMBER 2006

ESTABLISH LINKAGES MEDIUM-TERM SECTOR STRATEGIES This was done for – Agriculture Education Health Police Power Water Resources Works FCT Transport Youth Development Science and Technology Environment Aviation Internal Affairs Foreign Affairs Defence Solid Minerals Housing & Urban Development Information BOF 29 NOVEMBER 2006

ESTABLISH LINKAGES PREPARE ANNUAL BUDGET Issue Call Circular Support MDAs to prepare their budget proposals Receive budget submissions from MDAs Review budget submissions to ensure that they are– Within allotted expenditure envelopes Consistent with the MTSS (for MDAs with MTSS) In accordance with the Call Circular Collate submissions and put in form suitable for submission to NASS BOF 29 NOVEMBER 2006

VALUE FOR MONEY Better control of payroll and overheads Nominal roll with detailed information on each employee (names, grade level/step, etc) Detailed breakdown of overheads cost components and units costs Automation of budget data capture and computation templates Integrated Payroll System (present being procured) BOF 29 NOVEMBER 2006

REPORTING, AUDITING, MONITORING & EVALUATION Aggregate Expenditure Sector Envelopes MTSS Initiatives Chart of Accounts BUDGET Performance Measures EXPENDITURE Mandate Warrant/AIE Evaluation Monitoring Audit Revenue Deficit Reporting Due Process Detailed Payroll and O/H Cost Estimates MTEF FINANCIAL MANAGEMENT SYSTEM ANNUAL

REPORTING, AUDITING MONITORING & EVALUATION Publication of budget performance reports OPEN initiative led by OSSAP MDGs Engagement of Civil Society in budget monitoring and evaluation. Timely monthly returns to OAGF by MDA Monitoring and Evaluation fed back into planning process BOF 29 NOVEMBER 2006

TRANSPARENCY WIDE PUBLICATION OF FISCAL AFFAIRS Publication of – Capital Warrants Recurrent Warrants 2007 Fiscal Strategy Paper Guide to Understanding the Federal Budget Medium-Term Sector Strategies Annual Budgets BOF 29 NOVEMBER 2006

IMPACT Sustainable spending Alignment of government spending with NEEDS and MDGs Greater budget discipline More participatory and transparent process Improved budget implementation Value for money BOF 29 NOVEMBER 2006