INTRODUCTION
Public Financial Management (PFM), budgeting, fiscal, trade, industrial and monetary policies are all interlinked; they are greatly influenced by the macro-economic environment and they define the said environment. PFM issues range from the pre-budget, revenues, initiation and formulation, approvals, execution, monitoring, reporting and evaluation and the audit stage which provides evidence to feed back into the continually evolving and rotating chain.
• Admitted that states are not in charge of monetary, trade, industrial, etc. policies. They must however adapt, take advantage, and make the best out of the overall national policies to ensure that their budgets deliver development to the people. For a state like Kogi, the elbow room for mistakes has narrowed – like a people left behind in fiscal time and space by their peers, the only way to go is forward, though not just playing catch but through a leap frogging process.
• For development to occur, the PFM system must be evidence led and positioned to adjust to changing societal realities. It is a fundamental aphorism that the state of development in any society is directly related to the progress in its PFM. However, the society must have an agreement on the direction of the development or transformation. Answers are to be collectively provided to critical questions such as: where are we? And where do we want to be?
• Development involves evolution, growth, maturation, expansion, enlargement, spread, progress. But the direction of these movements have to be agreed within the social milieu of the people considering that development is a people’s work in progress. It is about the people, their participation, human, infrastructural, scientific and technological growth and enhancement of their contribution to the pool of human civilization.
• This is linked with transformation which involves change, alteration, a movement in the desired direction and a new way of doing things. Transformational budgeting is central to enhanced service delivery, wealth creation, poverty reduction, guaranteeing adequate standard of living, sustainable economic growth, good governance and the institutionalization of democracy. It is likely to evolve into getting out of the box rather than some out of the box thinking.
• Simply put, it implies Kogi State living according and within her means, planning expenditure, growing her wealth, ensuring sustainability, borrowing only when necessary and as much as her ability to pay back, being accountable, transparent and open, encouraging popular participation and reducing inequality, planning fiscal activities in a logical manner, maintaining fiscal discipline, promoting strategic priorities and delivering value for money, etc.
• It also involves a proper understanding of the concept of resources and how to tap and use them for good of the common will. Resources have been grouped into human, technological, information, ecological and financial resources. We dare state that we seem to be so endowed with the greatest of resources – the human element; but what is missing in most instances is the ability of governance to harness the resources for the public good rather than the current privatization of the commons.
The importance of the budget for effective service delivery in any country cannot be overemphasized. It has been recognized that the budget is perhaps the most important instrument for the development of any modern state apart from the constitution. It can be argued that it is only through the instrumentality of the budget that government can allocate resources to deliver services to the people especially the poor and excluded.
GAINS FROM PREVIOUS ADVOCACY
Over the years, efforts made by citizens groups, private sector organisations and the media has yielded some gains in the budget process in Nigeria. There is clearly an improved engagement by citizens in the budgetary process. Discussions about the budget take place almost on a daily basis in the social media, newspapers, radio and television.
On the citizens portal is an application that citizens can use to monitor projects and report. Citizens groups and the media are now more systematic in engaging the budget process. Several media platforms now have programmes dedicated to budget issues.
THE BUILDING BLOCKS AND IRREDUCIBLE MINIMUMS
• Budgeting for Development should be based on the plan, policy, budget continuum. Good plans lead to good sectoral policies which now inform budget priorities. But these plans must be developed through a process of popular participation that relies on evidence. A plan or policy is not just a wish list of projects and programmes but a coherent SMART framework (specific, measurable, attainable, realistic and time bound) that sets an implementable agenda.
• Evidence is key for planning and budgeting. For instance in the health sector, resources should be dedicated to diseases most prevalent in epidemiological analysis in the state; a Health Management Information System is imperative. This can be replicated for all the sectors.
• Data Collection, analysis and using the available information as a basis for planning is imperative
• Forecasting of revenue, mobilization of revenue must be based on empirical evidence. Just putting big figures will not do; what are the basis and what informs the figures? Having large variance at the end of the day between projections and actuals pedestrianizes forecasting. Building the capacity of Board of Internal Revenue and having appropriate laws and policies is also imperative. This may involve the automation and introduction of technology to plug revenue leakages and avoid cash based transactions.
• Accountability and transparency, value for money are great cornerstones that drive development. The system must be configured to allow the public know what comes into treasury and how it is used through routine and periodic accounting. This implies that a regime of free access to non classified budgetary information. Thus, relevant sunshine laws such as the Fiscal Responsibility, Public Procurement and Freedom of Information Laws must be in place. The laws must be implemented to the full. Accountability and transparency will position the leaders to be in charge, trusted and become reliable to ask citizens for sacrifice, contributions which they will oblige in the full knowledge that their resources and sweat will not be stolen and will be properly managed. Also, planning and policies would have identified the key binding constraints on development in the state and budgets will move resources in the right direction to be tackle them head on.
• It makes eminent sense to create centres of excellence where pending the removal of the constraints across the whole state, the constraints are immediately removed. The centres can be the models for the future for instance, a mini industrial/service zone where electricity, water, internet access, etc. is available 24/7 to see what impact it can have on production of goods and service delivery. Create demonstrable islands of sanity in the extant insane environment. Linked to this is the full understanding of the imperative of a rights based approach to budgeting which moves away from the language of needs and development goals into definite positions of the rights duties continuum identifying duty bearers, rights holders and the continuum relationship that delivers services and enforces rights. Budgets will be linked to the minimum core obligations of state on various rights.
• Sound public private partnership arrangements will be in place and step by step and well thought through investment will be pursued. Appointments to key positions must be based on knowledge, track record and capacity and not just mere political patronage. Can we seek to attract the best of our best to man key positions? No team wins a match with a third eleven when every other team comes with a good first eleven.
• Fancy and prestige projects have no place in modern budgeting. Projects should be driven by actual need.
• Use public investments to liberate energies and activate resources. Targeted PPP investments in sports can discover more talents who will be encouraged to achieve international repute which earns millions of hard currency for the beneficiaries.
A WORD ABOUT RESOURCES AND INCLUSIVE BUDGETING
The idea of inclusive budgeting presents a framework which recognizes the needs of all segments of society and equally provides for them. It provides the opportunity for society to utilize its full capacity, expertise and potentials to work for improvements in living standards, economic growth and social development. Thus, it forecloses the mainstream attempt to clap with one hand.
Essentially, economic policies and the budget will be directed at maintaining the necessary conditions for investors to create value whilst at the same time creating opportunities for the poor to get out of poverty. It recognizes the agency of all segments of society to contribute to “cake baking” and as equal participants in the sharing.
It allows for economic democracy instead of the current technocratic attempts at solving peoples problems without their contributions. It resents the one size fits all prescriptions of international financial institutions but is pragmatic enough to know what works and draw lessons from them. The connotation of best practices is taken with a pinch of salt because that phrase creates an end of thinking capacity concept but inclusive budgeting is at home with fit and good practices.
Inclusive budgets harness resources to grow the economy. It understands resources in their full ramification – financial, natural, technological, information and human. Understood in this way, it will quickly be understood that resources are not strictly lacking in Kogi State. The problem is the management of the resources. Financial resources involve budget appropriations and practical money moved to solve poverty problems; natural resources include land and the entire ecosystem.
Information as its name implies involves disseminating knowledge, ideas and concepts while human resources relate to the women, men and children who could be deployed for the purpose of progressively creating value, reducing poverty within the maximum of the resources available to the States.
THE BUDGET INITIATION AND FORMULATION STAGE
This stage takes cognisance of state and national plans and policies as the basis for preparing the budget and its undergirding medium term expenditure frameworks and medium term sector strategies. What is relevant here is that the budget is not drawn up as a wish list but based on policy coherence, measurable indicators and achievable targets, taking into consideration the lessons learned from previous experience.
Budget monitoring and evaluation reports and reports from the Auditor General and the Public Accounts Committee of the legislature come in handy to provide the mischief and gaps in the existing practice which needs to be blocked in the new spending plan.
Revenue forecasts are based on empirical evidence and tied to plans and policies. The perpetual large yearly variance between projections and actual revenue challenges the budget implementation process.
Requests for borrowing based on the dynamism of debt sustainability properly defined and contextualized for the society; cost benefit analysis, etc. Here the arguments of debt to GDP, debt to retained revenue, etc. will rage and be resolved.
But the Fiscal Responsibility Act is clear on debt limitation, no borrowing for recurrent expenditure, etc.
The practice of the dry cut concept of separation of powers between the executive and legislature will not be ideal here; consultations and iteration need to go on at this stage to avoid the inbuilt constitutional tension between the executive and legislature which seeks to derail social progress. If the legislators must have their constituency projects, this is the time to bring them on and agree on them rather than wait until the tail end at the legislative appropriation stage to insert them. The advantages are legion.
Deep consultations with civil society, organized private sector, etc. will be very relevant at this stage.
The formulation ought to be done according to a calendar that finishes its processes on time – not later than four months to the end of the year so that the budget will be with the legislature by the last week of August in every year.
The alignment of key sectoral policies will be imperative to achieving budgetary results and proper planning of income and expenditure.
Under the Fiscal Responsibility Act, Medium Term Sector Strategies (MTSS) and the Medium Term Expenditure Framework (MTEF) precedes and lays the foundation for the budget. Indeed by section 18 of the FRA, the MTEF is the basis for the preparation of the estimates of revenue and expenditure required to be prepared and laid before the legislature under section 121 of the 1999 Constitution as Amended.
The MTSS preceding the MTEF is expected to be drawn up by MDAs based on high level state policies in recognition of the policy, plan and budget continuum; prioritize expenditure within the available resource envelope and time frame. It is to be prepared by a sector team comprising the MDA representatives, relevant legislative committees representatives, organized labour, private sector and civil society representatives. Virtually all stakeholders are brought on board.
The benefits accruing from the MTSS and MTEF exercise have been stated as follows in literature. For MTSS:
• Articulating medium-term (three years) goals and objectives against the background of the overall goals of high level policy documents;
• Identifying and documenting the key initiatives (that is, projects and programmes) that will be embarked upon to achieve the goals and objectives;
• Costing the identified key initiatives in a clear and transparent manner;
• Phasing implementation of the identified initiatives over the medium-term;
• Defining the expected outcomes of the identified initiatives in clear measurable terms; and
• Linking expected outcomes to their objectives and goals.
For MTEF:
• Aligns system inputs including facilities, personnel, equipment and supply that are required for service delivery and production by service providers and the larger issue of enhanced service delivery which reflects as system outputs and outcomes;
• Aligns capital and recurrent expenditure over the medium term to ensure programme sustainability;
• Assures predictability of funding;
• Strategically realigns public expenditure and management to focus on those areas that make the greatest contribution to government’s strategic objectives. This would essentially involve a focus on priority interventions responsive to the predominant needs of the state, that is, infrastructure, pro-poor and developmental issues;
• Guarantees efficient and effective use of resources in the implementation of strategic priorities. The thrust is to introduce value for money with its cardinal parameters of economy, efficiency and effectiveness into the public sector;
• Identifies challenges and bottlenecks in the public sector and constructively addresses them;
• Facilitates monitoring and evaluation that feeds into the policy, planning and budgeting cycle;
• Fiscal (aggregate fiscal) discipline which communicates medium term fiscal policy and targets and the policy of fiscal sustainability and disciplines policy making;
• Allocation (allocative efficiency) which disciplines decision making and highlights need for action by showing future costs of current policies, future costs of new policies and investments and communicates commitment to specific priorities through forward estimates and indicative medium term allocations; opens up budget space to reallocate funds for new priorities;
• Resource Use (operational efficiency) which improves predictability of funding and policy for strategic planning and management and operational performance at sector level.
• The foregoing will help the state government generally to maintain fiscal discipline, and
• Promote strategic priorities and deliver value for money.
APPROVAL STAGE
The legislative approval stage should be time bound – to conclude and be ready before a date in the first week of December every year so that governor’s assent comes before the end of the year. State Houses of Assembly should be independent enough to do a thorough review of the budget before approval.
While we do not encourage the kind of soiled relationship at the State level, the current rubber stamp approach of State House of Assemble is unhealthy and cannot be the basis of budgeting for development. This still goes back to the leadership recruitment process where the governor as the unmovable mover decides who is given a ticket to run in the dominant party –from the councilor to the senator and further determines the composition of the principal officers of the State House of Assemble. This undermines democracy.
The approval process should clearly define the role of stakeholders beyond the MDAs; will there be public hearings and further inputs at this stage? The legislature needs to be supported by a strong Legislative Budget Office to facilitate informed and results based budgeting that is geared at solving societal challenges.
Proper clauses in the Appropriation Act to ensure that all monies are brought to account including grants and donations by donors and charities to ensure transparency and accountability and to avoid double counting.
MONITORING, EVALUATION AND REPORTING
Various agencies including the MOF have monitoring roles. Ministry of Finance through the BOS monitors budget implementation and reports to the State House of Assemble committees on Finance and the state level FRC. The reporting is quarterly and should be ready one month after the end of the quarter. It is to be widely disseminated in the print and electronic media and available on the website of the BOF and Ministry of Finance.
The oversight work of State House of Assemble Committees is relevant here to ensure that monies are spent according to appropriation and there is no waste or corruption in the system. Public hearings and investigations targeted at specific MDAs and projects may also become necessary in the course of oversight.
CSOs should also engage in their independent monitoring and feed the results through the BOS, State House of Assemble Committees or any other relevant agency.
Evaluation is critical and this is beyond monitoring of contracts and expenditure. It should focus on results. Queries for instance; how has a Primary Health Care facility reduced maternal, new born and child mortality and morbidity rates in a given locale? How has the water plant and its facilities brought down the incidence of water borne diseases in the community? How has a new road reduced deaths due from accidents and improved the ease of doing business over the connected communities and towns? This is about effectiveness and results.
OTHER ISSUES
Section 48 (1) of the FRA replicated in state FRLs: The Government shall ensure that its fiscal and financial affairs are conducted in a transparent manner and accordingly shall ensure full and timely disclosure and wide publication of all transactions and decisions involving public revenue and expenditures and their implications for its finances. (Underlining supplied for emphasis).
• Access to fiscal information and open governance
• Full year budgeting reports published and disseminated, etc
• Participation and the full mobilization of society for development is also an important indicator.
• Taxation as a tonic for transformational governance.
CONCLUSION AND RECOMMENDATIONS
PFM is critical tool for development and transformational governance leading to change of attitudes, change of lifestyles and consumption patterns, respect and obedience to laws and policies, necessary for development proceed.
Improving and reforming the PFM system, not just the technical points will lay a solid foundation for societal transformation for development
The budget is crucial in allocating resources and delivering services to citizens. In the last few years, there has been some improvement in the budgetary process especially in terms of citizens engagement, but a lot still needs to be done. There is the need to deepen citizens engagement with the budgetary process. Conscious efforts need to be made to create more awareness and advocacy for deeper citizens engagement in the budget process. There needs to be a systematic way to get citizens input into the budget through consultation, dialogue, town hall meetings, citizens charters and other tools. Secondly, citizens groups need to prepare evidence-based presentations to the National Assembly at State Public hearings to influence the process and content of the budget process. Thirdly, more citizens groups need to systematically track and monitor projects in the budget and submit report to the State Assembly for oversight. Fourthly, there is the need for the Ministry of Budget and Planning and the Budget Office to institutionalize the participation of citizens groups in the MTSS process. Fifthly, citizens groups need to engage more with the audit process and engage in evidence-based advocacy based on the report of the Office of the Auditor General of the Federation.
Finally, the State Government need to be responsive to the advocacy issues that have been raised by citizens groups over the years. The first issue is that of budget realism. The government need to amend the macroeconomic framework of the budget to be more realistic. The second issue is the need for more budgetary allocation to sectors that will have impact on the lives of citizens such as agriculture, health, education and infrastructure. The third issue is the need to eliminate items that can be considered as frivolous, inappropriate and unclear. Budget lines items should be clearly defined to remove any doubt and ambiguity. In addition, there should be geographical and gender balance for the budget. Furthermore, efforts should be made to reduce recurrent expenditure and service wide votes rather than increasing them.
A Paper Presented by
IDRIS MILIKI ABDUL
Executive Director,
Conscience for Human Rights and Conflict Resolution (CHRCR),
Lokoja, Kogi State.
Paper Presented at a
KOGI STATE TOWN HALL MEETING ON 2023 BUDGET PREPARATION
Organized by
MINISTRY OF FINANCE, BUDGET AND ECONOMIC PLANNING
Lokoja, Kogi State – Nigeria.
19th October, 2022
