Economic Confidential, April, 2009

INTERVIEW

2009 Budget Will be Closely Monitored – DG Budget

The Director General of the Budget Office of the Federation, Dr. Bright Okogu had been profiled by the Economic Confidential on his appointment in January 2008. He is popularly known amongst members of Civil Society organizations as a scholar with a passion for transparency in the extractive industry of which he has delivered and published well researched papers. A graduate of Economic (B.Sc. and M.Sc.) from the London School of Economics and a Ph.D. from the University of Oxford, Okogu has a rich background spanning a career at the Organization of Petroleum Exporting Countries (OPEC), where he served as a Market Analyst between 1989 and 1997, and as a Senior Operations Officer at the OPEC Fund of International Development - both in Vienna , Austria . He also had a stint as a Lecturer in Economics at the University of Jos. Until his appointment to the Budget Office, Dr. Okogu was a Senior Economist in the Middle East and Central Asia Department of the International Monetary Fund (IMF), which he joined in 1999. He was at various times in charge of Saudi Arabia, Kuwait and Qatar. In this exclusive interview with the Economic Confidential after a workshop on Budget Implementation, Monitoring and Evaluation in Abuja this former Special Adviser to Minister of Finance, gives assurances on 2009 Budget.

EXCERPTS: -

What in your opinion were the reasons for the poor implementation of the 2008 budget?

The 2008 Budget was implemented to a level below the originally had hoped for.  And we tried to look at the various reasons. That’s why we commissioned a study on the implementation of the 2008 budget on what difficulties they had, one of them we believe is the factor that many of the Ministries were new and that was their first involvement in budget implementation. So these were issues there. The second I must say is that, people did not quite understand the due process mechanism. How it works, what they need to do and how to go about ensuring that they got due process certification for the work that we were doing. The third factor is that the budget was passed April 14 2008 and then there was a move to do an amendment version because of some of the issues that arose in them. So we were told by the Ministries Department, and Agencies (MDA’s) that some of them were un-sure whether to go forward with full implementation, knowing that some amendment was coming. So these were all elements that contributed to the 2008 budget failure. One thing I can tell you did not contribute to it, and I must tell you is there was no problem whatsoever with the release of funds.  100% release was done in 2008 on all capital projects.

What are the major features of the 2009 budget that are distinctive from the previous year with the intention to avoid its pitfalls?

I think that is a very good question. In my opinion the two day meeting here, this Workshop on Budget Implementation, monitoring and evaluation, precisely is the initiative to forestall such snag that we decided to introduce, because we wanted to make sure we learned from the experience of last years and to see how best to avoid the errors that arose in 2008. Now, the main measures, or the elements that I believe will help to ensure a higher level of implementation includes this enlightenment and teaching people and discussing with them so they can understand the issues. In this workshop, we brought the due process office, the Accountant-General Office, the Chief Economic Adviser to the President were here to give the lead papers with the view to really emphasize the criticality of getting the 7 point Agenda being the focus of the 2009 budget. Furthermore, we did include a design of a template for monitoring the implementation of the budget, capital vote in particular. For instance, we had it redesigned from what we had there before. We had it repackaged in collaboration with the National Planning Commission, MDG office as well as the office of the Chief Economic Adviser. So we have a very strong, very good template that is now going to be use to monitor the implementation of the 2009 budget. And finally, apart from all of these; you should know perhaps already that the President already gave approval limits to heads of the different MDA’s; so that things can actually move much faster. This basically are some of the things we did to ensure the success of the current budget. We will be publishing our reports regularly. Every quarter we will be monitoring to see how people are doing and reporting on this to the Federal Executive Council as well as to the National Assembly. Finally the Fiscal Responsibility Commission which has now started operation these past few months will be receiving our reports as well. So, all hands are on deck now to really get things moving.

So what can you say as the main priority of the 2009 Budget?

From the spending priorities, government is committed to developing the economy by increasing investments in building roads, railways, electrical power facilities, gas pipelines, healthcare delivery, educational institutions, dams and irrigation systems, among others.

Why did the Federal Government borrow money to finance the 2009 budget from the Excess Crude account?

The Federal Government did not borrow money from the Excess Crude account to finance the budget as such. As you know very well, the Excess Crude account money belongs to everybody, which means that all the tiers of government: the federal government, states and local government councils are all stakeholders in the Excess Crude account. When they meet together under the National Economic Council, they take decisions on common grounds. One of the decisions taken recently was they needed to access the Excess Crude account and use it for particular financing of the budget. You know the present reality of the economy at the moment. In all ramifications, it is a well documented procedure of assessment.

What are the measures equally put in place to mitigate against the financial melt down?

Well, the financial meltdown as you put it is a global phenomenon. Something that started in the United States of America’s Financial Sector, Banking System over there, it is spreading gradually to many countries of the world including Nigeria. In this year's budget, we have already adopted some fiscal approaches to stimulate the economy and dampen the effect of the global crisis as the Federal Government had resolved to fully implement the recently introduced electronic payment system. And we will improve tax reform system while reviewing the institutional framework of taxation. As you may be aware government, had made up its mind to phase out tax incentives and waivers to improve revenue accruing from tax while it will reduce overhead and cut expenditure while focusing more on critical sector, including security, Niger-Delta, health, education, and power amongst others.

Different speed of course in the case of Nigeria the spread is through 3 channels must say. First channel is the demand for crude oil and other primary commodities are gone down because economic performances are down in those countries. Therefore, it has affected the price of oil. Which is the first channel? The oil price currently is just hovering at about $50 dollars per barrel as against the average last year of close to a hundred. That gives a clear insight of one of the channel we are being affected. The second channel is the fact that Nigerians who live in the various Western countries who use to remit money to their families like school fees, up keep of aged parents, financing of projects back home etc that has practically slowed down. Because those people leaving in those countries don’t have exactly the same amount of opportunities that was applicable. The third channel I will say is the fact that foreign direct investment, those ones that come into the country to invest in and own economy, has equally slowed down in terms of the amount of money slowing down in their angle. If you look at these 3 factors they are the main areas that Nigeria is affected. Now, what has the government done? The Federal Government is cognizant of these challenges and has put modalities in place to serve as palliative. One of the things you   will notice is that in the 2009 budget, we put in place certain cost saving measures to ensure that we conserve the amount of limited resources available to us. No purchase of new vehicles, no construction or starting new office buildings and so on and so forth. All of these things are meant to ensure that the economy can be robust to be able to withstand the pressure that has just grip virtually the whole world.

It is necessary to add that as part of the measures, we made high projections in the non-oil revenue for the current fiscal year to make up for the losses that had been recorded in accruals to the treasury from the oil transactions due to the crash in the prices of oil at the international market. That is why  the government tasks the Federal Inland Revenue Service (FIRS) and the Nigeria Customs Service (NCS) to be more efficient and up their revenue collection drives.

How will the Deficit in the Budget be financed?

Like the Minister of Finance said at the Budget Briefing the deficit in the budget would be financed by a combination of sources, including outstanding signature bonuses, proceeds from privatisation and withdrawal of some accumulated reserves that the government had with the African Development Bank's Nigeria Trust Fund. The balance would be financed by borrowing from the domestic and international financial markets. And to ensure improved efficiency, effectiveness and productivity of government's expenditure, the Budget Office of the Federation, working with the National Planning Commission, Office of the Chief Economic Adviser and the MDG office, have designed a frame-work to monitor and evaluate the budget performance. The government is also working towards enhancing domestic resource mobilisation through the expansion of the non-oil tax base through appropriate tax policy and administration; making revenue generating MDAs to accurately disclose earnings, payments and remittances to the Federation Account.

What influenced the features in the 2009 budget?

In preparing the 2009 budget we've been guided by three main principles. First, in response to the global economic slowdown, priority has been given to critical infrastructure that would aid the development of the private sector, thereby increasing income-generating opportunities so as to reduce unemployment and poverty. Second, we have sought measures that have the potential to improve the competitiveness of our economy. Third, with a view to accelerating the return to healthy GDP growth rates, despite the global economic environment, we have sought measures that promote a more diversified economic base, tap new opportunities, and provide new economic drivers to benefit Nigeria in the long run."

What are the mechanisms put in place for budget monitoring if on the affirmative are Nigerians to expect 100% (percent) implementation of the 2009 budget.

I did elaborate on some of the steps and mechanisms put in place for ensuring a budget implementation free of the snags encountered in the 2009 budget. Beyond what I earlier mentioned, we also have the fact that the National Assembly has an interest and oversight aspect of this work of budget implementation. We also have Civil Societies that have shown an interest also in the issue of budget monitoring and so on. If you put a combination of all of these factors together, I believe you will begin to see that government has taken very, very serious steps to ensure that there is an improvement, vastly so in the budget implementation. I can assure you that there would be new focus on budget monitoring and evaluation by the government to ensure the deliverables achieved by the MDAs. Accordingly, a monitoring and evaluation system has been put in place that uses special electronic templates to systematically track and report on the actual outputs and outcomes achieved by MDAs. This system will ensure that the focus will shift from how much inputs in terms of financial and other resources are collected to each MDA to what was actually delivered by the various MDAs.  This shift in focus is part of a wider reform of introducing a Programme Budgeting System to replace the existing traditional system.  This new performance-based system will provide more information to help government determine which programmes and activities are achieving tangible and positive results for Nigerians, and how to better support them. Tracking deliverables had become a major factor in the 2009 budget, particularly given the provisions of the Fiscal Responsibility Act 2007 which requires the office to submit the report of budget monitoring and evaluation to the National Assembly on a quarterly basis.

How soon will the quarterly report be ready?

The report for the first quarter of 2009 would be ready next month and we will promptly brief the legislature on the performances of various government organizations with regard to their implementation of the budget.