Unveiling the Fiscal Responsibility Index (1)
Elected public officials and governments come and go, but they are evaluated during and after their tenures by a number of variables which are encapsulated in the good governance theme. A critical part of good governance is good economic governance which manifests in improvements in living standards of the people. Thus, economic growth and development are part of the dividends of good economic governance. Cascading down, a vital component of good economic governance is good fiscal governance or the elevation of fiscal responsibility to statecraft.
As the Muhammadu Buhari government is finally taking shape with the inauguration of ministers probably this week, it is imperative that the President and all ministers should dedicate a good part of their time to economic and fiscal governance. The reason for this proposition is not far-fetched. The economy has been buffeted by strong head winds and all statistics and indicators seem to be headed south. We have never had it so bad since the return to civil rule in 1999. Thus, the focus of fiscal responsibility is directed at revamping the economy and raising the confidence of Nigerians in their government, at all levels.
The word “fiscal” is generally defined as relating to financial matters, i.e. money and taxes and revenues belonging to the public treasury. It relates to accounts or the management of revenue and public finances of government. Fiscal policy therefore refers to government’s actions with respect to aggregate levels of revenue and expenditure and the resulting surpluses or deficits. It is the primary means by which government influences the economy. The government sets and implements fiscal policies through a number of means including the budget. “Responsibility” as a noun is about something which it is your duty to do or look after and for which you take the credit if it goes right and the blame if things go wrong. It is the state of being answerable for an obligation and includes judgement, skill, capacity and ability. Thus a combination of the words “fiscal” and “responsibility” to produce fiscal responsibility connotes the responsibility of a government in terms of fiscal issues and policy and how the government is able to pilot fiscal policy based on national and international good and fit practices to the advantage or detriment of its citizens.
Fiscal responsibility which should be the mantra of the administration covers the entire life of fiscal policies and processes from programming, planning and budgeting. It includes expenditure conceptualisation within the medium term expenditure framework, the fiscal strategy paper, the revenue and expenditure framework and ensuring that these documentations are done with the best available data. And now, the federal government is trying to kick start zero based budgeting, how well it is programmed and implemented will contribute to fiscal responsibility. It also includes the process of appropriation approval, the aggregate expenditure ceiling, the information to be sent by the executive to the legislature and the process of public participation at this stage. It reaches out to bring big corporations and institutions such as the Nigerian National Petroleum Corporation and the Central Bank of Nigeria and seeks to bring their profits and losses within budgetary purview and legislative control. It covers budget execution and reporting, issues of increase or decrease in taxation and personnel expenses. It further includes borrowing, deficits, debts and indebtedness and the duties of oversight over fiscal policy implementation.
For new ministers running the MDAs, the administration has to ensure policy-based budgeting where medium term sector strategies and medium term expenditure framework are derived from high level national policies and priorities including Vision 20:2020, the newly adopted Sustainable Development Goals and clearly articulated policy frameworks of the administration. In developing these sectoral plans, the inputs of stakeholders must be sought and obtained so as to ensure that all persons and organisations whose buy-in is essential to the success of the sectoral strategy are on board. No one knows it all; so ask the organised labour, the private sector, the civil society and all shades of opinion to contribute to the development and implementation of the budget and fiscal policy. Also, the days of budgeting without key performance indicators should be over so that Nigerians will be able to judge whether budgetary goals and objectives have been realised. It is no longer sufficient to spend money but we need to tie expenditure to specific identifiable deliverables.
The zero based budget approach announced by the administration will make sense if it is to interrogate existing projects to see how they fit into the new times and in a bid to improve the efficiency of spending. Thereafter, multi-year plans and forward estimates of present and planned expenditure need to be the norm as spelt out in the Fiscal Responsibility Act through the instrument of the MTEF. This is also the practice in virtually all democratic societies and civilized climes. Zero based budgeting for 2016 may facilitate our budget becoming more realistic. Putting 1000 projects in the budget when our resources can only pay for 200 should become a thing of the past. Let the budget contain only the projects we can realistically fund with available revenue.
Funding of capital goods and services cannot come from the budget alone. The idea of public private partnerships should be explored to the fullest to leverage private sector funds. But there is a caveat. The details of such arrangement should be worked out in such a away and manner that government takes only the risks that cannot be taken by the private sector. The contracts should provide a win-win scenario for the public and private sector rather than a situation where the investor takes all the gains while leaving all the risks and downsides to the public sector. Despite all the controversies and litigations, the Murtala Muhammed 2 airport terminal in Ikeja Lagos built by Bi-Courtney is a clear example of what can be achieved by leveraging private sector funds. But we need to learn lessons from its downsides so as to replicate more of such projects to increase our stock of infrastructure which will in the short, medium to the long run improve the ease of doing business in Nigeria. The lessons that have so far emerged from the Bi-Courtney arrangement include the need for more transparency at the negotiation stage, involve more stakeholders including professionals in the sector and do not allow undue discretionary exercise of powers to any individual or organisation in what evidently is a matter that will weigh heavily on the public treasury and interest in the future. Decisions in PPPs must be based on ascertainable empirical and comparative evidence. Thus, as projects are being reviewed under zero based budgeting, the government can begin the process of identification of projects that should be implemented under PPPs and thereafter commission the requisite studies.
Budget comprehensiveness and transparency is also another key component of fiscal effectiveness. We need standard economic classification of revenue and expenditure for easy understanding of the budget. All funds from multilateral and donor agencies should be reflected in the budget. Indeed, we need to capture all revenues and costs so as to have a comprehensive picture of our income and expenditure. The age long duplications and vague budget heads that make no sense except only to those who inserted them in the budget should be a thing of the past. In this era of change, utmost transparency is imperative. Every MDA needs a functional and regularly updated website where policy documents and financial data are uploaded. Freedom of Information desks in MDAs should no longer be seen as a perfunctory luxury but a key requirement for improvement of service delivery.
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