46925 m October 2008 Nigeria's Experience Publishing Budget Allocations: A Practical Tool to Promote Demand for Better Governance The Initiative On the 17th of each month, the day after the FAAC Since January 2004, the Nigerian Federal sat, summaries of how much each administrative Ministry of Finance has taken an initiative to unit received were published in major national improve transparency at all levels of newspapers and the Finance Ministry website. government, particularly the sub-national The amount each state received varies according to level. Every month, it publishes the federal, the number of local governments within the state state, and local government shares of revenue and the amount of oil produced (producing states from the country's federal account.i From its share in the 13 percent of revenues earmarked for inception, then Finance Minister Ngozi Okonjo- them by the derivation formula). Actual Iweala led this initiative as one of many efforts allocations for July 2008 varied greatly from N2.4 to improve public expenditure management, Billion for Ebonyi to N6.6 Billion for Lagos, among itself part of a broader set of institutional and non-oil producing States; and from N 3.1 Billion governance reforms.ii for Edo to N19.7 Billion for Rivers, among oil producing States.iii At the prompting of the The allocations published were those decided President himself, the Ministry subsequently made at the monthly Federal Account Allocation these figures available for the entire period of the Committee (FAAC) meetings. Under the Obasanjo administration, as well as providing procedure established by the Nigerian information on the content and interpretation of Constitution, FAAC used a Revenue Allocation budgets and budget execution reports. Formula to share federally-collected revenues between the federal level, the 36 States (plus Nigeria's effort to publish budgets is a leading the Federal Capital Territory), and the 774 local example of how transparent information is governments of the nation. According to the essential to allow citizens to participate current formula 55 percent of total revenues is effectively in governance, hold authorities to allocated to the Federal government, 25 percent account, and thereby enhance development to State governments, and 21 percent to local effectiveness.iv The intuition behind this government authorities. Sub-national govern- burgeoning awareness is clear. Like for other ments depend very heavily on such federal good things, the best governance outcomes transfers. In fact, most states' internal revenues result when there is a free flow of information are less than 10 percent of their total revenues. between those supplying government services Dependency of local governments on federal and those demanding those services. transfers is even higher. Broader Program interacted with their government. With monthly The revenue publishing initiative was only part of revenue allocations then available on the internet a broad set of efforts the executive and the and in the press, the initiative increased legislature launched to improve transparency. transparency, particularly of sub-national finances, Following years of economic stagnation, the and opened up dialogue on public revenues and Obansajo administration spear-headed a comp- expenditures at all tiers of government.viii rehensive reform program in its second term, including institutional and governance reforms. The popular response to the publication of the Through this set of policy measures, it sought to budget was extremely positive. It meant that tackle corruption, which was identified as one of the public could not be fobbed off with tales the main causes of poor economic performance in about the failure of the federal government to Nigeria. It included interventions in four areas, transfer funds to state and local levels. Further, namely: public procurement, public expenditure, it began a process whereby ordinary people transparency in the oil and gas sector and the could trace the flow of public resources and prosecution of corrupt practices. The revenue know who was accountable for the delivery of publishing initiative was a central element of the services.ix Accordingly, government officials public expenditure management component of the who were not able to account for where institutional and governance reform.v resources had gone or why services had not been delivered felt pressure from their To complement these actions, the executive constituency and suffered politically. tabled the Fiscal Responsibility Bill and the legislature put forward the Freedom of "It was so popular the papers sold out. People Information Bill. The Fiscal Responsibility Bill, got so excited saying, `So my local government eventually signed into law by President gets N40 million a month, how come there is no Yar'Adua in November 2007, requires the chalk in the schools, teachers haven't got paid, Federal Government to plan its revenue-raising how come there are no desks and chairs, and measures and spending priorities three years in there are holes in my road? What did you advance with the objective of smoothing spend it on?' A conversation took off in the expenditures, and also places strict controls on country", Ngozi notes.x government borrowing.vi These changes were reflected in the The Freedom of Information Bill was intended to improvement in Nigeria's ranking in the buttress these efforts. Like similar legislation Transparency International index of corruption expanding public access to information in (which rose 6 places in the ranking and 0.3 countries from Mexico to India, the bill would points in the Corruption Perception Index give Nigerians the right to request and receive score). Accompanying changes in the information from public bodies about the institutional and legislative frameworks have conduct of public business. It would also complemented the initiative in its purpose of provide protection for whistleblowers in the fighting corruption. The Economic and public service.vii Passed by the Senate in 2006, Financial Crimes Commission and the this Bill was submitted to the House of Independent Corrupt Practices and Other Representatives in November 2007 and is still Related Offences Commission established as pending approval. part of the institutional and governance reform program, have used the newly available Impacts information to pursue perpetrators of corrupt practices in all three tiers of governmentxi. As part of the broader, multi-faced program of reform, the publishing of revenue allocations changed the way that Nigerians viewed and 2 Finally, as a result of having this information While the federal budget and allocations to the available, civil society could take a more active and state and local governments are still freely informed role in public debate about budgets and available online, a challenge remains to implementation. The media's ability to analyze transform the mass of detail into a more user- and interpret budgets and government friendly format.xiv While monthly publications performance was greatly enhanced, providing inform citizens about how much money their impetus for a broader dissemination of state is allocated, they do not yet have access to information on fiscal issues. Since the information on how this is spent, for example, implementation of the initiative, media reporting by sector or program.xv As Revenue Watch of budget spending at the state and local levels has notes "revenue transparency must be increased, allowing ordinary citizens to monitor accompanied by parallel efforts to make budget formulation and expenditure at the federal, state, and local government budgets different levels of government.xii more transparent if civil society groups are to have any chance of ensuring that public Challenges officials use state revenues to advance development objectives."xvi The Nigerian Government's efforts to publish budget allocations faced a number of costs and Lessons Learned constraints. Politically, while it engendered enormous public recognition and support, the 1. The publication of government budgets prospect of greater accountability also should be understood as part of a broad package threatened the rents of corrupt political elites. of reforms upon which its relevance and From the beginning, the champions of the effectiveness depends. Although small and initiative faced considerable hostility. relatively low-cost, the initiative was a highly visible symbol of a shift in governing values, and For example, Ngozi Okonjo-Iweala noted that, was effective not only in transmitting information as champion of this work, "Putting information to citizens, but also garnering popular support for in the hands of the people didn't make me the wider reform process. The initiative arose out popular at all with the state governors. Some of a systematic assessment of sources and points of of them felt I was deliberately after them. Even corruption, and the publication of budgetary today, some of them are still sore."xiii allocations was selected, along side other means, as a key tool in promoting transparency. The financial cost of publication in the newspapers ran to about US$100,000 per 2. Political support from the highest levels month, or N2.5 million to publish in each of is essential to success. Strong support for the four newspapers. At the outset financial initiative in Nigeria came from the Presidency support for these Ministry of Finance itself. Such political will (including at times the publications was met by an international NGO, personal courage of its champions) is likely to be a fact which needed to be handled discretely an essential condition for change. At the same because of political sensitivities. Later, this time, if championing politicians are given full money was taken `off the top' from the credit for such initiatives, they will benefit from Federation Account (i.e., before distribution public recognition and popularity, thereby between federal, state and local government). aligning their political interests with the Unfortunately, the resources were not secured momentum of reform. as a line item, state representatives later blocked their use, and budget allocations are 3. The initiative both required, and in turn stimulated, the government to develop the now only available on Ministry of Finance capacity to analyze and present data about public website, not in newspapers. finances in a clear, standard and systematic fashion. In Nigeria, the existing formula and 3 procedure for revenue allocation required by the Constitution defined the initial scope of the The Social Development Department would like to express information to be published. However, the lack of its sincere thanks to Mrs. Ngozi Okonjo-Iweala for the information she offered about this initiative and for providing standardization and computerization of public an interview to the authors. This note was prepared by Vera financial accounts soon became apparent, and Songwe, Paul Francis, Paula Rossiasco, Fionnuala O'Neill and Rob Chase. It represents a strong collaboration between capacity building was undertaken in response. MDO, AFTCS and SDV. This note has not undergone the review accorded to official 4. Information provided to the public World Bank publications. The findings, interpretations, and conclusions expressed herein are those of the author(s) and should be brief, concise and published in an do not necessarily reflect the views of the International Bank easily accessible format in order to enhance its for Reconstruction and Development / The World Bank and impact. Information is only useful to the extent its affiliated organizations, or those of the Executive Directors of The World Bank or the governments they that it is comprehensible or interpretable. The represent. Additional copies can also be requested via e- Nigerian experience illustrates how brief, regular mail: socialdev@worldbank.org publications highlighting key information about budgets and revenue allocations can enhance the i http://www.fmf.gov.ng/FMF_Revenue_Alloc.aspx potential of the media and the public to promote iiNigeria's package of reforms in the areas of macroeconomic stability, structural reform, public expenditure management and accountability. governance were very successful in boosting the economy and improving public finances. Since 2001, the overall balance of the 5. Publication has a financial cost for which Government finances has changed from a deficit of -4.9% of GDP to a projected surplus of 16.4 % of GDP in 2008. A similar trend is continuity of resources needs to be guaranteed. observed in other indicators such as the Gross International The Nigerian case illustrates that ensuring Reserves, which grew from US$7.7 Billion in 2002 to an estimated US$28.3 Billion in 2005 and to a projected US$98.5 Billion in 2008. resources to maintain the initiative over the long The external debt outstanding as a percentage of GDP has also run may be a challenge. While external sources of improved dramatically, decreasing from 62.3% in 2001, to 20.7% in funding may provide a stop-gap or supplement, 2005, and 3.5% (projected) in 2008, after debt relief under the Paris Club in 2005-2006. http://www-wds.worldbank.org/external/ considerations of ownership, sovereignty and default/WDSContentServer/WDSP/IB/2007/06/26/000020439_2007 sustainability dictate that internal resources must 0626104202/Rendered/PDF/364960NG.pdf iii http://www.fmf.gov.ng/downloads/FAAC/sa_July_2008.pdf be ensured for public information purposes. iv As an example of increasing recognition of the importance of transparency, participation and social accountability for better 6. The impact of information on development outcomes, the World Bank Governance and Anti- constructive public debate can be enhanced corruption Strategy and Action Plan calls for efforts to scale up and mainstream support for the demand-side of governance. by engaging civil society and the media and v Interview with The Independent (UK), May 16, 2006. building their capacity to analyze and vi http://www.budgetmonitoringng.org/Spotlights/2007/12/13/ News12271/ interpret the information provided. Public and vii http://allafrica.com/stories/200806040567.html media access to information can also be further viiiInterview with The Independent (UK), May 16, 2006. ix supported by complementing legislation such http://www.brookings.edu/papers/2007/0323globaleconomics _okonjo-iweala.aspx as a Freedom of Information Act. x ibid. xi By September 2006, 31 of the 36 Nigerian Governors were being Overall, transparent information about investigated under charges of corruption by the EFCC, including some of those who have been traditionally regarded as government revenues and allocations is "untouchable". http://news.bbc.co.uk/2/hi/africa/5387814.stm essential to constructive public debate about xii For evidence on positive impact of budget transparency at the sub- national priorities. Publishing budget national level see: http://www.budgetmonitoringng.org/Stories/2007/08/23/News12149 information sends a strong political signal http://www.budgetmonitoringng.org/Stories/2007/03/21/News11746 that the Executive is open to, or even invites, http://www.budgetmonitoringng.org/Stories/2007/02/20/News11594 xiii public scrutiny of its actions. While it takes Interview with The Independent (UK), May 16, 2006. xiv http://www.accessmylibrary.com/coms2/summary_0286- significant political will to launch and 18233780_ITM maintain such an effort, as part of a broader xv In Rivers State, for example, according to Human Rights Watch, reform program, such steps can have real although the State government claims to publish its budget each year, in practice both state and local government budgets are treated impacts on how citizens hold authorities to as "closely guarded secrets". account and, ultimately, how development http://www.hrw.org/reports/2007/nigeria0107/ xvi http://archive.revenuewatch.org/reports/RWInigeriaApril2007.pdf resources serve public interests. 4