Tuesday, 22 April 2014

Current Fiscal Management Reforms….

At the start of Jonathan’s administration, there was a need to reform the fiscal management of the country in light of the unsustainable trajectory of most fiscal variables. As of 2010, the fiscal deficit, which is the excess of a country’s annual expenditure over its annual revenue, stood at 3.5% of Nigeria’s gross domestic product (GDP). In fact, this level of deficit spending already contravened the Fiscal Responsibility Act of 2007, which stipulates a three percent threshold for the fiscal deficit for every given year.
Furthermore, the budget was too lopsided in favour of recurrent expenditure. Recurrent expenditure were unacceptably high at 73.4% of the total expenditure, while capital expenditure, which is needed for fast-paced infrastructural development, stood at only 26.6% of total expenditure. The country’s domestic debt profile was also worsening significantly. At the end of the first quarter of 2010, Nigeria’s domestic debt had risen to about N3.6 trillion (or 16.4% of the GDP) from N1.7 trillion in December 2006.
Although tax collection had improved significantly from a paltry total of N455 billion in 2000 to N1.9 trillion by the end of 2009, there was a need to amplify this success, particularly as part of government’s efforts at diversifying the revenue base of the nation.
Specific Outcomes and Results are as follows:
The government had achieved quite a lot in the aftermath of these reforms.
An Integrated Payroll and Payments Information System (IPPIS): Once fully implemented, this system would enhance efficient personnel cost planning and budgeting given that personnel cost would be based on actual verified numbers and not estimates. As of June 2013, 260 Ministries, Departments, and Agencies (MDAs) were on IPPIS. Work is ongoing to bring an additional 321 MDAs into the system. The system has already identified over 46,000 ghost workers, which is estimated to have saved the government about N140 billion to date.
The Government Integrated Financial Management and Information System (GIFMIS): As of June 2013, nearly 60% of the budget was executed through the GIFMIS. This number increased to about 80% by the end of the year, which has significantly improved governance and reduced corruption.
Treasury Single Account (TSA): This system has already enrolled over 10% of the MDAs. This modest success in enrolment has culminated in a government average balance of N86 billion in 2013 as against an overdraft of N102 billion in 2011.
Budget Realignment: The government had realigned the budget strongly in favour of capital projects by allocating 31.3% of the 2013 budget to capital expenditure. Recall that this was only 26% of the budget as of 2010.
International Recognitions: As a result of these gains, ratings by international agencies like Fitch, Standard & Poor’s, and Moody’s have improved to BB- (or equivalent). This implied that Nigerian businesses could borrow at cheaper rates on the international credit markets. Indeed, it has already facilitated the raising of international bonds by some of the country’s commercial banks, including Access Bank ($350 million Euro Bond), GT Bank ($350 million Euro Bond), and Fidelity Bank ($300 million Euro Bond).
Revenue Mobilisation: The continuing reforms on revenue mobilisation yielded significant fruits. The Federal Inland Revenue Service (FIRS) recorded actual tax revenue of about N4.8 trillion at the end of 2013. This represents a 69% increase from the N2.8 trillion tax revenue for 2010.

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