Financial Discipline… making every naira count

Economists have long found Nigeria to be something of a conundrum. The macro picture has always appeared compelling – large population, oil reserves, mineral reserves, endless tracts of arable land, land and sea borders for regional domination. Indeed the absurdity of our underperformance is only surpassed by our ability to accurately quantify our losses and missed opportunities.

In the short period that I have been privileged to serve as Minister of Finance, I have observed that even the most basic systems and controls over the management of our resources are in dire need of strengthening. While we are regaled with and shocked by details of amounts stolen, diverted or wasted, we must face the cold reality that such acts are facilitated by weaknesses in our systems. Even if we successfully prosecute and jail every looter, ghost worker and other economic saboteur, there is every risk that those caught will only be replaced by persons who are just as bad, or worse – unless we radically strengthen our systems and institutions.

Our President’s brave and committed fight against corruption and waste is as much an economic crusade as it is a moral one. The objective is not just to stem the corruption and loss but to execute an economic plan to channel those monies into much needed areas that will support and reposition the economy.  In short, the fight against corruption is not about “retribution” and meting out punishment, it is about releasing funds for our economy. I am humbled to be part of the ongoing work on recovery and can report that the urgency in the work, especially our interface with nations where our money has been stashed, is propelled by our need for funds to invest into our economy.

Our economic plans are not about austerity and frugality; if that were the case then we would not be attempting an expansionary budget. We could have pursued fiscal consolidation and maintained 2015 budget size, and then introduced severe public spending cuts to balance the books by laying off workers and cutting projects. Had we done so, we would by now be the darling of the IMF and other multi-laterals.

Conversely, we are undertaking an ambitious counter cyclical strategy to stimulate our sluggish economy and expanding government spending with a focus on infrastructure, the true catalyst for economic growth. This will have contractors returning to site and re-engaging workers, it will see new projects commencing, arrears released and economic activity reinvigorated across the nation.  We plan to take advantage of low global prices for commodities and contract prices. Existing contracts are being renegotiated downwards, with significant savings recorded and new projects priced to reflect current commercial realities. Our spending stimulus is private sector driven, supported by a robust procurement system that will see permanent local capacity built in a number of sectors including oil and gas, housing construction and agriculture. However, and this is the key differentiator, we plan to spend in a disciplined manner that will extract the maximum value for every naira spent.

The process of building the internal control framework to support this need for disciplined spending has begun in earnest. Our Efficiency Unit has reviewed four years of detailed expenditure data to identify trends and is already negotiating volume discounts that appropriately reflect the buying power of government. Personnel remains our largest cost. In addition to the BVN driven cleaning of our payrolls that has so far removed 23,000 fraudulent entries, we have initiated significantly stronger controls over our payroll.  These efforts will exert a constant downward pressure on personnel costs until such a time as we have assurance that every payment is accurate and valid. A similar process is now commencing in Pensions. The N160 Billion spent monthly on personnel and pensions related costs demands this as an absolute minimum.

The revenue focus is non oil. We are revisiting historical decisions that are no longer in the best interests of the national economy. The establishment of various Boards and Parastatals to undertake the operational and revenue generating business of government was a well-intentioned attempt to provide separation from policy makers. However, as the economy has grown, so too has the revenue earned in these agencies and their financial autonomy has grown in a manner that no longer fully serves the public interest. Port charges, maritime charges, airport landing fees, visa charges, passport charges, telecoms licence fees, among many others, must be tracked and accounted for. While the Fiscal Responsibility Act was designed to provide control, actual compliance has been poor. The result has been leakage on a staggering scale, as findings from our ongoing audits suggest. This is a serious issue. The upside is a significant revenue opportunity which the TSA implementation has given us sight of, and which we are supporting with a proactive drive for improved accountability.

At the same time, our traditional revenue sources are being supported to be more effective. In Customs, we are making the necessary investments in container scanners and other equipment required to improve collection efficiency. This is combined with the results of a compensation survey which will see the introduction of performance related pay, to reduce corruption and create an alignment of interest that will enhance revenue generation. With FIRS there is a well-defined plan to enhance compliance by widening the tax net. Using data to drive tax compliance, we will ensure that the tax regime is efficiently administered and that everyone pays their fair share.

There is a need for disciplined and effective system of managing our financial resources to ensure maximum value. We will no longer measure performance by the size of our budget or the amount disbursed; we must measure by the impact of that expenditure on the lives of Nigerians. To measure and manage this we have already made some key changes in the way funds are released. We have abandoned the old system of capital releases that funnelled a proportional share of available funds released to each Ministry, Department and Agency. We have a robust system in place where funds are tied to specific outcomes as documented by each agency. This is being supported by follow up reviews to ensure implementation.

As Benjamin Disraeli once said, “We are not creatures of circumstance; we are creators of circumstance.”  I am firmly convinced that Nigeria is on the right path. The path of discipline will confront some age old destructive habits. It will challenge some unwritten rules, and I personally will step on some highly placed toes on this journey. All this I am fully prepared for, and so I do not expect nor do I particularly want to be popular.

However, I will act in the best interest of all Nigerians to ensure that we build the economy that we desire and richly deserve.