In May, Nigerian finance minister Ngozi Okonjo-Iweala told a ministerial briefing that her department was projecting a fiscal deficit of just 1.8% of GDP for the 2004 budget year. It is the straight-talking finance minister’s first full budget in office and is proving to be the sternest test yet of whether she can shake up her country’s creaking public sector.
Nigeria is burdened by debt and is not known for fiscal rigour, so the stakes are high. Achieving the deficit target will not just benefit the economy – more importantly, it will transmit a strong signal that Nigeria is serious about economic reform.
Despite enormous resource wealth – Nigeria is the sixth largest producer of crude oil – the country remains poor and under-developed. Economic mismanagement and corruption has almost crippled the country – electricity supply in the capital Abuja, for example, is erratic and prone to outages.
Promise of reform
President Olusegun Obasanjo won a second term promising that economic reform would top his agenda, and installed credible, experienced technocrats into key economic departments. Small gains have been registered in just over a year since re-election but not enough to convince Nigerians and external stakeholders that the country is irreversibly down the road of reform. In short, Nigeria has a serious credibility problem.
Which is why so much is staked on the Harvard and MIT-educated and World Bank veteran Dr Okonjo-Iweala. She confidently requests to be judged on her results.
Hers is a balancing act. She must hold all levels of government accountable to spending limits but equally must ensure that money is spent effectively. In the past it was not uncommon for just 20-30% of the capital budget to be spent on projects; in the year ahead the target is 80%. Yet she must keep overall spending in check, halving the deficit from recent historical averages. At the same time, government must move more decisively towards fulfiling the objectives of Mr Obasanjo’s National Economic Empowerment and Development Strategy, in particular by combating corruption, pushing through privatisation and addressing chronic infrastructure backlogs.
Out of a projected total government revenue of N1120bn ($8.6bn), N539bn will go to recurrent expenditure, which includes public sector wages and salaries; N359bn will be allocated to capital projects and N369.4bn has been budgeted for debt servicing. A total of 60% of the total budget is dedicated to seven priority areas – education, roads, health, power, water and agriculture.
“The budget has two objectives,” says Dr Okonjo-Iweala. “First, to make life easier and better for Nigerian people as soon as possible. This we will do through the provision of the things they most desire – good roads, better equipped schools, responsive health care, water for drinking and agricultural purposes, safer streets and, of course, food on the table.
“The second is to build a stronger and sustainable economic future for the nation by improving the fundamental indicators of the economy. To say the obvious, the budget sends a critical signal about government’s intentions to the welfare and prosperity of the Nigerian people.”
To achieve this, Dr Okonjo-Iweala is implementing unprecedented levels of transparency and accountability. The finance ministry will disclose all allocations to ministries, highlighted to the public in the press and on the internet. She intends to implement quarterly monitoring of budget implementation and will be sharing the results with the National Assembly and the public.
Achievable targets
“For the first time, we have asked the ministries, especially the large spending ministries, to link their budgetary allocations to concrete achievable targets and results on the ground. Taking just one ministry, Works, we have a list of 500 roads to be maintained, the list of roads to be completed and bridges to be built. We even have the allocations.”
Though common elsewhere in the world, these attempts at transparency and accountability are being welcomed in Nigeria with guarded optimism. Like foreigners, local Nigerians are more accustomed to broken promises than concrete improvements. In promising more effective delivery, Dr Okonjo-Iweala cites more than 500 projects that will have to be completed before new projects are undertaken.
It is true that the economic dream team assembled by President Obasanjo has been welcomed in and outside Nigeria, fostering hopes that the economic reform programme has unstoppable impetus. Dr Okonjo-Iweala is not expecting sceptical attitudes towards Nigeria to reverse overnight, asking that the country be given a year’s grace to implement reforms and establish a track record.
But with tentative endorsement from multilateral institutions and bilateral partners of the government’s economic plan, the finance minister is keen not to squander this opportunity to prove Nigeria is on the right track.
