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Cablegate: Budget Debate Moving Ahead, Gon Publishes Revenues

This record is a partial extract of the original cable. The full text of the original cable is not available.

261144Z Feb 04

UNCLAS SECTION 01 OF 02 ABUJA 000328

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: PGOV PREL KDEM NI
SUBJECT: BUDGET DEBATE MOVING AHEAD, GON PUBLISHES REVENUES
RELEASED TO LOCAL GOVERNMENTS FOR EXPENDITURE

REF: ABUJA 235

SENSITIVE BUT UNCLASSIFIED, NOT FOR PUBLICATION ON THE
INTERNET OR INTRANET.

1. (U) Summary. The GON's budget was not passed within the
ten days Finance Minister Ngozi expected (reftel), as the
Senate and House both took unexpected vacations while
requesting additional figures from the Presidency, but
National Assembly (NA) members expect to pass it in March.
The GON also began publishing in national newspaper ads a
detailed accounting of revenues released to Local Government
Areas for expenditure, an attempt to boost NA confidence in
the GON's financial management and a first step toward budget
expenditure transparency. Anticipating a proposed change in
the ratio of revenue sharing between the federal, state and
local governments, legislators are reconfiguring the federal
budget to reduced federal percentage numbers, even though the
ratio change has still not been decided. The budget's
deficit figure is still expected to stay below 2.5 percent,
and probably closer to 2.3 percent. End Summary.

FINAL BUDGET SAID "READY TO GO"

2. (U) In a meeting with Poloff, House Finance Committee
Chair Farouk Lawan said he expects final committee reports on
the budget to reach the House floor March 2. An affirmative
vote on the federal budget should come two or three days
after that, he said. The budget should also pass the Senate
within a week. Senator Farouk Bello, vice chair of the
Banking and Insurance Committee, said his chamber is due to
discuss it March 2 as well, although Lawan said Senate
leaders told Poloff that the Senate could pass the budget as
early as February 28.

3. (SBU) Lawan said the NA generally supported the budget and
blamed the delay on the Presidency's own failure to outline
its projected expenditures fully, especially its expected
revenues. The budget submitted to the NA on December 18 was
an inch thick, but did not explain or break down its revenue
projections. On the expenditure side, the House pointed out
that the Presidency neglected to budget salaries for parts of
several ministries and parastatals, Lawan said, and also
omitted the National Assembly's operations. Lawan said he
expects the Finance Ministry to submit full and somewhat
revised expenditure projections by February 27. A ministry
source confirmed that the final numbers should be delivered
to the NA by February 26. While it waits for those numbers,
the House has done its own independent revenue investigation
and asked the Finance Ministry for a detailed breakdown and
formula for the GON's revenue projections by February 27.

REVENUE SHARING

4. (U) In mid-February, a forum of all 36 state governors
announced that they opposed backsliding in the revenue
sharing formula President Obasanjo submitted to the NA in
2003. Under that proposed formula, states would have
received 33 percent of revenue, local councils 20.37 percent
and the federal government 46.63 percent. President Obasanjo
withdrew the formula change proposal in November because, he
said, multiple versions were circulating within the NA. NA
members believe it was because he realized the new ratios
would put the federal government at a disadvantage. Akwa
Ibom Governor Attah, chairing the Governors Forum, said the
governors stood by the original proposal, which they deemed
"just and fair."

5. (SBU) Rep. Lawan said Obasanjo and the states are now
close to reaching a new revenue sharing accord very similar
to last year's proposal. The House was adjusting the budget
to plan for the federal government receiving just 46.5
percent of national revenue, the lowest figure mentioned in
the negotiations, even though current law and the budget
proposal give the federal government about 48 percent. Even
with the increased expenditures and reduced revenue
calculated in, Lawan said the federal government budget will
only have 2.3 to 2.5 percent deficit, fitting Finance
Minister Ngozi's own mid-February projections of 2.1 to 2.5
percent.

BUILDING TRUST, SLOWLY

6. (U) NA members acknowledge that the Presidency has
improved its coordination on budget planning this year, but
they are still skeptical about Obasanjo. "We don't trust the
president," said Bello, of the opposition ANPP. Echoing
this, Lawan, of the ruling PDP, said there is "cynicism and
lack of confidence," especially in the state and local
governments, that Obasanjo will stick to the budget
allocations on expenditures.

7. (U) Hoping to overcome these doubts, the Finance Ministry
on January 30 published a five-page, small type ad in
national newspapers with the detailed figures for revenues
released to each of the country's 774 Local Government Areas
in January. This is the first time since 1999 that the GON
has any detailed breakdown of revenues released for
expenditure, and the GON says it will continue publishing
these monthly figures. Finance Minister Ngozi told Embassy
officers February 10 that her ministry's main reason for
publishing the numbers was to gain legislators' trust during
the NA budget debate (reftel), although her ministry's Budget
Office said it has always provided NA members with such
figures upon request. Lawan told poloff that the GON was
more likely publishing the numbers now to shift public
questions on budget corruption onto the states and local
governments, which collectively decide the expenditures for
just over half of government revenues. Ngozi said the same
thing in public, saying "If they (the constituents) know the
amount of money they are supposed to be getting and what
Local Government Areas should be doing, they can now ask
questions,"

EXCESS REVENUE STILL AN ISSUE BUT NOT HOLDING UP THE BUDGET

8. (SBU) One more budget argument continues unabated. Each
year the GON sets a planning price for oil upon which it
bases revenue projections, and any extra revenue from sales
at prices higher than that are to be shared among the
federal, state and local governments according to the
existing revenue allocation formula under the Constitution.
The GON is working on a stabilization fund whereby the
federal, state and local governments would put those extra
revenues aside for future use when oil prices dip, but the
state governors are still not convinced (septel) that
President Obasanjo will not spend whatever is in any of the
accounts as the federal government shifted money from capital
allocations in FY2003 to other projects. NA members in both
chambers, though, have disassociated themselves from that
debate, saying the state-federal dispute will not get in the
way of their passing the national budget.

COMMENT

9 . (SBU) This year's budget process holds several positive
signs for transparency and accountability in Nigeria. First,
the Presidency sought NA input for budget projections.
Second, the NA had the foresight to try to reduce allocations
to match what it believes are more realistic revenue
projections. Third, the Finance Ministry publicized figures
for revenues released by the Central Bank for expenditure,
responding to the budget implementation issue. There is
still a long way to go, however, before any part of the
budget process -- revenue, allocation or expenditure -- can
be called transparent.
ROBERTS

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