Okonjo-Iweala Lists Successes Recorded By The Jonathan's Administration In Budget Speech

 
 Good morning and thank you very much ladies and gentlemen.

Honourable Ministers, my colleagues from the ministries of Works, Power

and Women Affairs; Honourable Chair of the House Committee on

Appropriations; the Deputy Chair of the House Committee on Appropriations;

senior government officials; Special Adviser to the President on

Performance Monitoring; Permanent Secretaries; Distinguished DGs and heads

of organisations.
I am happy to see the Auditor General; he is joining us here today as well

as the Accountant General; and we have so many heads of parastatals and

other government agencies.
The Customs, thank you for coming also and joining us.

Donor partners, thank you. Distinguished ladies and gentlemen from civil

societies and the private sector, as well as ladies and gentlemen of the

press. It is really my honour to welcome you all to the public

presentation of 2014 Federal Government budget proposal.

Today, the speech I'm going to give – I have to crave your indulgence – is

going to be a little bit longer than usual because of what was described

by the Country Director of the World Bank and all of us and the Honourable

Chair of the House Committee: I laid the budget, we did not have the usual

budget speech of Mr. President, so I want to take the time to lay out some

of the key parameters of this budget. So I just want to alert you ahead of

time that it will be a little bit more detailed or longer than usual.

I want to start by expressing my profound appreciation to His Excellency,

President Dr Goodluck Ebele Jonathan and Vice President Namadi Sambo under

whose guidance the 2014 budget was prepared. I also thank the leadership

of the National Assembly, the Chairs of the Finance and Appropriations

committees of the Senate and the House. And I particularly want to thank

the Honourable Chair of the Appropriations Committee and his deputy for

spending time with us here today; also the other Honourable Ministers who

are here present.
I thank my cabinet colleagues for their support, their understanding; and

my three colleague ministers who are here today whose work is very

important to the achievement of the objectives of the Budget 2014 and even

the implementation of 2013 budget – the Honourable Ministers of Power,

Works and Women Affairs. We have to work under a very tight timetable and

constricted budget; yet they did the best they could to deliver with their

teams. Thank you.
I acknowledge the efforts of all other relevant stakeholders and

especially the staff of the budget office of the federation for their hard

work in preparing this budget. Please give them a round of applause. It

goes without saying that due to some of the constraints along the way,

during this budget preparation there were many sleepless nights and 24

hours working in order to get the budget delivered. I render my sincere

thanks to them all.
Now before I discuss the contents of the budget, please permit me to take

a few minutes to make some introductory comments which I think will

provide the context for the rest of the budget speech today. Before I do

that, I also want to point to you that you will be given – if you haven't

got them already – several important documents. First is Understanding

Budget 2014, the next is The Citizen's Guide to the Budget, so it makes

the budget simple; and we'll also be distributing, due to popular demand,

answers to the 50 questions. We got many messages saying that people would

like us to distribute it at this forum; so we'll try. We may not have

enough copies because we were not really preparing to do that. So we've

only got a few but we'll do the best we can.
Now, the first thing I want to address is, What is the budget all about?

We've heard many comments about the budget. We've called it a budget for

inclusive growth and job creation. And people have pointed: “How can they

say they are creating jobs when only “x” amount has been allocated to this

sector and it's not enough?” I want to state that the budget is not simply

a set of revenue and expenditure plans by government. Rather, the budget

is a statement about government's fiscal policies and related policies

which are intended to move the economy forward. The budget is not only

about the resources being allocated to various sectors, but also about new

fiscal policies which will stimulate growth across various parts of the

economy.
For example, in previous budgets we've announced measures such as backward

integration policies to support various Agriculture Value Chains such as

rice and sugar; and to support Industrial Value Chains such as cement, to

support the development of the Solid Mineral Sector and so on. So when you

look you often find that the impact of these policies may give resources –

and I will illustrate this as we go along with this speech – they make

resources available to the sector that are ten times the amount that is

seen within the budget.
The government uses the budget process as an occasion to launch policies

that can leverage significant resources outside of the budget to help grow

the economy, create jobs, and put supportive policies in place that are to

the benefit of Nigerians. I wanted to really mention that point. In this

regard, I want to add that a whole set of industrial incentive policies

which in Nigeria are typically called waivers and exemptions are a

deliberate act of government policy. And these are the policies that have

underpinned the expansion that I spoke about in the cement, the sugar and

other industries; and enabled the creation of jobs.

These policies can amount to significant amounts of money in billions of

naira but they are what enable our manufacturing industries in particular

to be competitive; to be able to expand in an era where they may face

constraints on their competition and production and thereby to create

jobs. So job creation is linked very much to these policies of government.

And I want to say that people need to understand this because at some

stages, you know, these policies are not well understood, and some people

think these are policies that lead to fraud.
I want to state in the case of waivers and exemption, there has been a

debate going on, and to elucidate that in the past these policies were not

applied properly in the way they should. Now, they have been restructured

and revamped so that from 2012 on, they are on a sectoral basis. Anybody

operating within the sector has access to the same incentives and the same

level playing field that everyone else has. But we need to understand

these policies as incentives to help our manufacturing grow.

The second point I want to point out is the level of transparency and

detail of the Nigerian Federal Government budget. In all my years working

across developing countries – and I'm glad the international institutions

are here – African Development Bank, the World Bank and the IMF are here –

I've not seen budgets as comprehensive and detailed that go down to how

much is spent buying plates, forks and knives, catering for food. It

doesn't exist. And I'm proud that in this country, we do not have a

problem with laying out the details of the budget so that Nigerians can

look. We just heard some comments by the civil society about a detail in

the budget – I think the DG budget will correct that particular impression

because there were some errors that arose in the GIFMIS which we

implemented this year that led to those. But apart from that, what I'm

proud about is that we have a level of detail in this budget that allows

Nigerians to see down to the last naira, what it is being spent on.

I think it is a big advantage. I thank our civil society colleague for

recognising this transparency. It is designed to engage the public in the

debate to show them exactly where the money is going. So we should see

this as a big advantage of this country's budget which you do not see in

other countries. When you travel elsewhere and you look at their budget,

if it is available, it is usually much more aggregated than what you see

in the Nigerian budget where budget is three volumes, because we've gone

to the last detail to share with Nigerians what it is so that they can put

their voices forward to the MDAs (to the Ministries, Departments and

Agencies), the Ministry of Finance and say, “This is what we think and

this is what we think.” And we are very happy that this budget has enabled

that engagement in that kind of conversation.
My third comment concerns our budget process. In preparing the budget each

year, we make every effort to be consultative by inviting stakeholders and

consulting them and talking to them about the process. But of course

increasingly as time goes along, I have found that the budget process is

also becoming difficult and more challenging for the executive and the

legislature to agree on key parameters. I want to thank the National

Assembly, because I think this year we engaged very deeply more than we

did before with the various committees to try to come to an understanding.

But it ended up taking some more time. And one of the reasons we took more

time was the issue of the benchmark oil price for the budget. And

incidentally we've also answered extensively on this issue in the fifty

questions.
I think in the future we need to consider moving to a system where we have

an objective and depoliticised process for some of the parameters that we

need to consider in order to move the budget process along expeditiously.

For example, we can consider what some other countries that have gone

through this exercise are doing. Chile has copper as their main product

and what they have is an independent panel of experts that are independent

of both the executive and the legislature and they set up a methodology

that is agreed. Whatever they bring in terms of the copper price is the

benchmark price that is used for preparing the budget; but it is done

independently and removes the rancour out of that process. In Ghana and

Mexico, Ghana actually studied what was happening here in Nigeria and

devised their own system that has a predetermined formula for setting the

benchmark underpinned by law so that there is no argument by either the

executive or the legislature; it just happens and it's automatic in the

way that it is done.
So I really would like also to appeal to the legislature, particularly,

the Honourable Chair and Deputy Chair here that we look at this and see if

together we can come up with an objective and independent process that can

determine some of the benchmarks that we need for our budget and take it

away from the realm of argument so that we can move this forward. If other

countries have done it, Nigeria is certainly capable of doing it. I

believe that if we can come to this, the slippages in our timetables and

the other issues that occur along the way will be reduced and we will be

able to produce and pass and move to implementation of the budget in a

much more expeditious manner.
The fourth point I want to make highlights the concerns on the structure

of our budget. Distinguished guests, ladies and gentlemen, the high share

of recurrent expenditures in the budget is of great concern to us as it

reduces the size of funds available for investments in capital projects.

We all know that and I want to state categorically that this has been our

view since the first day that we came into this job and has been the view

of the budget office that Nigeria needs to move to a different structure

of its budget. To this end, we worked hard to reduce the ratio of what we

had in the recurrent to capital from what we found in 2011 which was 74%

when I started work to 71.5% in 2012 further to 67.5% in 2013 but we are

back to 74% in 2014. And why is this? We are here because we have not yet

been able to make the choices needed to change the structure of the

budget.
You will see that in the presentations that will come up and maybe later

on in the day, the reason why we have a very high ratio of recurrent now

after a very good effort – when I was minister first time, we tried to

take the ratio down to about 65%. It came up again, then went down; but

the present situation we are in today occurred from the award to salaries

that were given in 2010. This jerked up the recurrent budget considerably

– and I have more to say about it – the personnel bill, I believe, went to

almost double its size and that changed considerably the structure of the

budget. As we speak, the pension benefits – the arrears of pensions

attendant on this; we've only begun to factor in the pension implication.

For the military, we did it in 2013. For the civilians, we're factoring it

into this budget and it's adding another 27 billion naira and we still

have the arrears to consider.
So, Nigerians need to see. As long as we continue to have these continuous

awards – and we are very much for equal pay for work, so this is not to

say that people should not be paid well but we need to recognise the

implication of what that means. When these awards are made, it jerks up

the recurrent budget. So it is not as if the government is sitting, not

trying to work on this but we've got other forces that lead to continuous

increase in the recurrent budget; and this is what we have been pointing

out. So all those who find this discomfiting, they need to know the reason

why we've got these ratios and they need to understand that as long as we

continue to increase these bills, have more awards and integrate the

arrears, the recurrent budget will continue to increase; and that's just

the structure, the structure is not a mystery. If you look at the graphs,

you will see that. So we need to make some tough choices.

The tough choices involve also trying to slim down in places where there

may be waste in the recurrent budget. So it's not just on the wages and

salaries; we must also work in other areas where there is waste – where

there are duplicative agencies and work by agencies, we must also in

fairness try to take those away, slim those down. And these are some of

the things that we are looking at.
To strike that balance that we need in this country between recurrent and

capital, some tough choices are needed. When we started with Mr President

looking at the Oronsaye report which gave a list of agencies with

duplicative functions or committees which we could just either streamline

or merge, we found that most of these agencies are underpinned by law. So

at the end of the day, we could not get up and say we merge this or we do

away with it because we have a law underpinning it. So through this, I'm

also strongly appealing to the legislature and the National Assembly that

we will need their help with the review and repeal of some of these laws

if we are to achieve the objective of curbing waste, streamlining

government expenditure and getting a balance.
I want to be very clear – all I want to say to you is that we are all in

this together. This is not a question of the executives sitting and saying

we are going to spend money in the recurrent. People need to recognise and

realise that each time personnel cost goes up because of further

increases, the recurrent cost goes up. Each time we are not able to

streamline our agencies because of – maybe legal issues – that's an

impediment. So we really need to work on all of this – the legislature,

the executive, the Nigerian public, civil society – we need to come

together to solve this problem; and we are very willing to do it because

we think the structure now needs to be changed.
My fifth and final comment is on the subject of budget revenues. Let me be

upfront in stating that the role of the federal Ministry of Finance is to

ensure that the maximum amount of revenue flows into our national coffers.

Our role is not just to look at expenditures and how to curtail it but is

also to increase the revenues and look particularly at non-oil sources

since we are trying to diversify this economy. But I'd like to take this

opportunity to clarify some issues. One is on the oil revenues and is

based on the debate that is on-going now.
Following initial reports by the Central Bank, there have been discussions

in the country and the media about monies not remitted by the NNPC to

government coffers. After our initial reconciliation, we now have an

amount that is agreed, an amount that everybody is talking about and has

brought everybody round the table – the $10.8billion which still needs to

be accounted for. I just want to remind everybody listening that this

revised $10.8 billion outstanding is the amount put forward by the

Ministry of Finance based on the reconciliation that has been happening at

the FAAC – the Federal Allocations and Accounts Committee chaired by the

Honourable Minister of State; and we have been doing this work over the

past two years.
I believe that the Federal Ministry of Finance has played its role in

bringing parties to the table. It has been working every single month to

see what is due to the Federation account and what is not due; and has

been able through hard work to table this number – month after month, this

is the total we have for the period we are talking about – and to get all

around the table to agree what the number is. You cannot even begin to

discuss unless you have the proper reconciliation.

Now the next stage of the discussion is to ensure that these funds are

paid into the Federation Account. We've come from a situation where it's

been agreed and admitted that the $49.8 billion that was put on the table

is not the right number. We are now at the 10.8 billion. And the next

stage is to ensure that we sit down and look at this number to ensure that

whatever funds of this belong to the Federation Account are paid in. I

think headlines will not bring money into the Federation Account. It is

our job in the Ministry of Finance to make sure that every naira owed the

Federation comes into the coffers. And that is why the hard and

unglamorous work of sitting down and looking at the numbers in reconciling

with the NNPC is underway as we speak.
So I want to make clear that any statements made about the disposition of

these monies prior to the completion of the reconciliation exercise, I

think it's premature – on all sides, whether it's from the Central Bank,

the Ministry of Finance, or the NNPC. We need to finish the hard work.

Where these monies have been spent we need to see the justification very

clearly with supporting evidence that they've been spent. And where that

does not exist, the monies need to be remitted to the Federation Account.

This is what we stand for and this is why we are insistent that we focus

on what is the hard work to be done. And we will be accountable for

managing the government's finances that come into the coffers of the

Federal Ministry of Finance, of the treasury. And we want to one more time

reassure everyone that our job is ensure that we get hold of every naira

that belongs to the Federation Account.
Now, on non-oil revenues, in recent months also, our non-oil revenues have

also decreased due to our recent fiscal policies and to some extent due to

some goods being smuggled across our borders. For instance rice, the

policies that we put in place – the fiscal policies we put in place to

protect the rice industry – have worked but have also led to some

unforeseen side effects in terms of increase in smuggling. And we are

looking at that to look at these policies and review them to a point where

they work better for the benefit of the economy. But I want to say that we

are looking at our non-oil sector too. It's not just oil; we must not be

fixated only on oil. And in that regard, we are working very hard. The

Federal Inland Revenue Service is working hard to improve on the good job

that it has already been doing and has engaged international consultants

to help us further boost our non-oil revenue performance. And with the

capacity building they are giving and the support, the FIRS, and later on

working also with Nigerian consultants, will be able to carry on this work

and make sure that our non-oil revenue performance also increases.

Let me end this section of the remarks by assuring Nigerians that on all

these issues the Federal Ministry of Finance is pushing hard in the right

direction; keeping its focus on trying to correct where it can, the

imbalances that exist and pointing out where there are issues sometimes

beyond its own capability to solve alone and where it will need the help

of the Nigerian public and the legislature. Some of these issues cannot be

solved alone. We must come together to grasp them and to move on. On the

revenue side we pledge to continue working hard to plug leakages and to

boost both oil and non-oil revenues.
Now let me turn to the global economic environment and address the budget.

The proposed 2014 budget is being presented to you today; prepared against

the backdrop of a fragile global economic recovery and uncertain outlook

for the global economy. The advanced economies are growing again for which

we pleased, albeit at a slow pace. And emerging market economies face the

double challenge of slowing growth and tighter fiscal conditions

especially with the anticipated tapering or quantitative easing by the US

Federal Reserve bank. Overall, 2013 global growth was weak with the

preliminary estimate of 2.9% growth for the world economy.

Why do all these things matter to us? It matters because Nigeria is well

integrated into the global economy. And so we must remain vigilant about

developments that happen internationally. The USA and Europe together

account for nearly 54% of our export while the BRICS economies: Brazil,