In this interview, Tijah Bolton-Akpan, a consultant on public policy analysis and an Executive Director of Policy Alert explains in detail why Akwa Ibom and 11 other states in the country missed out on the recent disbursement of N43.42 billion as grant from the World Bank to 24 states and advises the states on what they need to do to qualify for the next round of the grant.
SN: What is the N43.42B World Bank SFTAS grant all about?
In 2018, Nigeria entered a concessional loan agreement with the World Bank for a $750 million facility to improve governance at the state level across Nigeria. From its name, the States Fiscal Transparency, Accountability and Sustainability, otherwise known as SFTAS programme-for-results is focused on getting states become more transparent, accountable and sustainable.
If you recall, some years ago the 36 states agreed with the Federal Ministry of Finance to implement a programme called the Fiscal Sustainability Plan or FSP, which was to ensure that states could not access budget support from the federal government until they met certain scores under a 22-point criteria. Unfortunately, at some point the federal government became less and less stringent with some of those conditions when disbursing budget support because many states were facing serious liquidity challenges.
Fast forward to July 2016, Nigeria joined the Open Government Partnership, OGP, where the country voluntarily obligated itself to be accessed on 14 commitments ranging from anti-corruption, fiscal transparency, access to information, and citizen engagement. So, what SFTAS did is marry some OGP requirements with some elements of the defunct FSP to incentivise state governments to step up the plate in terms of fiscal governance.
It came as a $750 million concessional loan to the Nigerian government out of which $700 million would be spent as grants to the state governments while $50 million would be spent as technical assistance which the federal government and the states have already been benefiting from since 2018.
SN: So how can a state qualify for the grant?
There are nine criteria known as Disbursement Linked Indicators or DLIs and under each DLI there are a number of disbursement linked results, or DLRs with different financial values attached to them, which means you qualify for the grant based on your performance on specific results relating to their governance processes, particularly in areas such as budget transparency, citizens participation, revenue and debt management, public procurement, payroll transparency and even fraud and corruption complaints procedures, or what you would call whistleblowing. So the indicators look at questions such as how early in the year is the budget call circular issued by the Budget Office? Is there a process for ensuring that citizens participate in the making of the budget and are their inputs published alongside the budget itself on the government website?
Is the government using the Chart of Accounts framework to prepare its budget? How about quarterly budget implementation reports? The DLR is that it should be published online within four weeks from the end of the quarter, but how many states are doing that?
There are also results related to public procurement. Does the state have a public procurement law with a statutory board or commission in charge of procurement? Is contract award information published online in an open format? How about the debt load of the state? How sustainable is it when you compare total debt stock to a share of total revenue? Is there a debt management law? For 2019, for instance, what is deducted at the end of the month for debt servicing should be no more than 40 per cent of gross FAAC’s allocation. Also, under this programme each state is expected to prepare a quarterly debt report and ensure it gets to the Debt Management Office at least two months after the end of the quarter.
There is also the issue of the annual audited financial statements. Is it prepared in accordance with the International Public Sector Accounting Standards and published online by July of the following fiscal year? I can go on and on. It also looks at how the state’s actual spending by the end of the year compares to what was budgeted, which is known as expenditure out-turn deviation. Many states still don’t do up to 50 per cent of what they budgeted but the result expected under this programme is between 30 per cent in the first year to 15 per cent which is the international threshold by the fourth and final year of the programme.
It also looks at what percentage of civil servants and pensioners have been captured in biometric payroll and what percentage have their accounts linked by BVN to eliminate payroll fraud. For revenue, does the state have a consolidated revenue code covering all its IGR sources? What is the year-on-year nominal growth in IGR? The state is also expected to operate a Treasury Single Account that covers most government finances, I think about 50 or 60 per cent.
SN: How did Akwa Ibom State perform on the various criteria you’ve highlighted?
Let me start by correcting an impression. The $120.6 million released to 24 states is for 2018 and this is a four-year programme so a state that missed out in one year can catch up and even overtake in the following year. So, it is just like a student’s exam result for 2018 being released belatedly in 2020. It is a picture of where we were as at 2018 but it is by no means a true picture of the state of fiscal transparency and accountability in the state right now because a lot has changed over the last one year.
And you must also note that states don’t have to achieve all of those results to qualify. Each of the results has a definite financial value as I said and you get based on your performance, which is why some states like Kaduna, got far more than others. But there is a benchmark. While Akwa Ibom met some of the requirements in 2018, such as the early issuance of call circular, preparation of budgets using Chart of Accounts and a few others, but it still did not meet the benchmark which is why the state lost out.
SN: Did Akwa Ibom government met the conditions for the grant?
There were several other scores on which the state did not measure up. Let’s use the budget process as an example. Recall that the governor mentioned the late passage of the 2019 budget which is just one of the criteria, but there are many others, which I will highlight. We have no process for aggregating citizens’ inputs into the annual budget. Meanwhile, this programme measures not only whether the budget is passed on time, but whether the budget is published online, whether citizens were consulted, whether women in particular made inputs, whether those inputs were taken on board and published online alongside the approved state budget before the end of January of that fiscal year. It also looks at whether there is a citizens’ budget, and whether there are quarterly budget implemented reports promptly published and so on.
We did poorly in these areas. And that is just under budget preparation and implementation before you go to public procurement and debt management laws, which we do not have. This state over the last 20 years has always been in some process or the other of making a public procurement law, but it never gets done. The current state House of Assembly has passed a procurement law, but we wait to see if the governor will assent to it. The same goes for the Debt Management law. Debt is a real challenge here. Despite the state’s revenue, the fiscal space is seriously constrained by external and domestic debt obligations, which currently stand somewhere around N282 billion, according to the DMO. So, this programme looks at almost everything.
However, I must quickly make the point that although Akwa Ibom did not achieve several of these results for 2018, it subsequently achieved many of them for the 2019 assessment. For instance, the state now has a citizens’ budget committee in place consisting of representatives of civil society groups, disabled persons, community representatives, and many other groups. Also in 2019, the state budget went online, with the citizens’ budget alongside it. You also recall that the 2020 budget was presented, enacted by the House and signed into law by the governor ahead of the new fiscal year. The audited financial statements were also prepared on time. So, there is a big likelihood that the state could qualify for the next round if it works harder on some of the observed weaknesses.
SN: What should the state do to qualify for it in the next round?
I already said Akwa Ibom State should work on those areas where it is weak. It must be mentioned here that one of the biggest challenges the state is facing is secrecy. And this is not just about Akwa Ibom, most states are still struggling with the hangover of the Official Secrets regime, where you see routine government information treated as top secret. Opacity is the default mode and it’s really sickening. Granted, there is some improvement on disclosure but more needs to be done.
For instance, even the SFTAS programme we are discussing, there is nothing in the public domain from the state government side telling citizens, hey, see what we are doing. The SFTAS annual action plan is not online, neither do we have a dashboard that says where the state is on the disbursement linked indicators and results at any material time. And that is why we had a lot of speculation, because when you do not disclose information proactively, nature abhors a vacuum and people will fill that gap with fake news and guesswork.
Aside from working on some of the specific indicators and results I mentioned, one of the biggest steps the state can take toward qualifying for the next round is to sign on to the Open Government Partnership, OGP. States implementing the OGP stand a better chance to qualify because several of the SFTAS criteria in most cases double as OGP criteria, which makes implementation easier.
SN: What lessons should the government learn from missing in the grant?
One of the lessons we need to learn from this SFTAS experience is that time is money. Any reforms you can put in place for your state, don’t wait until tomorrow, do it right away. Kaduna moved early and they were rewarded handsomely for it. So did the 23 other states. If Akwa Ibom and the 11 other states work hard now, they can still qualify for the 2019 grant.