By Abubakar Jimoh
The rebasing of Nigeria’s GDP has projected the nation as a middle income economy resulting in consequent dwindling donors’ resources with the effect that by 2022 the country will witness reduction in availability of grants and more external funds that can be accessed through higher interest loans.
Efforts at providing an enabling platform for inter legislative Committees dialogue to interact in proffering holistic solutions to the current trend and challenges confronting adequate and sustainable social sector financing coupled with the need to harness and strengthen domestic resources for social sector financing in the face of dwindling funding led to a one-day retreat for National Assembly Members organised by House of Representatives Committee on Appropriation in conjunction with Civil Society Legislative Advocacy Centre (CISLAC) recently in Abuja.
Giving his opening address, the Executive Director of CISLAC, Auwal Ibrahim Musa (Rafsanjani) noted that the Retreat was primarily triggered by the current but unpleasant trend arising from pervasive dwindling donors’ resources, which without pretence leaves Nigeria as one of the major beneficiaries with a challenge and no option than to proactively brainstorm, provoke critical discussions and harness potential for domestic resource mobilisation for sustainable social sector financing to inform appropriate legislative decisions and policy directions in Nigeria.
As adequate and sustainable financing for social sector remains paramount to achieve healthy, secured and developed society, the Executive Director recounted the Nigeria’s ailing health, agriculture and education sectors that have hitherto suffered from inadequate financing, warning that though “donor resources play an integral role in complementing Nigerian governments’ efforts in social sector financing, however, we must as well not lose sight to acknowledge the present reality and proffer holistic measures to avert the detrimental impacts dwindling donors’ resources may pose to our nation’s social sector investment and development”.
He noted: “While the fundamental purpose of humanitarian aid by any government is to support the efforts of a receiving nation at revitalising her social sector as well as uplifting the poor from extreme poverty, which renders them incapacitated to attain self-reliance and effectively fight diseases, the present dwindling donors’ resources, if not instantly matched with concrete legislative and policy measures will without doubt revert existing achievements and backpedal development of our nation’s social sector.
The CISLAC’s boss provided an exclusive narration of the current development in donors’ resources to Nigeria, when he reveals: “It is no more news that the rebasing of Nigeria’s GDP has firmed up the nation’s position as an emerging market economy. However, in the wake of GDP re-basing, Nigeria is fast witnessing down-slopping trend in donors’ resources, practically buttressed by the recent international decisions to withdraw funding for social sector like the European Union (EU) which specifically withdraws financial support for Nigeria, saying the country has enough resources to meet her developmental needs; Global Alliance for Vaccine Initiative (GAVI) which runs out by 2020 with potentially 7.5million children losing access to live-saving vaccines annually; United Nations Children’s Fund (UNICEF) warning governments to take full responsibility of their respective nutrition financing while their refusal may lead to another 2.5 million severely acute malnourished children and grossly intensify child mortality in the country.”
He did not conceal the similar and most recent development from proposed international aid cut by the United States, stating that if such executed without proactive national measures, will constitute additional challenge to the development of Nigeria’s social sector financing.
The Chairman House Committee on Appropriation, Hon. Mustapha Bala Dawaki in his goodwill message urged concerted efforts by relevant stakeholders towards local production of immunisation vaccine to reduce high financial burden associating with vaccine procurement which constitutes the a major component of donors’ support in Nigeria, calling for a strengthen collaboration between executive and legislature arms to support and fast-track the process.
He said the continued mono-economic practice and lack of innovation in domestic resource mobilisation with particular focus on oil revenue had discouraged the nation’s capacity and efforts at diversifying and effectively harnessing domestic resources for financing social sector.
Also, lamenting delay and inadequate release of appropriated funds which remain systemic challenges to resource mobilisation, allocation and utilisation for the social sector development in the country, the Chairman House Committee on Finance, Hon. Babangida Ibrahim urged increased domestic financial priority for key sectors of the economy to mitigate wastage and shortfall in resource mobilisation and allocation for adequate and sustainable social sector financing.
The Director-General, Budget Office of the Federation, Mr. Ben Akabueze added that while the rebasing of Nigeria’s GDP has projected the country as a middle income economy with propensity for incessant dwindling donors’ resources, by 2022 there will be decreased availability of grants with more external funds that can be accessed through higher interest loans.
He revealed that a Technical Committee has been constituted by the Budget and Planning Office will critically observe, analyse, and address the impacts of Nigeria’s transition from lower to middle income status.
“After the rebasing, Nigeria was rated a Middle Income country, meaning that Nigeria should be able to take care of its own. By the year 2022, Nigeria will bear the full cost of vaccines formerly funded by GAVI. Most donors’ resources are already on their way out. Therefore we must take cognizance of this fact,” the Director-General explained.
Mr. Vishal Gujadhur, Lead Presenter also Senior Program Officer, Development Policy and Finance in USA noted that though in 2010, while Nigeria’s GDP almost doubled with per capita income much higher than originally thought, it as well showed untapped revenues from non-oil sectors and weakness in the nation’s revenue mobilisation.
He said: “As countries grow wealthier, donors begin assessing whether a country can pay its own way. With a Gross National Income (GNI) per capita of $2,450, Nigeria is now squarely a lower middle income country (LMIC). It continues to receive significant concessional funding – for example from the World Bank, Gavi, and bilateral donors like DFID.
“When a country is above the ‘threshold’, it will be ‘graduated’ from assistance. In 2016 Nigeria fully exited the ADF which is the concessional window of the AfDB – a marker of things to come.”
The Senior Program Officer observed that based on Official Development Assistance (ODA), between 2011 and 2015, Nigeria received an average of $2.9 billion in aid flows. To size this figure, he recalled that ODA inflows in 2015 at $3.2bn were more than total government expenditure on education.
“Nigeria graduated from ADF in 2015, entered the accelerated transition phase of Gavi in 2017 and is projected to stop receiving Gavi and International Development Association (IDA) funding by 2022. More than 80% of these flows come from a few institutions – IDA, Global Fund, USAID, DfID, and Gavi. This means the graduation policies of a few institutions will have a significant impact on Nigeria’s aid flows.
Nigeria’s top 3 bilateral donors – USA, France and the UK – make up more than 80% of total bilateral aid in-flows. Recent political trends in these countries, and more nationalist leaning policies will impact aid flows. The US is already due to scale back its aid according to the 2018 budget proposed by President Trump. DfID current five year plan (through 2020) has this current plan as the last “full” one for Nigeria,” Gujadhur added.
He warned that since Nigeria has crossed the eligibility threshold for both IDA and GAVI which combined amounted to about $1.1bn, 34% total 2015 ODA flows, crossing the eligibility threshold would raise high expectation of Nigeria to graduate from these sources of funding soon. “Nigeria will lose the equivalent of 10% of 2016 FGN revenue.”
Gujadhur argued that though on an aggregate level Nigeria is not as dependent on aid, however, on sectoral level, Nigeria is more dependent on aid, given the significant concentration of aid flows across health, population policies, education and agriculture. “This means that the impact of transition will be felt more in these specific sectors if not so much at the aggregate level. Transition preparation would therefore require a more targeted approach.
An uncoordinated aid transition will impact Nigeria’s primary health care and the government would be unable to achieve the Economic Recovery and Growth Plan (ERGP)’s goal of revitalizing primary health care in Nigeria. Some sub-sectors, like vaccines and family planning, are at particular risk without proper planning,” he cautioned.
The ERGP in the analysis of Ministry of Budget and National Planning, articulates Nigeria’s vision for the country for the period 2017-2020, and lays the foundation for long-term growth, primarily to optimise local content and empower local businesses. The plan stipulates the role of government in facilitating, enabling and supporting the economic activities of businesses. It articulates the strategy for aligning fiscal, monetary and trade policies. The plan outlines relevant policy instruments to promote import substitution and export promotion.
Similarly in agriculture, Gujadhur observed that between 2012 and 2015 ODA inflows averaged 75% of FGN budget to the Ministry of Agriculture and Rural development and even surpassed Ag budget in 2014. He said an uncoordinated transition could impact the economy especially given that agriculture has been a strong driver of the economy as the only sector that grew in 2016 in spite of the recession.
Discussing the potential opportunities for domestic resources mobilisation, he stated that Nigeria’s revenue as % of GDP is lowest in world. “Numbers are even worse for 2016 – now below 6%”.
As part of the immediate measures, Gujadhur advised that apart from Fiscal Strategy Paper and fiscal space which must be connected to realistic short and medium terms targets, 2018 budget should be center of Nigeria’s development strategy with Economic Recovery and Growth Plan as basic to put medium term plan together.
On short term basis, he acknowledged the an inter-ministerial team set up by the Honourable Minister for Budget and National Planning to work on transition strategy, but according to him adequate support from the National Assembly and other Ministries, Departments and Agencies remains critical to the success of such process.
As medium term measures, Gujadhur recommended increased non-oil revenues “from very low base” with continual government’s efforts on the tax administration through appropriate legislative driven tax policy.
Prof. Ode Ojowu, a renowned economist also the lead discussant added that the GDP growth reduces ODA flows, and “may not necessarily buffer the shock to specific sectors of ODA intervention like Health and Population”.
He called for more efficient, transparent and accountable budgetary process to provide a cushion to the reduced flow of ODA. “We note that in assessing the impact of development assistance, we should not lose sight of the fact that a reasonable percentage of the funds returns to donor country by way of expatriate consultants and procurement of goods,” Prof. Ojowu noted.
The renowned economist recommended the need for ODA Policy in Nigeria to provide a portal where the activities, funds and location of donors could be accessed and practically collate for effective utilization as donors are guided by their respective country laws, rules, regulations and politics.
“In 2005, the National Planning Commission produced a draft ODA policy for Nigeria, but it did not sail through. The immediate objective of that policy was Nigeria still needs the ODA policy. In the interim, given the co-funding relationship, government can negotiate with development partners to focus their resources in a defined area of priority rather than spreading thinly across sectors,” he explained.
As part of the exit strategy, Prof. Ojowu recommended: domestication of ODA funded activities with significant reduction in major costs such as freight, insurance and other port handling charges; greater cooperation between the Ministry of Budget and National Planning, Ministry of Finance and the benefitting Ministries and Agencies to promote joint ownership of the intervention projects and minimize the sectoral impact of declines in ODA flows; an appropriate population policy; a framework for states to compete for federal government grants and donor support; proactive multi-tier budgeting for greater coordination, efficient budgeting and improved outcomes in place of the focus on federal budgetary allocations.
In order to increase revenues from incomes, he further suggested institutionalized revenue and expenditure tracking; strengthen institutions to fight corruption; adoption of international best practices in tax legislation and administration; comprehensive data to track compliance to Voluntary Assets and Income Declaration Scheme; established centralized database that harmonizes the extant databases, covering international passport, bank verification number (BVN), driver’s license, permanent voter’s card, mobile network sim registration, national identity card.
Examining Nigeria’s financing flows and efficiency for mobilizing domestic resources for sustainable social sector investment, a don at Department of Economics, University of Ibadan, Prof. Abiodun O. Folawewo, observed that total government generated revenue at all levels of government has been grossly inadequate to finance the administrative, socio-economic and developmental responsibilities.
He said: “At the federal level, externally driven revenues (oil-revenue) have dwarfed domestic domestically (non-oil) sourced. At state and local government levels internally generated revenues (IGR) usually fall below accruals from federal allocation accounts.”
He identified available sources of local funding for developmental projects and social sector investment to include: constitutional provisions in terms of taxes, levies and others rates; investment opportunities; and borrowings from local financial market.
The existing gaps in domestic resource mobilisation according to him include inefficiency in tax regime; weak capacity of revenue collection agencies; lack of innovation for resource mobilization; inadequate utilization of current tax law provision; and corruption and revenue leakages/losses.
The university don recommended as ways forward: training and re-training of revenue collection personnel at all government levels; continuation of the current restructuring of revenue and expenditure system of government; innovation in terms of exploring hitherto existing untapped aspect of constitutional provisions; removal of all administrative bottlenecks to the levying and collection of taxes, especially at state and local government levels; motivating and incentivising of citizenry for payment of taxes; mainstreaming of the large the informal sector; public-private partnership; and enactment of law on minimum budget benchmark for social sector funding.