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Putting State Fiscal Management in
Perspective: a Case Study
Adeyemi Fajingbesi Ph.D
Managing Consultant,
Economic Policy Analysis Centre (EPAC)
Ibadan
adefajingbesi@yahoo.com
Sensitization Workshop for the Leadership of Local
Government Councils and Directors of the State MDAs.
13 – 15 April, 2010
Outline
1. Introduction
2. Challenge of Governance and Fiscal Management
3. Development Initiatives
4. Fiscal Performance
a) Revenue
b) Expenditure
c) Fiscal Balance
5. Service Delivery
6. Resource Allocation Process
7. Reform Agenda
8. Conclusion
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1. Introduction
Context:
Created on 27th August 1991, Delta State: one of the
nine Oil producing states and in fact the leading
producers of crude oil and Natural Gas in Nigeria.
The state is also rich in solid minerals: Industrial Clay,
Kaolin, silica sand, and salt, etc.
It has a landmass of about 18,050 Km2 of which
more than 60% is land.
The state is one of eight littoral states in Nigeria with
an extensive shoreline of about 122 km.
Industries in the state include:-
i)Glass factory at Ughelli; 2) African Timber and
Plywood factory at Sapele; 3) Asaba Textile Mills; 4)
Delta Boatyard and; Delta steel company
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1. Introduction
Context:
Agriculture is the mainstay of the economy of Delta State.
Faming, Fishing and Hunting are the major occupations engaging
about 80% of the active labour force
The dominant economic trees are rubber, Oil and Raffia Palm
trees etc.
Delta State is a leading producer of palm produce in Nigeria.
The dominant food crops are cassava, yam, cocoyam, soybean,
maize, and potatoes.
The state is also endowed with assorted fruits and vegetables,
Timber etc.
The agricultural sector has continued to under-perform, due to
failure to modernize farming technology and shortage of
agricultural credit
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1. Introduction
Context:
• Programmes put in place to encourage agric include:-
i) Delta Agricultural Development Programme (DADP)
ii) Task force on communal farming
iii) Agricultural Loans schemes to small scale farmers
iv) Fishermen Farm Settlement Scheme
v) Tree crop Unit and Livestock production
• Delta State has an estimated population of about 3.8m, or
2.5% of the country’s population.
• More than 70% of the people reside in the rural areas
1. Introduction
Objectives of this module:
To assess the public financial management system of
the state
To identify key constraints and propose an agenda for
reform.
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2.The Challenge of governance and
Financial Management
Delta state faces a number of development challenges that
include the following:
- Underutilization of available resources-reflected
in the dearth of physical infrastructure in form of
roads, railways and power generation facilities. The
peculiarity of the State as of other states in the
region is the fact that it “probably costs 2 to 5 times
more to put a kilometer of road” in the state
compared to another state in another geo-political
zone in the country. This is about “terrain
2.The Challenge of governance and
Financial Management
Depletion and degradation of the natural resource
base as a result of environmental pollution. As it is
well known and related to the aforementioned
challenge is the fact that the region’s eco-types are
highly sensitive to environmental pressures such as
changes in climatic conditions , oil spills, pollution in
general, indiscriminate logging, over-cropping, soil
erosion, etc
2.The Challenge of governance and
Financial Management
Poor human capacity and attendant low income profiles-
this is at the heart of the need for empowerment-with
direct consequences for public financial management
Weak public institutions-inherited from past acts of
uncoordinated planning characteristic of military
administration of civilian activities. In particular, there was
the absence of law enforcement agencies, corruption and
absence of transparency and accountability in conduct of
public affairs (a fiscal responsibility law was an
anathema), unprofessional and inefficient civil service
system, official bottlenecks and non-democratization of
the development process at all levels.
2.The Challenge of governance and
Financial Management
Others are:-
i) Peace and security
ii) Youths unemployment
iii) Rehabilitation of former activists
iv) Etc.
3. Development Initiatives:
DL-SEEDS
A vision-based economic blueprint preceded
DELTA-SEEDS.
The blueprint was the outcome of the Delta State
Think Tank on Development (DSSDT)
A comprehensive economic blueprint on
development of the state
Implemented between 2000 and 2003
The state government also formulated a three-year
rolling plan to reflect the blueprint.
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3. Development Initiatives:
DL-SEEDS
Principal interventions (2000-2003)
A poverty alleviation scheme,
Improvement in infrastructural facilities: The
state government
Job creation through provision of an enabling
environment for industries, and
Resuscitation of ailing industries.
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3. Development Initiatives:
DL-SEEDS
The state government adopted DL-SEEDS to
formalize and elaborate on the vision framework
approach to planning;
put the state’s plan on a comprehensive vision-
directed framework;
develop a strategic planning framework to facilitate
and ensure implementation of envisioned programs
and projects;
set up a mechanism for effective monitoring and
evaluation of programs and projects.
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3. Development Initiatives:
DL-SEEDS
Like NEEDS, DL-SEEDS was formulated in the
context of a medium-term framework and the goals
are poverty reduction, employment generation and
wealth creation.
Pivot of DL-SEEDS
An investment-led poverty reducing employment
(IPRE) paradigm;
a holistic and multi-faceted device
Focuses on investment in key areas of the economy
with high employment potentials.
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3. Development Initiatives:
DL-SEEDS
Emphasis on pilot projects under the IPRE
initiative. The programs include those of:
Employment-Intensive Road Construction;
Information Technology Skill Development;
Entrepreneurial Development;
Informal Sector Capacity Building; and
Smallholder Rubber and Cocoa plantation
Development.
15
3. Development Initiatives:
DL-SEEDS
The focus of DELTASEEDS was in the following
strategic areas:
Agriculture
Social Development
Environmental/Physical Planning
SMEs
Reform of government finance institutions
for revenue enhancement
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3. Development Initiatives:
DL-SEEDS
Agriculture
- Production Techniques
- Land Tenure
- Marketing
- Crop types
- Storage
- Level of participation by the Organized
Private Sector
- Level of participation of Government
3. Development Initiatives:
DL-SEEDS
Social Development
- Education
- Health
- Roads
- Transportation
- Water Supply
- Justice
3. Development Initiatives:
DL-SEEDS
Environment/physical Planning
- Renewal of Urban centers (including possibilities of
development of green belts).
- Introduction of community – based waste management
system.
- Encouragement of environmentally friendly attitudes
among households and firms.
- Establishment of State Disaster management Agency
(Emergency Relief Agency)
- Revamping of State Collaboration with oil companies in
the State
3. Development Initiatives:
DL-SEEDS
SMEs
- Broadening of financial base for the Development
of SMEs, through credits.
- Empowerment of farmers/co-operative societies
- Management of Procurement process to impact on
Indigenous entrepreneurs by cutting-out undue
influence of idle middlemen.
- Introduction of Graduate empowerment
Programme.
3. Development Initiatives:
DL-SEEDS
Reform of Government Finance Institutions for Revenue
Enhancement
- Diversification of revenue sources
- Re-examinations of Fiscal Responsibility Bill with a view
to integrating relevant
aspects to existing financial procedures.
- Re-orientation in Government budgeting (Holistic
Approach rather than for the exclusive benefits of
implementing departments
- Effective Revenue collection mechanisms.
- Development of e-government in the State.
3. Development Initiatives:
DL-SEEDS
Sectoral Priorities: Not clear; approach
holistic
However, DL-SEEDS provides for the
strategic prioritization of projects, and for
monitoring and evaluation.
3. Development Initiatives:
AK-SEEDS
Unlike most other states, the Delta State
Government has initiated the production of Medium
Term Sector Strategies (NBS, 2006)
However, the costing of recurrent expenditure
implications of DL-SEEDS strategies is not MTEF
compliant (NBS, 2006).
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4. Fiscal Performance
a) Revenue at 2000 Prices (2001-2008)
State aggregate revenue rose in real terms from
N28.81 billion to N75.20b, and averaged N36.02b
The average revenue of N36.02b was much higher
than the national average of N32.43b.
Revenue growth volatile, but revenue rose every
year except in 2002.
On average, state revenue rose by 16.67%, which
was less than the national average of 15.4%.
State revenue per capita amounted to N7,119 vis-à-
vis the national average of N3,996
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4. Fiscal Performance
a) Revenue at 2000 Prices (2001-2008)
Federal transfers accounted for 88.85% of state
revenue, 1.4 percentage points higher than the
national average of 89.95%.
The transfers rose every year, except in 2002 when
it declined by 46.24%.
IGR rose in real terms from N3.65b in 2001to N9.58
in 2008 at an average rate of 7.22%
IGR accounted for 11.15% of state revenue
When compared with some states the share of IGR
in Delta state is lower than that of Lagos and Kano
States, but higher than that of Akwa Ibom, Cross
River and Ondo States (Table 1)
25
4. Fiscal Performance
a) Revenue at 2000 Prices (2001-2008)
In per capita terms, IGR amounted to N738, higher than
the national average of N472.
Taxes accounted for 82.7% of IGR.
There were significant deviations of actual revenue from
budgeted revenues
The average deviation of actual revenue from the
approved estimates was -57.53% for IGR, -24.52% for
Federal Transfers and -27.87% overall.
26
4. Fiscal Performance
a) Revenue at 2000 Prices (2001-2008)
Table 1: Internal Revenue Effort
Average
Per Capita Share of
Revenue total revenue
State (Naira) (%)
Delta 2041 11.2
Akwa Ibom 738 9.6
Cross River 431 8.9
Kano 279 13.7
Lagos 2075 50.5
Ondo 293 6.0
27
4. Fiscal Performance
b) Expenditure at 2000 Prices (2001-2008)
State aggregate spending rose from N23.81b to
N82.70b, and averaged N41.3b.
The average spending of N41.3b much higher than
the national average of N38b.
State aggregate spending was volatile from year to
year
On average, state spending rose by 18.4%, higher
than
state revenue growth of 16.67%, and
the national expenditure growth of 15.8%
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4. Fiscal Performance
b) Expenditure at 2000 Prices (2001-2008)
In per capita terms, state spending was N8770
compared to the national average of N4,144.
Recurrent expenditure accounted for 58.1% of state
spending; and capital expenditure 41.9%.
Recurrent expenditure rose by 16.1%, while capital
expenditure rose by 21.2%.
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4. Fiscal Performance
b) Expenditure at 2000 Prices (2001-2008)
Sectoral priorities (capital expenditure)
Major Sectors:
Economic Sector 45%; General Administration 6%;
the Social Sector 20%; and Environmental and
Regional Development 29%
Sub-Sectors:
Works and Transport 23.6%; Manufacturing, Cooperative
& Finance 15.9%; Commerce and Tourism 8.9% and
Education, Science & Technology 6.9%
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4. Fiscal Performance
b) Expenditure at 2000 Prices (2001-2008)
On average, actual capital spending was short of the
approved budget by 23.07%
In contrast, the actual recurrent spending exceeded
the approved estimates by 12%.
Unlike state revenue, the average percentage
deviation of state aggregate spending from the
budgeted expenditure was more than one-quarter of
the budgeted amounts.
31
4. Fiscal Performance
b) Expenditure at 2000 Prices (2001-2008)
Table 2: Percentage Distribution of State Spending Based on Economic
Classification (Period Average)
(in percent)
Akwa Cross
State Delta Ibom River Kano Lagos Ondo
Recurrent 56.01 58.7 60.2 64.5 79.1 68.0
Capital 43.09 41.3 39.8 35.5 20.9 32.0
Total
Expenditure 100 100 100 100 100 100
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4. Fiscal Performance
b) Expenditure at 2000 Prices (2001-2008)
Table 3: Functional Composition of State Capital Spending (2001-2008
Average)
Sub-Sector Share (%)
Works and Transport 23.6
Manufacturing, Cooperative & Finance 15.9
Commerce and Tourism 8.6
Education, Science & Technology 6.5
Urban Development 5.2
Social Dev. and Sports 0.3
Forestry 0.2
Livestock & Veterinary Services 0.1
Fisheries 0.1
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4. Fiscal Performance
c) Fiscal Balance at 2000 Prices (2001-2008)
The state government consistently budgeted for a
balanced
The outturn of the budget performance however,
recorded deficit for most of the period under
review.
In the outturns, fiscal surplus was recorded in
2003, 2005 and 2008.
Fiscal deficit grew in nominal terms from N8.19 in
2002 to N51.93b in 2006.
34
5. Service Delivery
Assessment of socio-economic performance
hamstrung by inadequate data
This assessment focuses on:
Poverty Incidence
Education
Health
Water and Electricity
No. of Projects in Key Sectors
35
5. Service Delivery
Poverty Incidence
The 2001 Independent Report
Widespread poverty with 57% of the people
living below the poverty line;
28% or one million people were in abject
poverty; and
Considerable variations in poverty incidence
by LGA.
36
5. Service Delivery
Poverty Incidence
Relative poverty in Delta State 56.1% in 1996 compared to the
national average of 65.6%.
In 2004, relative poverty in the state was 45.35%, lower than
the national average of 54.4%.
Absolute poverty based on $1 per day: 40.4% in Delta State
compared to 51.6% nationwide
Absolute poverty based on basic needs index (BNI): 50.8% in
Delta State vis-à-vis 54.7% nationwide
Perception studies put poverty incidence at about 62.6% in
Delta State vis-à-vis the national average of 63.9% (NBS,
2006).
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5. Service Delivery
Table 4: Relative Poverty in Nigeria and Delta State
State 1996 2004
Delta State 56.1 45.35
Nigeria 65.6 54.4
Source: National Bureau of Statistics, NBS (1999, 2005).
38
5. Service Delivery
Education
Access to primary school 73.0%; lower than the national
average of 75.9% (Table 5).
Low primary school completion rate: 15.3%, but completion rate
is higher than the national average of 12.1%.
Access to secondary education 52.7%; higher than the national
average of 47.3%
Secondary school completion rate 29.4%, is higher than
national average of 20.1%.
Adult literacy in any language 74.4%, higher than 65.7%
nationwide.
The rural sector relatively disadvantaged than the urban sector,
except in primary school completion rate.
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5. Service Delivery
Table 5: Performance in the Education Sector, 2006
Delta State National
Indicator
Aggregate Rural Urban Aggregate Rural Urban
Access to Primary School 73.0 72.3 75.3 75.9 71.9 86.7
Completion Rate (Primary) 15.3 15.4 15.0 12.1 10.6 16.3
Access to Secondary School 52.7 47.5 63.7 47.3 37.5 69.3
Completion Rate (Secondary) 29.4 25.2 38.1 20.1 13.6 34.7
Adult Literacy (Any
Language) 74.4 80.5 90.6 65.7 58.6 79.6
Source: NBS, Core Welfare Indicators Questionnaire Survey, 2006
40
5. Service Delivery
Health
Access to health services: 48.7% compared to
55.1% nationwide (Table 6).
Low utilization rate of health services: 10.5% vis-à-
vis 8.1% nationwide.
Percentage of under-5 children who are fully
immunized: 66.5% vis-à-vis national average of
43.4%.
The rural sector worse off in each of the indicators
vis-à-vis the urban sector.
41
5. Service Delivery
Table 6: Performance in the Health Sector, 2006
Delta State National
Indicator
Aggregate Rural Urban Aggregate Rural Urban
Health Access 48.7 44.1 59.0 55.1 47.8 70.9
Healthcare Utilization
Rate 10.5 9.8 14.9 8.1 7.8 8.8
of Children Fully
Immunized 66.5 67.6 59.4 43.4 36.7 59.2
Source: NBS, Core Welfare Indicators Questionnaire Survey, 2006
42
5. Service Delivery
Water and Electricity
Access to safe water source: 54.0% compared to
51.4% nationwide
Access to safe water source: 44.0% in rural areas
and 73.8% in urban areas
Access to electricity: 74.7% compared to 55.2%
nationwide.
Access to electricity: 67.2% in rural areas and 90.8%
in urban areas.
43
5. Service Delivery
Projects in Key Sectors, 2004-2005
The state government formulated 1121 projects in
basic infrastructure, education and health (Table 7).
Of the planned projects, 26.1% were for
electrification, 40.4% for water supply and 33.4% for
Road construction and rehabilitation.
Project completion rate averaged 47.01%.
Project completion rate ranged between 0% for
primary schools and 60.3% for water supply.
44
5. Service Delivery
Table 7: Number of Planned and Executed Projects, 2004-2005
No No Completion
Project
Planned Completed Rate (%)
Electricity 293 90 30.7
Water Supply 453 273 60.3
Roads 374 164 43.9
Primary Schools 1 0 0.0
Total 1121 527 47.01
Source: National Planning Commission; 2006 SEEDS Benchmarking Result
45
6. Resource Allocation Process
The 2006 SEEDS Benchmarking Exercise shows
that certain strengths and weaknesses characterize
the resource allocation process (Tables 8-9).
Strengths
Budget is comprehensive
Recruitment is based on service delivery needs
Evidence of feedback mechanism to measure user
satisfaction
Strategy to monitor and reduce payment arrears
Written procedures are followed in awarding contracts
Scrutiny of Auditor-General’s reports by the Public Accounts
Committee
46
6. Resource Allocation Process
Weaknesses
Lack of a coherent fiscal strategy
There was no medium term sector strategy (MTSS)
Staff audit not used to reshape the civil service.
Service provision not monitored against policy targets.
Inadequate tracking of poverty reducing expenditures
Baseline data not disaggregated by LGA and gender
Irregular in-year budget reports
Late submission of financial statements
Late submission of Auditor-General’s reports
47
6. Resource Allocation Process
Table 8:: Scoring of Key Elements of Delta State Budget Process
S/N Description Score Obtainable Score Obtained
1 Evidence of a coherent fiscal strategy 2 0
2 Comprehensiveness of the Budget 2 0
3 Multi-Year Expenditure Framework 2 0.5
4 Evidence of MTSS 2 2
Evidence of costed capital and recurrent implication of
5 SEEDS 3 1
6 Socio-economic data are used for policy making 2 2
7 Staff audit have been used to reshape the Service 1 0
8 Recruitment is based on service delivery needs 1 0
9 Evidence of action taken in response to complaints 1 0
Total 16 5.5
Source: National Planning Commission; 2006 SEEDS Benchmarking Result
48
6. Resource Allocation Process
Table 9: Scoring of Key Elements of Delta State Budget Monitoring and
Evaluation Process,2003-2005
S/N Description Score Obtainable Score Obtained
Monitoring of service provision against policy targets
1 2 0
2 Tracking of poverty reducing expenditures 2 0
3 Disaggregation of baseline data by gender 1 1
4 Disaggregation of baseline data by LGA 1 0
Evidence of institutional framework for sustainable
5 3 0
debt management
6 Elimination of payroll fraud 3 1.5
Source: National Planning Commission; 2006 SEEDS Benchmarking Result
49
6. Resource Allocation Process
Table 9 (contd)
S/N Description Score Obtainable Score Obtained
7 Strategy to monitor and reduce payment arrears 1 0.6
Regularity and comprehensiveness of in-year budget
8 2 2
reports
Submission of financial statements within the
9 2 2
stipulated time
Submission of Auditor-General’s report within the
10 2 0
stipulated time
Scrutiny of Auditor-General’s reports by the Public
11 2 2
Accounts Committee
Total 21 8.1
Source: National Planning Commission; 2006 SEEDS Benchmarking Result
50
7. Reform Agenda
Development Initiatives
Costing of recurrent expenditure implications of
plan based on MTEF
Putting higher priorities on the social sector or
(pro-poor programs)
IGR Mobilization
Consolidation of database on taxpayers
Promotion of commercial and industrial activities.
51
7. Reform Agenda
Budget Formulation and Execution
Improved database and disaggregation by LGA and gender.
Development of a coherent fiscal strategy
Further Improvement in allocation to capital programs
Improvement in revenue and expenditure projection
techniques
Improved credibility of the budget.
Monitoring of service provision against targets.
Tracking of poverty reducing expenditures
Monitoring of fiscal deficits and payment arrears to ensure
fiscal sustainability.
52
8. Conclusion
The state government should consider the following:
Implementation of the State Vision 20:2020 with the aid of
implementable medium term plans
Improved funding and implementation of the capital program.
Improved priority for the social sector, particularly pro-poor
programs.
Restraints on fiscal deficits to ensure fiscal sustainability.
Monitoring of service provision against policy targets.
Capacity building in plan and budget formulation, monitoring
and evaluation.
Vigorous pursuit of his Excellency’s 3PA of Peace and Security,
Human capital development and Infrastructural development
53
8. Conclusion
Public service reform with the changing role of the public
sector as the sole provider of employment to a new role of
just creating a conducive environment for the private sector
to create wealth and job
The need to run a lean and efficient government with high
value for money spent;
the high expectations of citizens in respect of provision of
services for improved standard of living,
the effect of technological change and coming of e-
government
increased focus on growth and development, in addition to
interest of international development partners on the need
to reduce the size of government and curb waste.
Thank You
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