US embassy cable - 04ABUJA328

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SENSITIVE BUT UNCLASSIFIED, NOT FOR PUBLICATION ON THE 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