The Consensus on Fiscal Discipline in States

Many states across the country recently received awards from the federal government for their performance in the ongoing Word Bank-assisted States Fiscal Transparency Accountability and Sustainability (SFTAS) Programme for Results (PforR), designed to enthrone fiscal discipline at the sub-national level. Ndubuisi Francis profiles the reform-styled programme which has opened new vistas for public finance management in the states

There is a growing consensus by stakeholders at the federal and state levels that the four-year SFTAS programme (2018-2022) is increasingly revolutionising the way public finance management system is handled at the sub-national level.

Conceived by the federal government, SFTAS was approved by the World Bank in June 2018 and took effect in May 2019 to nudge states into imbibing fiscal transparency, accountability and sustainability.

The programme’s original $750 million loan from the World Bank comprised two components – the performance-based grants from the federal government to states for achieving the Annual Eligibility Criteria and the Disbursement Linked Indicators (DLIs), the programme results.

Following the advent of COVID-19 in December 2020, the World Bank approved an additional financing of $750 million to assist states to cope with the fiscal constraints occasioned by the pandemic, bringing the total to $1.5 billion.

The Precursor 

In 2016, the federal government introduced a 22-point Fiscal Sustainability Plan (FSP) for states and local governments, designed to bolster fiscal prudence and transparency in public expenditure. 

The aim was for state governments to abide by the FSP’s strategic objectives around the five key elements of accountability and transparency, increase in public revenue, rationalisation of public expenditure, public financial management reforms, and sustainable debt management. 

The ultimate objective of the FSP was to ensure that states were on the path of fiscal sustainability.

However, after more than a year of the existence of the FSP, many of the states were still a study in opacity. They were bereft of fiscal discipline and transparency while wastages and mismanagement festered.

These unwholesome trends constrained the federal government from having a good understanding of states’ expenditures and their fiscal situation until risks materialised.

Therefore, in a bid to nudge the states into imbibing fiscal transparency, accountability and sustainability, the government at the centre, in collaboration with the World Bank decided to incentivise states with the SFTAS programme, which is anchored by the Programme Coordinating Unit (PCU) under the Federal Ministry of Finance, Budget and National Planning.

The programme supports the full and sustained implementation of a strategic subset of reforms from the FSP and the Open Government Partnership (OGP) commitments that are implemented at the state level. 

As of October 8, 2022, the Finance Ministry had disbursed the total sum of N475.5 billion to the 36 states following their performance in the 2018, 2019 and 2020 Annual Performance Assessments (APAs) carried out by the Office of the Accountant Generalof the Federation (OAGF). The last and final disbursement (2021 APA) is expected to be made in the next few weeks.

The Turning Point

The programme which thrives on the tenets of responsive and responsible governance was designed to encourage states to significantly improve outcomes in four key results, and provides performance–based grants and technical assistance to the sub-nationals to implement the federal government’s 22- point Fiscal Sustainability Plan FSP and the Open Government Partnership.

The four key areas where states are expected to significantly increase results are: Fiscal Transparency and Accountability; Strengthen Domestic Revenue Mobilisation; Increase Efficiency in Public Expenditure and Strengthen Debt Sustainability. 

The federal government has already disbursed grants to states that met the Annual Eligibility Criteria and Disbursement Linked Indicators (DLIs), which are determined through the Annual Performance Assessment (APA).

For the states, they have come to realise that the more fiscally transparent, accountable and sustainable their operations are, the closer they come to harvesting from the incentives offered by SFTAS.

SFTAS has not only bolstered the internally generated revenue (IGR) of various states in areas like property taxation, it has also plugged leakages and led to greater efficiency in public finance management.

The Awards

Impressed by the far-reaching reforms the SFTAS programme has so far entrenched in states across the federation, the federal government recently rolled out the drums to celebrate what many analysts have described as one of the far-reaching fiscal reforms of the Buhari administration.

At an award dinner in Abuja, where various states were honoured, the Minister of Finance, Budget and National Planning, Mrs.  Zainab Ahmed applauded state governments in the country on their performance on the SFTAS.

 Ahmed expressed delight that the $1.5 billion SFTAS programme supported by the World Bank which commenced in 2018 has come of age with the full institutionalisation of fiscal reforms at the sub-national level.

The event witnessed the presentation of awards to best performing states in the successive Annual Performance Assessments conducted over the last three years of the programme’s existence.

The deserving states were honoured based on their performance in key results areas, including Overall Best on SFTAS (All DLIs), Improvement on Original DLIs, Fiscal Transparency and Accountability, Domestic Revenue Mobilisation, Efficiency of Public Expenditures and Debt Sustainability.

In the first category of Overall Best on SFTAS (All DLIs), Yobe clinched the first spot as ‘Top Performer’ with Jigawa, Kebbi and Ebonyi states grabbing the ‘Excellent Performer Award’ while Sokoto, Gombe, Delta, Borno and Niger states got the ‘Very Good Performer Award’.

For the second category: Improvement on Original DLIs (1-9), Borno won the ‘Top Performer Award’ with Nasarawa, Kebbi and Bayelsa states clinching the ‘Excellent Performer Award’ while Zamfara, Imo, Kano, Ebonyi and Akwa Ibom states received the ‘Very Good Performer Award.’

Under the Fiscal Transparency and Accountability category, Yobe again got the ‘Top Performer Award’ with Gombe, Delta and Ekiti states following closely behind with ‘Excellent Performer Award’ while Edo, Abia, Ondo, Enugu and Kogi states got the ‘Very Good Performer Award’.

The domestic revenue mobilization category saw Osun State clinching the ‘Top Performer Award’ with Sokoto, Kaduna and Bauchi states earning the ‘Excellent Performer Award’ while Kebbi, Jigawa, Ebonyi, Kogi, Gombe, Nasarawa and Plateau states took the ‘Very Good Performer Award’.

In the Efficiency of Public Expenditures category, Edo came tops with the ‘‘Top Performer Award, closely followed by Borno, Niger and Ebonyi states with the ‘Excellent Performer Award’ while Delta, Yobe, Kebbi, Osun, Gombe and Jigawa states achieved the ‘Very Good Performer Award’.

Under the Debt Sustainability category, Jigawa clinched the ‘Top Performer Award’ just as Yobe, Kebbi and Ebonyi states took the ‘Excellent Performer Award.’ 

Kogi, Sokoto, Borno, Akwa Ibom, Delta, Niger and Nasarawa states grabbed the ‘Very Good Award’ category.

While presenting the awards to the governors of the various states, the finance minister expressed hope that the honour would spur them further to strive towards deepening and mainstreaming the reforms in their respective States.

Ahmed also highlighted that since inception, the programme had continued to enjoy a very high level of political support and commitment with steady and strong performance coupled with demonstrable high level of ownership by State and Non-state Actors especially the civil society and the media.

She explained that the primary objective of the programme was to install a common set of fiscal behaviour and standards and facilitate the widespread adoption of good practices in fiscal and public financial management across the states while respecting their fiscal autonomy.

She said: “These good practices include preparation of Citizen -based Budgets, timely preparation and publication of Annual Budget and Audited Financial Statement as well as adoption of National Chart of Account amongst other Disbursement Linked Indicators (DLIs).

“There is no gainsaying the fact that over the years, SFTAS has achieved its set objectives and recorded significant milestones in improved fiscal transparency and accountability; increased domestic revenue mobilization; increased efficiency in public expenditure; and strengthened debt management in line with the already imbibed ideals.”

The minister, who described the SFTAS programme as one of the country’s most laudable and enduring fiscal reforms initiated under the President Muhammadu Buhari administration, with the support of the World Bank, also expressed optimism that the resounding success recorded, especially the wholesale adoption of the SFTAS Charter by all the 36 state governors, the programme ideals already entrenched in the fiscal governance space at sub-national level would continue to enjoy a place of pride in the conduct of fiscal governance even in the absence of any further fiscal incentives.

Ahmed excitedly told the governors that in the next few weeks, their sates would receive the last tranche of performance-based grants including the sum of N1 billion withheld by the Central Bank of Nigeria (CBN) through naira exchange deficit thus bringing to a close, the Performance for Results Grant.

Speaking on behalf of the Nigerian Governors’ Forum, Sokoto State Governor Aminu, Waziri Tambuwal assured the federal government and the World Bank of their continued support in upholding SFTAS’ ideals beyond the fiscal incentives, noting that the grants were very useful and that the states had begun to streamline their operations, cut cost, publish their accounts, and deepen citizen engagements.

The NGF had recently launched and signed the States’ Charter to Sustain Fiscal Transparency, Accountability and Sustainability Reforms whereby they reaffirmed their unwavering commitment to the sustainability and willingness to be further accountable to the people.

On the occasion, the immediate past NGF Chairman and former Ekiti State Governor, Kayode Fayemi expressed optimism that much was already being sustained beyond SFTAS’ performance years, with states still publishing their fiscal documents in line with appropriate standards and pursuing the implementation of various laws that have been put in place.