Appraising World Bank’s $750m SFTAS Programme For States

The State Fiscal Transparency, Accountability and Sustainability (SFTAS) Programme for Results is a product of mutual agreement between the Federal Government of Nigeria and the World Bank designed to strengthen the Fiscal transparency, accountability and sustainability in Nigerian States as a way of improving their revenue base, increasing fiscal efficiency in public expenditure and reducing debt overhang.

Thus, the SFTAS Programme aims to significantly improve outcomes of participating states in 4 key results (KRA’s): Increase Fiscal Transparency and Accountability; Strengthen Domestic Revenue Mobilization; Increase Efficiency in Public Expenditure and Strengthen Debt Sustainability. It is envisaged to provide performance –based grants and technical assistance to states to implement the 22 point Fiscal Sustainability Plan (FSP) and the Open Government Partnership (OGP) commitments over the next 4 years (2018-2022).

The USD 750 Million IDA credit facility extended to the Nigeria Government by the World Bank and endorsed by the National Economic Council in March 2018 is billed to take off by the end of 2018. Already, all the 36 state governments have submitted written expressions of interest to the Federal Ministry of Finance to participate in the programme.

The rationale behind the State Fiscal Transparency, Accountability and Sustainability (SFTAS) Programme is informed by the current serious fiscal challenges faced by the states with many unable to pay backlog of salary arrears of  several months due to poor fiscal governance occasioned by high cost of governance, profligacy poor revenue drive amongst others.

It is instructive to note that most states with the exception of a few have weak fiscal transparency and accountability structure characterized by unpublished budgets & financial statements, lack of timely budget implementation reports, very high budget deviation (between 30% to 55%) and their Citizens are never engaged in the budget process. State Executives believe they are not accountable to the citizens and hence do not need their input in major policy decision-making processes particularly budget processes where everybody is kept in the dark. It is only the media and the civil society and sometimes social media activists who on behalf of the citizens can hold leaders accountable usually at a great cost to themselves and their families.

It is also worth emphasizing that most state governments are known for their penchant to outspend one another without corresponding efforts to strengthen their domestic revenue base even when they are endowed with so much resources in their backyards waiting to be tapped. Instead of enhancing their domestic revenue mobilization they would rather wait for statutory transfers from the federation account which does not always meet their expectation. Where revenues are collected by revenue officers in the states and Local Governments, a larger percentage goes into private pockets. Most states are unwilling to automate their tax collection processes, open Treasury Single Account where all receipts are domesticated for transparency and accountability and they do not provide enough incentives to motivate tax payers by way of providing adequate infrastructure, social services like security and employment opportunities for the citizens. At the moment, only 6 states have IGR Tax Code.

The dispensation of political patronage by public office holders by way of appointing thousands of political appointees who draw their salaries and allowances from the lean finances of the states does not give room for enhanced fiscal efficiency in public expenditure. The incidence of ghost workers also takes a larger chunk of the state resources with over-bloated civil service but low productivity. While many states have done biometric capture they are yet to link it to payroll even as their Procurement systems lack transparency and are inefficient which is why recurrent expenditure outruns capital spending.

States also have poor debt management strategy characterized by increased domestic arrears, omissions of key provisions for debt management, lack of sustainability analyses with debt to revenue ratio tripling from 2014-2016. Most states have taken unrealistic loans including raising bonds in the capital market with deductions made at source (FAAC) through irrevocable payment standing order (IPSO) thus leaving the states with little or nothing barely enough to pay workers’ salaries for the current month not to talk of paying backlog of arrears. Thus, some governors have become mere salary-paying governors as they cannot carry out any meaningful project due to the lean finances of the state.

In view of the above shortcomings, it is imperative for state governments in the country to strengthen their fiscal governance and sustainability strategies as unfavourable fiscal conditions will continue to pose challenges to their developmental aspirations as long as they continue to rely on monthly pay outs from the centre without concomitant efforts to look inwards. Strengthening state revenue, increasing expenditure efficiency and strengthening debt sustainability needs to be underpinned by an increase in state fiscal transparency and accountability.

– Mohammed is a public affairs commentator.