VZCZCXYZ0037
RR RUEHWEB

DE RUEHUJA #0077/01 0221453
ZNR UUUUU ZZH
R 221453Z JAN 10
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC 0046
INFO RUEHOS/AMCONSUL LAGOS 0041
RUEHUJA/AMEMBASSY ABUJA

UNCLAS ABUJA 000077 
 
SIPDIS 
PLEASE PASS TO EEB/IFD/OMA BRIANA SAUNDERS 
 
E.O. 12958: N/A 
TAGS: EAID ECON EFIN PREL NI
SUBJECT: NIGERIA: FY 2010 PROHIBITION ON ASSISTANCE TO CENTRAL 
GOVERNMENTS WHOSE BUDGETS ARE NOT TRANSPARENT 
 
REF: 10 STATE 1923; 09 ABUJA 626 
 
¶1.  (U) The following is Embassy Abuja's response to the questions 
contained in Reftel A. 
 
 
 
¶2.  (U) SFOAA funding:  The Government of Nigeria is expected to 
receive U.S. foreign assistance, using FY 2010 funds, for the U.S. 
President's Emergency Plan for AIDS Relief (PEPFAR), International 
Military Education and Training (IMET), Foreign Military Financing 
(FMF), and technical assistance and training through USG-funded 
implementing partners. 
 
 
 
¶3.  (U) Public availability:  The Nigerian federal budget is a 
public document.  The enacted federal budget is available in both 
print and electronic form soon after it is approved by the National 
Assembly and signed by the President.  Hard copies can be obtained 
from the Clerk's Office in both houses of the National Assembly. 
Electronic versions can be obtained from two government websites: 
www.budgetoffice.gov.ng and www.fmf.gov.ng.  Formal public audits 
of government accounts are conducted and end-of-year outcomes 
reports are published, but with a lengthy lag.  The first 
end-of-year outcome report was published for FY 2004.  The Debt 
Management Office publishes debt, but not grants, received from 
bilateral and multilateral sources. 
 
 
 
¶4.  (U) Incomes and expenditures:  Incomes and expenditures are 
included in the enacted federal budget.  Expenditures are provided 
in much more detail than incomes, but this is because the majority 
of projected income is oil and gas income, which is based on a 
projected average annual oil price and a projected average annual 
production level.  The President's annual budget speech provides 
the assumptions behind the income and expenditure numbers.  The 
Ministry of Finance also publishes every month the distribution of 
all revenues to the federal, state, and local levels of government. 
This information is published in the local newspapers and posted on 
the above-mentioned government websites. 
 
 
 
¶5.  (SBU) Post assessment:  The federal budget is a plan, not an 
actual statement of spending.  There is a significant difference 
between budgeted and actual expenditures, or under-spending, but 
this is largely due to a lack of implementing capacity when it 
comes to capital spending, rather than a lack of transparency. 
Recurrent expenditures, which consist primarily of government 
salaries, are fully spent.  There is also a significant difference 
between budgeted and actual incomes, due to fluctuations in 
international oil prices and domestic oil production.  The 
combination of lower oil prices due to the global recession and 
lower oil production due to the damage of pipelines and oil 
terminals by militants contributed to a major reduction in oil 
revenues in 2009.  There was also a significant decline in non-oil 
revenues.  Lower oil and non-oil revenues led to drastic decline in 
income. 
 
 
 
¶6.  (SBU) Since 2009.  The National Assembly passed the Fiscal 
Responsibility Act of 2007 to ensure transparency in the use of 
government revenues.  The Fiscal Responsibility Act provided for 
the establishment of the Fiscal Responsibility Commission to 
monitor government budgetary practices and consistency with the 
Act.  This Fiscal Responsibility Commission was in the process of 
establishing itself in 2009.  The new Chairman of the Commission 
acted independently, published positive articles in the press, and 
visited the World Bank in Washington in November/December 2009 
seeking advice on how to manage the Committee.  The Fiscal 
Responsibility Act had been passed in 11 states and was at various 
states of enactment in the remaining 25 states as of the end of 
¶2009.  The National Assembly also passed the Public Procurement Act 
of 2007 to ensure transparency and value-for-money in government 
procurement.  The Public Procurement Act also had been passed in 
some states as of the end of 2009.  The World Bank, the African 
Development Bank, USAID, and the U.K. Department for International 
Development have agreed under the World Bank-led Country 
Partnership Strategy II to continue efforts to build the capacity 
of state governments to introduce fiscalQsponsibility legislation 
and public procurement reform.  The World Bank is leading a donor's 
group to promote these reforms in collaboration with the Ministry 
of Finance. 
 
 
¶7.  (SBU) The Federal Government resorted to increased use of the 
Excess Crude Account, or "rainy day" fund, to make up for 
shortfalls in budgeted non-oil revenues in 2009.  These 
expenditures were distributed between the federal, state, and local 
levels of government and were not part of the financing plan that 
was presented to the National Assembly, and not part of the checks 
and balances represented by the federal, state, and local 
governments, and the National Assembly. 
 
 
 
¶8.  (SBU) Government efforts.  The National Assembly has continued 
to step up its monitoring and oversight of the budget process since 
the new set of law makers came into office in May 2007.  The 
proposed Petroleum Industry Bill (PIB) is expected to receive its 
third and final reading in early 2010.  The PIB seeks to increase 
the GON's share of oil and gas revenues from mandated joint 
ventures, unbundles the existing state-owned Nigerian National 
Petroleum Corporation (NNPC), and creates three independent 
regulators for the upstream, midstream and downstream industries. 
These regulators would monitor revenues and the USG has been asked 
for help to help establish these regulatory bodies.  The revenues 
would be monitored by the regulators and would go directly to the 
Ministry of Finance, bypassing the NNPC and all other existing 
intermediaries.  This would be a major step forward in increasing 
budget transparency because oil and gas revenues constitute an 
estimated 85 percent of current central government revenues. 
 
 
 
¶9.  (SBU) Elsewhere, the National Assembly passed the Nigerian 
Extractive Industry Transparency Initiative (NEITI) law in 2007. 
NEITI released in 2009 its audit of Nigeria's 2005 oil and gas 
revenues.  This audit has been accepted by the Federal Executive 
Council (or cabinet), presented by the President to the National 
Assembly, and published.  In addition, NEITI fully procured audits 
for the years 2006-2008 and plans to release, present, and publish 
these audits in the same manner.  The GON has also agreed to have 
an independent validator verify fulfillment of the agreed-upon 
Extractive Industry Transparency Initiative (EITI) standards. 
 
 
 
¶10.  (SBU) USG/Post actions.  The USG has supported effective 
implementation of NEITI since the NEITI law was passed in 2007. 
USAID resources supported effective oversight of the implementation 
of NEITI in 2009.  USAID participated in a UNDP-chaired donor group 
in 2009 that worked with the Nigerian Governors Forum to improve 
fiscal transparency among Nigeria's 36 states.  Specifically, USAID 
had a consultant working with the state governments on state fiscal 
responsibility legislation.  USAID will continue its assistance to 
build the capacity of the Bauchi and Sokoto state governments to 
introduce fiscal responsibility legislation and public procurement 
reform through its new Leadership, Empowerment, and Advocacy and 
Development (LEAD) project.  USAID conducted an assessment to 
identify states in the oil-producing Niger Delta that work with 
donors and the GON as EITI lead-states.  Bayelsa State, for 
example, has adopted EITI at the state level (BEITI).  Bayelsa 
State has signed an MOU with the USG to finance USAID-managed 
technical assistance to promote fiscal responsibility legislation 
and public procurement reforms.  However, Bayelsa State has not yet 
provided the necessary financing to USAID.  Introducing fiscal 
responsibility legislation and public procurement reform in the 
states is a major step forward because approximately 50 percent of 
central government revenues are transferred to the state and local 
governments and it is in this half of central government 
"expenditures" where greater budget transparency is most needed. 
SANDERS