On the 11th of November 2015, Nigeria welcomed a Federal Executive Council as President Buhari formally admitted his new 36-member cabinet and assigned their portfolios. The president also reduced the number of ministries to 24 from 32 by merging certain ministries and eliminating others. Nigerians lauded these moves which the President has pushed as a way of reducing expenditures after suggesting that Nigeria is broke.

Despite this positive step, some have questioned President Buhari’s moves, one of which is his decision to remove the budgeting processes from the Ministry of Finance and to create an independent Ministry of Budget and Planning. Having these two ministries split is certainly not peculiar to Nigeria as there are a few countries around the world, like the United States and Australia that operate this sort of system. However, the difference is that these countries are better developed and have stronger institutions, accountability and transparency which leads to smoother coordination in the budgeting process.  But in a country like Nigeria with weak institutions, dividing two functions that are part and parcel of the same thing is a possible recipe for disaster that might result in a dysfunctional and inefficient system – something Nigeria can certainly not afford at this point.

Some developed countries like South Korea have attempted to split their finance ministry at some point, but after realising that both are better under one roof, moved to merge the ministries. In 2008, the government of South Korea joined the Ministry of Finance and Economy and the Ministry of Planning and Budget (MPB) to create the Ministry of Strategy and Finance (MOSF) in order to put fiscal policy functions and inter-ministerial policy coordination under one roof. In countries where these twin ministries are run parallel to each other, the decision to split is mainly political, usually because the president intends to weaken the Ministry of Finance and control more of its functions. Is this the actual intention of President Buhari?

Headquarter of the Ministry of Strategy and Finance, South Korea
Headquarters of the Ministry of Strategy and Finance, South Korea

President Olusegun Obasanjo, attempted a similar move during his tenure when he opted to shift the office of the budget to the presidency. This move was not welcomed by the country’s former finance minister, Ngozi Okonjo-Iweala, as she tendered her resignation in defiance. Now, President Buhari has succeeded in splitting the ministry leaving a number of questions unanswered. Who will be in charge of developing the macroeconomic framework that underpins the budget – the Ministry of Finance, or the Ministry of Budget? Also, who will have oversight over the budget execution?

Another unclear move by the president is his decision to place a relatively inexperienced person like Kemi Adeosun in the critical role of finance minister. Considering the significance of the Ministry of Finance, one would expect a more seasoned candidate for a position responsible for the country’s finances, and macroeconomic outlook. Analysts have also commented on the fact that  Adeosun is to work solo without a junior minister of state. This move by President Buhari has been described as a “first-class blunder” by one of our contributors, Bayo Adeyinka who suggests that Adeosun lacks the pedigree of Nigeria’s former finance minister, Ngozi Okonjo-Iweala, and the gravitas of Charles Soludo, former CBN governor. Foreign media and financial experts have also questioned if she is capable of engaging international financial organizations and multilateral agencies effectively.

Adeosun might have a strong background in the UK’s private financial sector, and also a few years of experience as the Commissioner of Finance of Ogun state, but federal politics is a completely different game. Nigeria’s economic growth has slowed due to oil price drops, stringent but unclear monetary policy, and an economic policy that has been adrift since Buhari’s ascension to power. Now the country has a seemingly weak Minister of Finance — who has been stripped of an essential role such as budget planning and execution — expected to bring some sanity to the chaos. But without the tool of budgeting in her arsenal, the minister of finance is hampered in managing the fiscal imperatives of the economy.

According to an investor and financial expert who wished to remain anonymous, “the removal of the Budget Office from the Ministry of Finance is a huge mistake. A decision that seems motivated by a desire to whittle down the office of the Minister of Finance given the status of the previous minister, and less out of a genuine desire to actively manage fiscal policy in the government.”

Headquarter of Federal Ministry of Finance in Abuja, Nigeria
Headquarters of Federal Ministry of Finance in Abuja, Nigeria

On the other hand, President Buhari’s nomination of Udo Udoma, a strong and respected former senator as the Minister of Budget and National Planning seems to be a winning move. As a former Vice Chairman of the Senate Committee on Public Accounts, Judiciary, Banking and Currency, Udoma has experience working with budgeting and the Ministry of Finance. He was also the Chairman of the Governing Board of the Securities and Exchange Commission which brings experience with and understanding of financial markets. However, Udoma cannot run the whole budgeting process by himself which raises the question of whether or not the new ministry has the skilled professionals needed for the kind of strategic budgeting the country requires. If the answer is no, then this move could also pose a systemic risk as decisions in this ministry are taken without a full understanding of the interconnectedness of numerous economic variables.

Menachem Katz, a financial expert and former IMF country director for Nigeria explained that the system of public service in Nigeria is such that it doesn’t allow for specialisation, hence there is a dearth of well-trained economists within the economic team. Civil service staff are constantly moved around randomly preventing skills development and knowledge accumulation in specific areas or policy sectors.  In developed countries such as the UK, ministries are run and staffed by skilled professionals in that particular space. There are also university-to-government pipelines where the government selects the best students from prestigious universities like Oxford and Cambridge to train and retain. “As long as they do not have such a system in Nigeria, the whole budget process will remain weak,” said Katz.

The finance minister and the minister of budget and national planning will have to harmonise goals and operations – albeit in separate ministries – if they are to get anything done. The finance ministry needs the Ministry of Budget to actively plan. The budgeting ministry needs the Ministry of Finance to effectively disburse funding according to its mandates. What happens if they don’t coordinate and they each try to extend their roles to make sure that they are in charge? In such a scenario, clearly, the stronger person is bound to take charge, which in this case is Senator Udoma. This leaves Kemi Adeosun as a manager of parastatals that are already independently run by equally strong individuals – Nigerian Customs Service, the Federal Inland Revenue Service — and boxed in by equally substantial ministers at Trade and Investments, and Petroleum (run by the president himself, with the assistance of Ibe Kachukwu).

Udo Udoma and Kemi Adeosun
Udo Udoma and Kemi Adeosun

But if Adeosun is no pushover, and does not succumb to the looming pressure around her, it means President Buhari has successfully created a battlefield within his executive council. Or maybe not. If Udoma and Adeosun refuse to act with professional maturity and actually get work done, they’ll have to run to the President for his resolution of every point of conflict — which is perhaps what the president intends. This means that while some Nigerians are busy calling the move to separate the budgeting and finance ministries a blunder, it might well be an intentional one. President Buhari might be building a system in which he remains the final authority on finance, budget and national planning, leaving both ministers as glorified figureheads. The problem with this strategy is that if the president is busy, as his office often demands, things get stuck and nothing gets done. Whatever the intention, removing the Ministry of Budget and Planning from the finance ministry without a carefully deliberated plan, does have grave implications for Nigeria’s economy.

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