Akinwunmi Ambode discusses the progress of Nigeria Finance Reforms. Excerpt from the lecture delivered at the retreat of the Forum of Accountants-General in Nigeria, Victoria Island, Lagos.

1. Public financial management reforms: The wayforward
Akin Ambode
Public financial management is about ensuring that public money is well-spent and it is made to
stretch as far as possible. It provides leaders and public-sector managers with information to
make decisions and to know if they are using resources effectively.
The concentric point of public finance management lies at the threshold of planning for financial
resources from different sources and allocating them to various sectors with utmost control for
the efficient and effective delivery of public service goals.
Accountants-general, and invariably other financial managers, must know that public financial
management is not accountancy. Financial reporting and accounts rendition with other statutory
functions of accountant-generals are just an integral part of public financial management.
Accountants-general have been positioned to manage the finances of the state to create stability
in the operations of government.
A good public financial management system will obviously afford any committed financial
manager the opportunity to contribute to the long-term economic success, growth and
development of the state. In essence, financial managers must begin to see themselves as
stabilisers of government or public-sector institutions where they find themselves and not just
ordinary persons in the scheme of things.
Public financial management system
Public financial management system comprises the legal (e.g., public finance laws) and
organisational framework for supervising all phases of the budget cycle, preparation of plans and
strategies, fiscal projections and costing (budget preparation, budget execution and
implementation, budget monitoring and reporting, internal controls and internal audit, external
scrutiny and oversight including external audit), legislative follow-up on audit findings and post-
implementation project evaluation.
Strong public financial management systems are essential to improved service delivery, poverty
reduction and, to an extent, achievement of MDGs. An effective public financial management
system will naturally guarantee financial efficiency, improve transparency and accountability.
Public financial management system is designed to support all financial operations; collect
accurate, timely, complete, reliable and consistent information on all public financial events;
provide adequate management reporting; support government-wide and agency policy decisions
and produce auditable financial statements.
Institutional framework
Strong institutions and relations among the three arms of government (executive, legislative and
judiciary) are the cornerstone of any public financial management reform. We must deliberately
continue to strengthen our institutions in order to contribute to a well-functioning public
financial management system. Such institutions at the federal level include but not limited to:
Federal Ministry of Finance (FMF); Budget Office of the Federation (BoF); Office of the
Accountant General of the Federation (OAGF); Debt Management Office (DMO); Federal
Inland Revenue Service (FIRS); Nigeria Customs Service (NCS); National Planning
Commission (NPC); Revenue Mobilisation Allocation and Fiscal Commission (RMAFC);
Bureau of Public Procurement (BPP); Office of the Auditor General for the Federation, and the
National Assembly.

2. In the same vein, building similar institutional framework at the state and local government
levels is totally indispensible.
We must get it clear: reforms are not static. Everyday situational changes aimed at improving
work efficiency and effectiveness come under the classification of reforms. Whether the reforms
are specifically targeted at improving public financial management in a structured manner is at
the heart of our subject-matter. Reforms initiatives in public financial management have been
embraced due to greater emphasis on good governance and anti-corruption issues, political
changes, fiscal crisis, public pressure as well as pressure from donor agencies and development
partners.
Public financial management reforms deliver results when there is high level buy-in and political
leadership commitment to their implementation. Model reforms are tailor-made to suit
institutional and capacity requirements, and existence of effective co-ordination arrangements by
government officials to monitor and guide reforms.
Reforms in retrospect
In 2003, a new economic team appointed by former President Olusegun Obasanjo had the
mandate to address the fundamental weaknesses in the public financial management system in
Nigeria. Since then, significant steps and measures have been taken to increase the transparency
of the budget process, ensure more efficient cash management, reform procurement processes,
and modernise the legal framework for PFM in the country.
It would be recalled that various measures that have been adopted to date include: budget-
tightening austerity measures (1982-1985), Structural Adjustment Programme-SAP (1986),
National Economic Empowerment Development Strategy (NEEDS) agenda (2004), Nigerian
Extractive Industry Transparency Initiative-NEITI (2004), the Pension Reform Act (2004), the
Fiscal Responsibility Act-FRA (2007), Public Procurement Act-PPA (2007), establishment of
the Bureau of Public Procurement (BPP), Statistics Act (2007), and Freedom of Information Act-
FOI (2011).
The design of Nigeria’s public financial management system clearly needs modernising, given
the fact that there is a risk of not achieving the country’s development goals due to weak PFM
capacities.
It is in line with this reality that the major components of the new PFM reforms in Nigeria have
focused on budget and budget management, budget classification and development of national
charts of accounts (BC & NCoA), public procurement, treasury single account, adoption of
International Public Sector Accounting Standards (IPSAS), modernisation of the internal and
external audit, legal and regulatory reforms as well as capacity building, including changes to
financial reporting systems, promotion of accrual-based financial statements, ensuring better
expenditure selection, linking budget with results, changes in internal and external public sector
audits, providing reviews of the efficiency and effectiveness of government operations (value-
for-money) and monitoring service delivery.
Monitoring of public financial management reform programmes is a useful basis to develop
effective frameworks for evaluating PFM reforms. This evaluation should be based on a
combination of measures such as international PFM assessment tools, self-assessment, and
systems audits and milestones review. The major tasks of monitoring require the measurement of
progress, identification of bottlenecks and challenges and recommendation of actions to be taken
in order to sustain progress towards the attainment of the agreed benchmarks. Monitoring
progress enables decision-makers in government to assess the success and difficulties of the
reform process and make decisions accordingly.
For the purpose of monitoring progress, different measurement techniques are needed to assess
the relationships between activity implementation and output/outcome impacts in areas such as
reforms measures/activities (training, new law, etc), implemented institutional and system

3. changes (IFMIS, NCOA, etc) in the performance of the PFM system over the years. Monitoring
PFM reforms also requires a framework that ensures consistency over time, precise, systematic
coverage of the budget cycle and objective measurement of progress.
The Public Expenditure and Financial Accountability (PEFA), Public Financial Management
Performance Management Framework can be employed as a readymade tool that would provide
reliable information on the performance of PFM systems, processes and institutions over time.
The Performance Measurement Framework would go a long way in supporting and
strengthening PFM reforms. It includes a set of high-level indicators and incorporates
performance reports, which support monitoring and tracking of performance over time, are few
and widely acceptable to all stakeholders and measure performance relative to the key PFM
system characteristics.
Public Expenditure and Financial Accountability Framework is a contribution through collective
efforts of many stakeholders to assess whether a country has the tools to deliver three main
budgetary outcomes, namely: aggregate fiscal discipline, strategic resource allocation, and
efficient use of resources for service delivery.
PEFA indicators measure the performance of the six core objectives of a PFM system in relation
to credibility of the budget (that the budget is realistic and is implemented as intended);
comprehensiveness and transparency (that the budget and the fiscal risk oversight are
comprehensive and fiscal and budget information accessible to the public); policy-based
budgeting (that the budget is prepared with due regard to government policy); predictability and
control in budget execution (that the budget is implemented in an orderly and predictable manner
with inbuilt control and stewardship in the use of public funds); accounting, recording and
reporting (that adequate records and information are produced, maintained and disseminated to
meet decision-making control, management and reporting purposes); and external scrutiny and
audit (that there are arrangements for scrutiny of public finances and follow-up by executive are
operating).
To provide essential narrative on these indicators, the PFM performance report has been
developed. The PFM performance report is designed to explain the ratings of the core objectives
and provide context in a standardised manner.
The performance report documents and summarises the current performance of PFM systems,
processes and institutions based on the indicators, the recent and on-going reform measures
implemented by government, assessment of the institutional factors that are likely to impact
reform planning and implementation in the future.
Of concern, however, is the limited progress that has been made in improving public financial
management in the three tiers of government in Nigeria with the sustainability of PFM reforms
appearing uncertain. Some of the factors contributing to the sorry state include the inadequate
sequencing and fragmented approach to reforms, limited monitoring of progress resulting in
concentration on inputs rather than focus on results on the ground, and capacity constraints.
In order for PFM reforms to achieve success, the next steps and way forward would be such that
as government moves towards implementation of the various reform initiatives, PFM work
should be reoriented to support this process. In addition, the following strategies should be
adopted:
The budget must be viewed as a technical process, not a political process; due process and
formal practices have to override current common informal behaviour; attitudinal change by all
players of PFM process is necessary for any significant improvements to occur; PFM reform
programmes need ownership, strong high-level political commitment and support to achieve real
sustainable progress; building on existing capacity to develop professional skills is required;
effective training methods should be employed; increased public awareness on reforms is highly

4. imperative; and civil society and majorly all stakeholders need to continue to hold governments
accountable for the public finances entrusted in their hands on behalf of the rest of us.
Excerpt from the lecture delivered at the retreat of the Forum of Accountants-General in Nigeria
at Radisson Blu, Victoria Island, Lagos.