New Publication: Analysis of Agricultural Public Expenditure in Nigeria: Examination at the Federal, State, and Local Government Level

The Nigeria Strategy Support Program (NSSP) is pleased to announce the publication of Analysis of Agricultural Public Expenditure in Nigeria: Examination at the Federal, State, and Local Government Level by Aderibigbe Olomola, Tewodaj Mogues, Tolulope Olofinbiyi, Chinedum Nwoko, Edet Udoh, Reuben Alabi, Justice Onu, and Sileshi Woldeyohannes as the 1395th publication in the IFPRI Discussion Paper Series. The IFPRI Discussion Paper was published on December 11, 2014.

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Abstract: The level of public spending on agriculture in Nigeria remains low regardless of the indicator used. Agricultural spending as a share of total federal spending averaged 4.6 percent between 2008 and 2012 and has been trending downward precipitously. In contrast, Nigeria recorded an annual average agricultural growth rate of more than 6 percent between 2003 and 2010, and agricultural gross domestic product followed an increasing trend between 2008 and 2012. Budgetary allocation to agriculture compared with other key sectors is also low despite the sector’s role in the fight against poverty, hunger, and unemployment and in the pursuit of economic development. Public investment has been stifled by the lopsided manner in which national revenue is being allocated among the three tiers of government that have responsibility for agricultural development. Subnational governments rely heavily on statutory allocations from the federation account to finance their budgets. Delays in concluding the transfer arrangements and periodic oil revenue shocks often account for delays or outright nonrelease of funds for budget implementation. Technical inefficiency in public spending has been more prevalent at the subnational level than at the federal level. In relative terms, however, the problem of technical inefficiency is far more acute than that of allocative inefficiency. At the federal level agricultural spending was aligned with development objectives in 2012 compared with previous years. During 2012, the federal budget allocated more than 73 percent of actual capital expenditures to crop agriculture, but a large part of the expenditure on crop value chains went to subsidies for inputs, including fertilizers, seedlings, and agrochemicals. But findings of the benefit incidence analysis of public spending on fertilizer subsidy suggest that the target population of the program has not benefited as intended. Allocative efficiency of overhead spending was generally poor between 2008 and 2012 because of the tendency for overhead spending to be used to support the bureaucracy rather than operations and service delivery. At the subnational level, the performance of state governments in terms of budget execution and the fact that larger deviations than at the national level are experienced between capital and recurrent budgets point to a need to address the quality of spending.

To develop the agricultural sector, all tiers of government—federal, state, and local—should increase spending. The state and local governments should step up efforts to increase internally generated revenue so as to reduce overdependence on allocations from the federation account. To enhance technical efficiency, effective monitoring frameworks for budget implementation should be established by all tiers of government. Procurement and cash management processes should also be strengthened to enhance value and avoid rushed commitments. Allocative efficiency should be improved by making budgetary allocations to agriculture more realistic. To improve the overall budget process, it is important for the three tiers of government to adopt a system of collaboration in agricultural development agenda setting and joint financing of projects that will minimize waste of financial resources and eliminate delays in the budget process. The house of assembly at the federal and state levels should enact a budget process act to give legal backing to the stipulated time frames relating to budget preparation, approval, and implementation. Because the dearth of information is likely to undermine the effectiveness of the budget as an economic management tool, the federal and state governments should strengthen the information system for agriculture public expenditure management.