Nigeria Reforms Government Spending with New Policy
By Patience Ikpeme
The Federal Government has announced a major policy shift aimed at improving fiscal discipline and ensuring greater efficiency in government spending.
The new regulation mandates that government ministries, departments, and agencies (MDAs) must receive warrants and Authority to Incur Expenditure (AIEs) before entering into any legal commitment for contracts.
The announcement was made by the Minister of Finance and Coordinating Minister for the Economy, Mr. Wale Edun, during a stakeholders’ meeting in Abuja on Wednesday.
Speaking at the Stakeholders’ Engagement on the Implementation of the 2025 Capital Budget, Edun stated the policy is designed to serve as “evidence of funds available for award of contracts or processing of payments for ongoing and completed contracts. Prior to legal commitment, we spend what we have earned.”
He went on to say, “For the avoidance of doubt, we are to ensure that no letter of award is issued, contract signed, or entered into any financial obligation unless corresponding warrants and AIEs covering the full or committed portion have been duly released.”
The minister spoke of the government’s determination to meet its obligations, while acknowledging the need for improvement. “The past is the past. We are where we are. Government will meet its obligations. Nonetheless, we are here to make things better, to improve as we go forward.”
Edun attributed the government’s improved financial position to the removal of certain “distortions” which he said “were costing 5% of GDP.” He explained that with the removal of these obstacles, “the funds are flowing, and we have seen from the figures, they are flowing into the federation account as well as other avenues of government revenue.”
The minister detailed the government’s economic strategy, which he said is focused on investment over consumption. “They are channeled into investment in equipment and facilities that increases productivity, rules the economy, creates jobs, and lifts people out of poverty by the millions. That’s the aim and objective strategy and policy of Mr. President and indeed his entire team and administration,” he said.
While acknowledging that the economy is currently growing at around 3.5%, which is above the population growth rate, Edun clarified that the target is much higher. “The target is to at least double population growth, get to our 7% per annum consistently with rapid, sustained, inclusive growth, and then millions of Nigerians will be lifted out of poverty,” he said.
Dr. Tanimu Yakubu, the Director-General of Budget, provided insight into the reasons for past financial challenges. “In both the first and second quarters, we had significant revenue underperformance,” he said, citing three key factors. The first, he explained, was the Petroleum Industry Act (PIA) of 2022, which allocates 30% of gross oil revenue to the NNPC for management fees and another 30% of gross oil and gas profit to the Frontier Exploration Fund. He disclosed that he has initiated efforts to amend the PIA to secure more revenue.
The second factor, he noted, was the practice of using “2025 inflows to service the 2024 budget” at the beginning of 2025. Lastly, Yakubu attributed revenue shortfalls to developments in the international oil market, which saw a drop in oil prices and an inability to meet targeted output, making it necessary to prioritize expenditure. “What is required to fund that would also be raised. So that we can achieve a close out on 2024,” he said.
The Accountant-General of the Federation, Shamseldeen Ogunjimi, spoke about the practical application of the new policy and its impact on existing contracts. He called on MDAs to prioritize their budget implementation plans. “After Procurement process done and award letters already released, What happened? We have said that you just have to find a way to realign this,” he said, before adding that the goal is to “restore that confidence… that when you hold a government contract letter, that everyone, bank and all, will be looking for you to sponsor.”
Ogunjimi clarified the status of existing contracts, saying, “For those that have already completed their procurement process and all that. You are going to align them in your budget implementation plan, a warrant will be released accordingly and you now know those who can go ahead.” He also assured that contracts already loaded onto the GIFMIS platform, and for which a cash warrant has been processed, will be considered a commitment and will be funded. “For those that are scheduled. That is a commitment on the part of the government. And we are going to fund it,” he stated.
Mr. Steve Ehikhamenor, Director of Funds in the Office of the Accountant General of the Federation (OAGF), advised MDAs on how to navigate the new system. He spoke about the delays in releasing funds and asked MDAs to prioritize their budget implementation plans based on a circular issued by the Budget Office. “We are not here for a joke. We are here to resolve issues. And that is the reason why you are asked to prioritize your budget implementation,” he said.
