Regarding the 2019 appropriation bill recently presented by President Muhammadu Buhari to a joint session of the National Assembly, a major concern stems from the fact that it is already running behind schedule. Given the preoccupation of the lawmakers with political activities, it is unlikely that the proposals will receive an urgent attention despite the President’s plea to members of the National Assembly to “commit to an early passage of this budget in the larger interest of our people and the national economy”. This would not be the first time. Tabling the 2018 budget proposals to a joint session of the National Assembly on November 7, 2017, the President had also appealed for a swift passage of the Appropriation Bill.
Unfortunately, it was not passed until May 16, 2018, seven months after it was submitted for legislative review.
In recent times, the performance of the capital expenditure component of the annual budgets has been severely constrained due to several factors ranging from shortfall in expected revenue to cumbersome procurement process. These challenges were aggravated by late passage of appropriation bills into law. The negative effect of late passage of the 2019 budget will, like the previous budget cycles, manifest in sub-optimal implementation of the capital component. For instance, by the President’s own admission, capital releases with respect to the 2018 budget only commenced after the signing of the 2018 budget on 20th June 20, 2018 and “of the total appropriation of N9.12tn, only N4.59tn had been spent by September 30, 2018 against the prorated expenditure target of N6.84tn”.
This adverse variance fell more on capital spending in view of the fact that debt service and the implementation of non-debt recurrent expenditure notably payment of workers’ salaries and pensions were largely met. It is not an accident that annual budget performances were a lot better when the country ran a predictable January to December financial year. Much as the Federal Government’s budget represents less than 10 per cent of aggregate expenditures in the economy, it has a very significant accelerator effect on the financial plans of sub-national governments including the private sector. It goes without saying therefore that the present slow pace of economic growth is due, in part, to avoidable delays in the budget process.
Besides the concern which the delayed budget process raises, there are equally other weighty issues. The 2019 budget is predicated on a benchmark oil price of US$60 per barrel, oil production estimate of 2.3 million barrels per day and an exchange rate of N305 to one US dollar. Based on these assumptions, total revenue of N6.97tn is projected to fund aggregate expenditure of N8.83 trillion. The oil price benchmark, seen as too optimistic, is a source of worry. The President had justified this by stating that “notwithstanding the recent softening in international oil prices, the considered view of most reputable analysts is that the downward trend in oil prices in recent months is not necessarily reflective of the outlook for 2019”. Recall, however, that the sudden collapse of oil price in 2014 caught many reputable energy analysts gaping. Therefore, it is important to approach the oil revenue projection with caution bearing in mind that the international crude oil market is highly volatile. As a corollary, the 2019 budget appears to lean more on oil revenue projected at N3.73tn than non-oil revenue estimated at N1.39tn. This leaves the economy vulnerable to external shocks and poses a major budget risk.
Further, there is the concern that the 2019 budget will most likely witness a high level of off-budget funds masking the true picture of government fiscal position. Although recurrent (non-debt) spending of N4.72tn has made provision for the implementation of a new minimum wage, it is doubtful if this amount will be sufficient to accommodate the attendant bailouts to state governments by the Federal Government in support of the implementation of not only the new national wage floor but also agreements with various labour unions including those of universities and polytechnics given the paltry balance in the Excess Crude Account. Not a few also think that the conduct of the general elections in 2019 and the oil subsidy regime (in respect of which US$1bn has been earmarked as under-recovery by the the NNPC) represent a source of off-budget spending in 2019. These potential off-budget funds will undermine government’s plan to “progressively reduce deficit and borrowings over the medium term”.
For the 2019 budget not to run into a major hitch, it is important that, as much as possible, all claims on public financial resources are identified and reconciled within the framework of the budget possibly incorporating tax proposals to fund such claims in the event that the oil revenue projections do not materialise. It should equally entail obtaining approvals for the plan to borrow N1.649tn for the purpose of financing the budget deficit. This is vital in the light of the 2018 budget experience where the implementation of the capital component of the budget did not commence nearly two months after the signing of the Appropriation Bill by the President chiefly because the government’s borrowing plan did not receive timely approval by the National Assembly.
The budget breakdown is meant to provide the nuts and bolts that will facilitate budget implementation and control. With respect to capital spending, the breakdown lists some projects as “ongoing” but fails to state the completion targets expected in 2019. For example, under “Transport”, it says N80.22bn counterpart funding has been provisioned for railway projects including the “Lagos-Kano (ongoing), Calabar-Lagos (ongoing), Ajaokuta-Itakpe-Aladja (Warri) (ongoing)” while N13bn has been earmarked for construction of a second run-way at the Nnamdi Azikiwe International Airport Abuja.
To see the shortcomings in this presentation, these same projects also featured in the 2018 budget breakdown where a provision of N162bn counterpart funding was made. Even the Port Harcourt-Maiduguri railway listed as a “new” project in 2018 budget is also appearing as “new” in the 2019 budget. This sort of narrative does not allow for a correct assessment of progress made in the execution of these projects. The same presentation flaw is observed with respect to projects listed under “works” in the 2019 budget where about N280bn is meant for the construction and rehabilitation of roads including counterpart funding for the dualisation of Makurdi-Enugu Road, Akwanga-Jos-Bauchi-Gombe Road among others.
It stands to reason that long-term projects such as roads or railways spanning several years should first be included in a country’s development plan (or at least medium-term plan) indicating timelines and then each year, the annual budget draws from it showing (preferably in kilometres as opposed to ‘sections’) achievable targets. This renders the use of “ongoing” a poor indicator to have in an annual budget. It bears repeating that for the budget information to discipline fiscal actions, it must be transparent. This demands the avoidance of the use of opaque and arbitrary language to enable the electorate verify the budget information as well as monitor performance. A good example is specifying road or rail projects in terms of kilometres to be attained. Without such numbers, it is difficult for the populace to hold the government accountable. Our legislators should bear this in mind as they get set to interrogate the budget proposals. It is obvious the 2019 budget train is leaving the station late. So, every effort should be made to recover lost grounds including through a speedy passage of the 2019 Appropriation Bill, as urged by the President, in the interest of the nation’s economy.
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