Economic Renaissance by Henry Boyo
lesleba@lesleba.com 08052201997
The palpable sigh of relief that the 2018 Federal budget was ultimately endorsed as late as June 20 by President Buhari was unexpectedly muffled by allegations that the fiscal plan had once again being mangled and heavily padded by the National Assembly.
Clearly, the original N8.6tn budget that the executive arm of government laid before the legislature on November 7, 2017 is evidently different from the N9.12tn passed in mid May by the National Assembly and later endorsed, although with reservations, by President Muhammadu Buhari almost six months into the fiscal year.
Hereafter, some matters arising from the legislated expenditure and revenue plan will be examined in the following interrogative prose:
Why was the budget passed so late and how would it affect implementation?
As best practice, consultations for next year’s budget would normally commence between the executive and the legislature, as early as March – April of the current year. Consequently, the parties concerned, have between eight and nine months to effectively and satisfactorily resolve their differences so that budget passage before the year-end recess becomes a mere formality, while implementation will commence on January 1 of the new fiscal year. Regrettably, this has not been the case.
Arguably, delay in the budgeting process, would be eliminated, if both the executive and the legislature are also guided by the content of government’s subsisting Medium Term Expenditure Framework, which already provides the basic outline and direction of public expenditure and revenue projections, within a three-year rolling cycle.
At present, the recurrent budget allocation, which primarily comprises salaries and general consumables, still represents about 70 per cent of the 2018 total budget. Furthermore, all monthly recurrent expenses payable up to June 30 can legally be disbursed before legislation. Consequently, a delay in the passage of the budget until June 30 may not really put pressure on anyone who receives his or her salary and emoluments from government.
It is for this reason that President Buhari appeared compelled to assent the 2018 budget before June 30, although he had reservations about the re-tweaking of the executive’s original sectoral allocations by the National Assembly.
However, one can only imagine the dysfunctionality that will result if all government ministries and parastatals, including the security forces, the legislature and judiciary, do not receive salaries for just one month. Such a challenge, might unfortunately, self justify public servants’ resort to ‘self -help’ in converting public assets and opportunities within their control to cash in order to sustain their families.
How does late passage affect the implementation of the capital budget?
Well, in deference to the law, despite the social and welfare benefits of improved infrastructure, the 30 per cent allocation for capital expenditure cannot be accessed until the President ultimately assents the budget after its passage by the legislature.
Consequently, with the President’s assent to 2018 budget by mid June, there is just six months left for full implementation of the critical infrastructure projects, which were already planned and scheduled for funding within the fiscal year. Predictably, a compression of such projects into six months would invariably result in slip-shod execution and will inevitably create great opportunities for corrupt enrichment from well contrived revenue leakages.
Ultimately, those projects that were budgeted will invariably become partially completed or carried forward into the incoming New Year’s budget, even when the related expenditure was already fully funded. Regrettably, therefore, with the President’s assent to the 2018 budget in June 2018, the impact of capital budget implementation will expectedly not be different from the dismal performances in previous years.
Shouldn’t we be worried that President Buhari claimed the legislature had unilaterally increased the budget by N578bn from N8.66 to N9.12tn in order to divert more funds for their own respective constituency projects?
Well, such apparently self-serving budget amendments are not new and they have also characterised Buhari’s budgets since 2016. What is surprising, however, is that no lesson seems to have been learnt and it will not be a surprise, if these same allegations similarly trail the 2019 budget. Nonetheless, the issues of inchoate, ‘tweaked’ or bloated budgets will probably become minimised, if the budgeting process commences early in Q2 with clearly defined schedules for regular consultations between the executive and the legislature to appropriate within the explicit framework earlier captured in the Medium Term Expenditure Framework, and government’s expectations, which are already expressed in the Economic Recovery and Growth Plan.
There is the uneasy feeling that such best practice budgeting process will not serve the needs of public officers, whose personal fortunes have become underpinned by the dysfunctionality in the preparation and execution of annual budgets. Thus, the controversy generated by Mr. President’s allegations of budget ‘mangling’ by the legislature will ultimately and sadly induce a distraction from the more significant, weak structure and porous content of the 2018 budget (see “Is 2018 budget from same template for slow death?” www.betternigerianow.com <http://www.betternigerianow.com>)
Shouldn’t Nigerians be impressed that the N9.12tn budget for 2018 is the cpountry’s largest spending plan ever?
In practice, the N9.12tn budget is probably not larger, in real value terms, than the 2015 budget of N4.5tn when the naira exchanged for about N150 to $1. Thus, the 2018 budget is like a bloated balloon. Any expectation that its performance and implementation will be superlative will clearly be misguided, especially, when capital budget implementation will technically commence over six months behind schedule.
Is it not a positive development that capital expenditure was increased from N2.36tn in 2017 to N2.87tn in the 2018 budget?
In practice, with the annual inflation rate still in excess of 10 per cent, the real value of the 2018 capital allocation may not be significantly different from the 2017 allocation. However, according to the Minister of Finance, by June 2018 only N1.5tn had been released out of the approved allocation of N2.36tn in 2017. Invariably, with almost half of the year already gone, it is highly unlikely that the allocation of N2.877tn capital budget for 2018 will be fully cash backed or implemented.
Conversely, despite reports of reduction in the population of ghost workers, the application of TSA and the recovery of looted public funds and sales of government assets, etc, the allocation for salaries and recurrent expenses ironically increased from N2.99tn in 2017 to N3.51tn in the 2018 budget.
With the reduction of budget deficit from N2.36tn in 2017 to N1.97tn in 2018, it seems government may have acknowledged public concern on debt sustainability?
Even if the deficit reportedly represents just 1.74 per cent of the GDP, it is still worrisome that over 40 per cent of the aggregate revenue is applied to debt service annually. It is also inexplicable that the 2018 budget accommodates a deficit when, fortuitously, over 50 per cent additional revenue from above crude oil budget price should have eliminated any need for borrowing.
Regrettably, any surplus above crude oil benchmarks will, as usual, be consumed alongside the N1.6tn approved borrowing in the 2018 budget.
No allocation was provided for fuel subsidy. Why?
Invariably, if the subsidy is also captured in the 2018 expenditure profile, rather than as a trading loss on NNPC accounts, the N1.95tn budget deficit may, in fact, oppressively increase by almost 50 per cent. Equally worrisome is Federal Government’s reported collaboration with Niger Republic to establish a refinery in that country, while our own refineries have remained comatose.
Will this budget trigger an upswing in the economy?
Well, President Buhari readily accepted in his budget speech that total government expenditure is barely 10 per cent of total value of economic activities in Nigeria. In practice, the activities in the private sector generate over 90 per cent of all incomes annually. Nevertheless, the private sector will inevitably fail in its role as an economic engine, if inflation continues to depress consumer demand and restrain production, while cost of funds to real sector investors remain prohibitive at over 20 per cent.
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