A report that the Federal Government failed to markedly implement the capital budget in fiscal 2017 continues a worrying trend of consumption over investment. Findings by the Fiscal Responsibility Commission that only N1.4 trillion of the N2.17 trillion provision for capital expenditure in that year’s national budget was released, reveals that the government has not overcome decades-long fiscal habits that drain scarce revenue for services at the expense of wealth-creating infrastructure. Bridging the grave deficit that keeps most Nigerians poor requires a shift in priorities and the budgeting process.
The FRC report was familiar fare. Capital expenditure in 2017 witnessed N734.53 billion or 33.78 per cent shortfall; the N2.17 trillion budgeted for the year was hailed as an improvement over previous years as acknowledged by the commission, which rated this 66.22 per cent fair. This is a sad commentary of our preferences as a country desirous of emerging as one of the world’s top 20 economies.
Significantly, recurrent expenses – overheads, personnel costs and services – suffered no such fate. Instead, the government borrows or diverts funds to run the bureaucracy, while roads, dams, ports, health and education facilities are under-funded.
For 2018, according to the Central Bank of Nigeria, quarterly funding consistently showed shortfalls in capital releases, while recurrent spending fared better. Though N2.87 trillion or 31.5 per cent of the total N9.1 trillion budget was for capital projects, the N3.51 trillion recurrent budget received greater attention and a substantial portion of the N2.01 trillion budgeted borrowing to plug the deficit. Of the total N2 trillion released in Q1, capital funding received only N507.16 billion compared to N1.39 trillion for recurrent; of the N1.63 trillion released in Q2, recurrent got N1.28 trillion and capital N231.93 billion; in Q3, N1.89 trillion was released with recurrent getting N1.58 trillion and capital N191.36 billion. Hopes of a positive change based on high allocations to Power, Works and Housing N715 billion were dashed with the shortfalls. Now, its major projects remain uncompleted.
This pattern led to the identification of about 56,000 abandoned projects nationwide (federal and states) valued at N12 trillion by the Chartered Institute of Project Management of Nigeria in 2017, higher than the 11,886 projects valued at N7.78 trillion estimated by a Federal Government panel in 2011.
Nigeria misplaces its priorities: for a country with such poor infrastructure, a fast rising population, dwindling revenues, low investment inflows, low industrial base, poor export sector and an unemployment crisis, building up a formidable infrastructure mix should be a national emergency. The United Nations Development Programme says roads, buildings and airports and such “practical infrastructure,” meet the demands of society and improve human development indices. Bridging the infrastructure gap will require $3 trillion between 2018 and 2040, asserts the African Development Bank. The Securities and Exchange Commission estimates that a minimum of $878 billion in new investments are needed by 2040.
Identifying the problem as successive governments have done is one thing; devising and implementing action to reverse it is another and in this, they have failed. The Muhammadu Buhari administration is toeing this path by its refusal to radically overhaul the bureaucracy, the budgeting process and the economy. It must accept the reality that lack of infrastructure, a parasitic public service and an overwhelming but under-performing state sector, stifle growth, export and revenue diversification, job creation and industrialisation.
Buhari should reverse the ugly trend. First, a look at the components of the budget, both recurrent and capital. The cost of governance is too high; what we spend on overheads and personnel do not justify devoting over 70 per cent on the average to servicing less than two per cent of the population. And it is bound to get worse; at current pay levels, over N2 trillion is borrowed annually to fund the deficit. This is absurd.
Second, the capital votes need a critical review; we need to discard the template that itemises furniture, SUVs, luxury guest houses and buses as capital projects. They are cost items that, while they may classify as assets in profit-making enterprises, they add little value in a public service that is no longer driving development. Instead, priority should be given to strategic economic projects like the Apapa Ports link roads, Lagos-Ibadan Expressway, Second Niger Bridge, all major inter-state highways, dredging of rivers, dams, Ajaokuta roads and rail link roads and health institutions.
This government should launch an ambitious infrastructure provision programme that will attract investments into the country. Central to the wrong choices we make is the failure to liberalise critical sectors and attract foreign direct investment, without which, says the World Bank, the gap cannot be bridged. The government should exit the petroleum downstream sector, open up the railway sector, steel, airports and seaports to lift the measly $2.2 billion FDI of 2018, create jobs, expand revenue and boost exports.
Nigeria wastes over $2 billion subsidising petrol imports when it can simply sell its refineries and support private refiners with policy incentives. It attempts forlornly to single-handedly fund railways, ports and airports by a foolhardy preference for Chinese loans rather than moderate the space for FDI and thereby free scarce resources for education, health care, sanitation and road infrastructure. This enabled Ghana to displace Nigeria as the top draw for FDI in West Africa in 2018, while Rwanda and Ethiopia in Central and East Africa respectively, are favoured investment destinations.
Both the Executive and the Legislature must come to grips with how their inaction on the capital budget is dragging the economy down, deepening poverty and worsening unemployment. Public investments – such as education, public health and infrastructure – are a fundamental element of any pro-growth budget. As the debate on the 2019 budget is still in progress, President Buhari and the National Assembly should get it right this time by assigning more funds to critical projects, reforming the economy and overhauling the bureaucracy.
END
Be the first to comment