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Arresting the dominance of recurrent expenditure


By Babajide Komolafe
At the end of its Article IV Consultative Mission to Nigeria last month, a team of economic experts from the International Monetary Fund, IMF, called on the federal government to reallocate resources from recurrent expenditure to capital expenditure.

“We recommend that expenditures be reallocated from recurrent to capital projects to support economic growth”, said Mr. Scott Rogers, Head of the IMF Mission in statement issued at the end of the  mission.

But the recommendation of the team was an indirect expression of worry over the continued dominance of recurrent expenditure in the annual budget of the country. For example recurrent expenditure constituted 45 per cent of the N4.6 trillion  budgeted for 2010.

According to the Appropriation bill, total recurrent expenditure amounted to N2.077 trillion. This  dominance of recurrent expenditure in the annual budget of the country can best be described as unreasonable and wasteful, especially when juxtaposed with the nation’s quest to be one of the biggest 20 economies in the world by 2020, and the huge infrastructural need across the country.

For a country with less than 50 per cent of its roads  motorable  , non_existing rail transport, and epileptic power supply not to mention the fact that about 50 per cent of it 150 million population live below the poverty line, it is unbelievable that 45 per cent of the annual budget will be for recurrent expenditure.

Economic sense or even common sense requires that such country devote majority of its resources on capital expenditure, investing in infrastructural capabilities that will provide improve the business climate and generate employment and income for its people. And that was  the point made by the IMF team.

The persistence of such dominance only suggests an ingrained culture of waste in the way the affairs of the country is managed.

This came to the fore recently when the  Central Bank of Nigeria, CBN, Governor, Mallam Lamido Sanusi lamented the huge recurrent expenditure of the National Assembly in the total federal budget. While the National Assembly tried to dispute Sanusi’s claim, a glimpse into the  remuneration package for political, public and judicial  office holders obtained from the Revenue Mobilisation Allocation and Fiscal Commission, RMAFC, in Abuja showed  that a senator receives as much as N5 million annual  furniture allowance.

This culture is however not limited to the National Assembly because the remuneration package for National Assembly members at best mirrors what obtains generally in the nation’s public service. For example,  it is not uncommon to see about five vehicles in the entourage of a Federal Minister or that of a state governor.

This trend indicates little or no seriousness on the part of government officials to the economic development of the country. This is confirmed by the fact that on an annual basis, less that 50 per cent of the capital expenditure is implemented. For example, the Minister for Finance, Mr. Olusegun Aganga at a recent hearing by the House of Representative, disclosed that fund released to the MDAs for capital expenditure is lying idle at the Central Bank of Nigeria (CBN), and that only 25 per cent of the capital expenditure has been implemented as at end of September.

This must change especially if the country is  to attain its Vision 2020. And that is the trust of the recommendation of the IMF team and the lamentation of the CBN Governor.

This was amplified by Mr. Johnson Chukwu,  MD/CEO Cowry Asset Management Limited, he said  “It is common sense that for any country to develop economically, it must commit more resources to develop its economic and social infrastructure. Emerging economies like China, Brazil, India, Indonesia, South Africa, etc are commanding so much foreign investment because they have invested heavily in developing their infrastructural base.

It therefore follows that if as a country we continue to invest over 70 per cent of our national budget on consumption— recurrent expenditure instead of capital goods— infrastructure, our country’s hope of ever becoming a developed nation will remain a mere wish.

The different arms of government must recognise the imperative of drastically reducing their recurrent expenditure so as to devote more resources to the much needed infrastructural development of Nigeria.
Until we stop this profligacy, there is no hope that the roads, railways, airports, schools, hospitals, etc that we need to jump start our economic development will ever be built.

This reality seems to have dawned on the Federal government given the recent decision to cut down recurrent expenditure.

This decision must, however, be backed with visible action which should reflect in the proposed 2011 budget. But most importantly is the need to radically address the problem of non-implementation of capital projects, otherwise this would make nonsense of reallocation of resources from recurrent to capital expenditure.


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