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Budget 2018: Matters arising

By Henry Boyo

THE huge sigh of relief, that the 2018 Federal budget was ultimately endorsed, as late as 20th June, by President Buhari, was unexpectedly muffled by allegations that the fiscal plan had once again being mangled and heavily padded by the National Assembly.

The observations of this columnist on ‘salient aspects’ of this year’s budget were succinctly captured on November 13th 2017 in an article titled “Is 2018 budget from the same template for slow death?” (see www.betternigerianow.com)

Notably, however, the original Executive budget laid before the legislature, on November 7 2017, is evidently different from the N9.12Tn, passed in mid May by the National Assembly, and subsequently, also endorsed, although, with reservations by President Buhari, on June 20 2018, i.e. almost 6 full months into the fiscal year!

Hereafter, some matters arising from the legislated expenditure and revenue plan will be examined in the following interrogative prose. Please read on.

Chairman House Committee on Appropriation, Hon. Mustapher Dawaki; SSA National Assembly, Senate, Senator Ita Enang; Chairman Senate Committee on Appropriation, Senator Danjuma Goje; President Muhammadu Buhari (sitting); Vice President Yemi Osinbajo; Chief Whip House of Representatives, Hon. Doguwa and the Chief of Staff to the President, Mallam Abba Kyari during the signing ceremony of the 2018 Appropriation Bill into law at the State House, Abuja. Photo by Abayomi Adeshida

Why was the budget passed, so late and how would it affect implementation?

Indeed, as best practice, implementation should properly commence on 1st of January and end on 31st December, within a January – December fiscal year. Thus, budget consultations for next year, would therefore, normally commence between the Executive and the Legislature, as early as March – April of the current year.

In such event, the parties concerned, have between 8 – 9 months to effectively and satisfactorily resolve their differences, so that, in November, the process of passage becomes a mere formality,  before the year-end recess, so that budget implementation will actually commence from January 1st of the new fiscal year.

It is therefore inexplicable that, inspite of regular media reports and assurances of close cooperation between Parliament and the Executive to ensure early budget passage and prompt, sadly, the reverse is actually the case.

It is also arguable, that delay in the budgeting process, would be eliminated, if both the Executive and Legislature are guided by the content of government’s subsisting Medium Term Expenditure Framework (MTEF), which already provides the basic outline and direction of government’s expenditure and revenue projections, within a 3 year rolling cycle.

The way things stand, the recurrent budget component, which primarily comprises, salaries and general consumables, presently, represents over 70% of the total 2018 budget. Nonetheless, the law also allows the draw-down, of all monthly recurrent expenses without Legislation, for the first 6 months of every fiscal year; thus, a 6 month delay in budget passage, may not really add any pressure on the cash and subsistence needs of all recipients of salaries and other emoluments from government; nonetheless, as such delay must not overflow beyond 6 months into July.

It is for this reason, that Mr President appeared compelled to assent the 2018 budget, even though he had reservations about the re-tweaking of the Executive’s original sectoral allocations by Parliament.

However, one can only imagine the dysfunctionality that would result, if all government ministries and parastatals, including the security forces, the Legislature and Judiciary, did not receive salaries for just one month; worse still, however, such a challenge, might unfortunately, justify public servants’ resort to ‘self -help’ in converting public assets and opportunities within their control, to cash in, and sustain the upkeep of their families.

How does the late budget passage affect the implementation of the capital budget?

Unfortunately, despite the significant social and welfare benefits of improved infrastructure, unexpectedly, however, usually, less than 30% of total budget is generally allocated to capital expenditure annually.

Furthermore, and worse still, the annual vote for capital expenditure, cannot be accessed, until Mr President, ultimately assents the budget, after Legislative passage. Consequently, with the President’s assent to 2018 budget by mid June, there is just 6 months left, for full implementation of critical infrastructure projects, which were already planned and scheduled for funding within the fiscal year. Predictably, a compression of projects into 6 months would invariably result in slip-shod execution and will inevitably, also, create great opportunities for revenue leakages.

Ultimately, the projects budgeted, will invariably become partially completed or carried forward into the incoming New Year’s budget, even, when the related projects were already fully funded. Regrettably, therefore, with the President’s assent to the 2018 budget in June, the impact of Capital budget implementation, will expectedly not be different from the dismal performance in previous years.

Shouldn’t we be worried that Mr President, claimed that 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 amendments to the budget are not new, and have also characterized Buhari’s budget since 2016. What is surprising, however, is that no lesson seems to have been learnt, and it would not be a surprise, if these same allegations, also trail the 2019 budget. Nonetheless, the issues of inchoate, tweaked or bloated budgets will probably become minimized, if the budgeting process commences from the beginning of the second quarter, with clearly defined schedules for regular consultations between the Executive and the Legislature, within the explicit framework, contained in the Medium Term Expenditure Framework, and government’s expectations in the Economic Recovery and Growth Plan (ERGP).

There is, nonetheless, 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, presently, generated by Mr President’s allegations of budget ‘mangling’ by the Legislature, will ultimately, 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?”)

So, shouldn’t we be impressed that the 2018 N9.12 Tn budget is Nigeria’s largest spending plan ever?

The N9Tn budget is truly the highest budget in nominal terms, but this budget, is probably not larger, in value terms, than the 2015 budget of  N4.5Tn,  when the naira exchanged for about N150 = $1. In other words, the 2018 budget is like a bloated balloon, which is infact full of air! Consequently, any expectation  that this year’s budget performance and implementation will be superlative, will clearly be misguided, especially, when capital budget implementation will technically commence over 6 months behind schedule!

So will this budget trigger an upswing in the Economy?

Well, President Buhari readily accepts that total government expenditure is barely 10% of total value of economic activities in Nigeria. In practice, the activities in the private sector constitute 90% of value of all incomes; nonetheless, the private sector will fail in its role as an economic engine, if inflation continues to depress consumer demand, while cost of funds remain prohibitive at over 20% for most entrepreneurs.

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