By Victor ‘Tunde Oso and Akoma Chinweoke
The return of the country to January to December fiscal calendar has been eliciting varied public reactions ranging from indifference to demand for serious and efficient implementation of the letters and spirit of yearly budgets by the government.
In separate interviews, economic experts, who spoke to Sunday Vanguard, applauded the return, while others said there’s no big deal and rather harped more on compliance with and accountability on the content and provisions of the Appropriation Act.
They also offered proactive recipes to growing a sustainable employment-generating economy, which would have positive consequence on the living standards of the people and halt rising inflation.
They also called for participatory budgeting where all the stake holders and budget beneficiaries are allowed to participate and make their own input. While it is true that budgeting exercise involves taking into consideration the submission of various departments and units in government, budgeting process should not be reduced to mere aggregating of such submissions into a whole. Rather, there is need for harmonization of policies and projections to avoid duplication and ensure internal consistency.
New budget cycle not a big deal-Awoyemi, Proshare boss
The Chief Executive Officer of Proshare Nigeria Limited, Mr. Olufemi Awoyemi said going back to the January to December is not a big deal, because for several years now, there has been reported cases of budget unaccomplishment, budget disparity, budget indiscipline, poor or non performance of budget and poor budgetary implementation. Policy frameworks must be sensitive towards the primary goal of uplifting the quality of life of the Nigerian household as the unit of primary socio-economic concern.
Awoyemi said it is not fiscal cycle that is important, but proper budget effectiveness, regular monitoring and evaluation of programmes and projects. It is necessary, the Proshare boss said, to develop an appropriate mechanism for monitoring the budget in order to enhance effectiveness in the level of budget achievement.
Addressing the standard of livelihood of the Nigerian household takes care of tackling the many issues of the nation. If policies are constructively targeted towards lifting the real income per capital of Nigerians with greater dispersion of the benefits of growth amongst citizens, then the unintended consequences of growth without development would be corrected.
Awoyemi said over 75 per cent of Nigeria’s population operate in the informal sector with corruption being a major source of funding for the informal sector. He said whenever we draw our budget and we don’t take that sector into consideration, then government is missing the point. Formalising the informal sector is not just what government needs to do, it is the only thing they need to do because that is almost the whole economy of Nigeria we are talking about.
Therefore, the formalisation process for informal sector operators should be a key area for consideration for governments at all level. In fact, many informal sector operators are afraid of formalising their businesses because of the perception that it comes with additional costs and obligation. This, therefore requires proper enlightenment from the government as to the benefits these set of operators stand to benefit. Thus, policies to reduce taxes for small businesses, and make the formal registration process faster and easier should be promoted. In addition, organising the informal sector operators would help the Central Bank of Nigeria in its financial inclusion drive as well as its cashless policy.
The Proshare boss said it is rising inflation rate is expected because the Federal Government closed parts of its borders in August to fight smuggling of rice and other goods, hence this crackdown on smuggling is pushing up food prices.
“When you go to the market or any store now they will tell you that is because the border is closed, so, we should expect inflation rate to continue to rise because local food production of common foods like rice, oils and fats, bread and cereals has not been able to meet demand,” he said.
New fiscal cycle, a milestone-Mailafia, ex-dep gov, CBN
Former Deputy Governor of the CBN, Dr. Obadiah Mailafia gave kudos to government, stating that this goes down on record as a major milestone. You would recollect that since the commencement of the Third Republic in 1999 we had not been able to commence the budget year in January as expected. In fact, in recent years the budget was never finalized before June of the actual budget year. So, this is a great accomplishment.
It owes mainly to the fact that the ruling All Progressives Congress APC have a clear majority in the National Assembly. It is also owes to the fact that leadership of both houses are on friendly and cordial terms with the Presidency. And we must grant to them that both the Presidency and parliament have expressly been committed to ensuring a speedy conclusion of the budget negotiations to ensure take-off in January. We can only hope that this good beginning will be sustained in subsequent years. I would love to see a situation as obtains in other jurisdictions when the budget year is enshrined in law.
He said rational expectations are a major factor in contemporary open-economy macroeconomics. Starting the budget in January sends the right signals to businesses and other economic actors. It also helps investors both internal and external to anchor their expectations on rational foundations. It can only serve to improve business confidence while boosting the general climate for investors.
I am also optimistic that it starting budget implementation in January will enhance the quality of implementation, as we would avoid the complications of two parallel budgets being implemented at the same time. Good budget implementation will of course enhance growth and general improvements in welfare.
Mailafia said the recently released inflation figures for November showed that inflation stood at 11.85 percent in November, up by 0.24 percent in the month of October and it would be the most significant increase in prices since April last year, when inflation had dropped from a high of 12.48 percent to 11.61 percent in May.
The NBS also notes that the inflation food index rose to 14.48 percent in November. Food accounts for a significant portion of general inflation. According to the NBS report, the general rise in prices derives mainly from food price increases, particularly staples such as bread, cereals, meat, fish, potatoes, yam and tubers. The recent inflation trend derives from the reality of seasonality. We are entering the festive season of Christmas, which often translates into higher demand and higher prices. There is also the impact of the border closure, which has seen sharp increases in certain basic staples, particularly rice.
Rising inflation due to border closure-Audu, ex-banker
To Dr. Aliyu Audu, economist and banker of over 15 years experience, the restoration of the budget cycle from January to December is a good thing for Nigeria that will enable government implement a higher percentage of the budget since historically we have not been able to implement more than 30-40 % of the budget so this hopefully will enable us to achieve a higher percentage since we have all lot of critical areas in the economy that are in deficit like infrastructure, agriculture etc.
Audu lamented that we have been passing the bill into law in June, which is almost 3rd quarter this is not good because it leaves little room for full implementation and the Nigerian economy is heavily dependent on government spending.
“The rising inflation is November is obviously due to the border closure as goods are not freely available like before so therefore demands exceed supply leading to demand pull inflation also coupled with the higher demand for goods due to the festive season all this contribute to increasing inflation in November,” he said.
Funding the budget, a challenge-Chukwu, MD, Cowry Assets
Mr. Johnson Chukwu, MD/CEO, Cowry Assets Management Limited said it is the fourth time since 1999 that the appropriation bill is being signed in December. This implies that there is every tendency that it’s implementation would start first day in January. For me, this is a positive. In terms of the N10.594 trillion budget itself, the challenge still remains that of revenue and I don’t think in terms of budget structure, there is any material chain in the previous year’s budget.
It is still a dominance of recurrent expenditure. We have seeing in this instance that debt service is going to be higher than the capital expenditure budget. So, if you add debt service of N2.3 trillion to recurrent expenditure of N4.84 trillion, then you are actually dealing with a budget that has more than N7 trillion in recurrent expenditure and only N2.47 for capital expenditure. So, recurrent expenditure is almost two and halve times the capital expenditure. Clearly, therefore, we still have challenge of funding capital expenditure and of funding of the budget as a whole.
Cost of governance still high- Enwegbara, Chairman/CEO, PADC
For Odilim Enwegbara, Chairman and CEO, Pan Africa Development Corporation, regularizing the budget cycle to run from January to December means nothing if we don’t reduce high cost of running government. “We must bring to an end the current jamboree public servants are enjoying at the expense of growing the social side of the economy. This and other wastages should stop,” he said.
Secondly, Enwegbara said, government must begin to migrate from our present outdated manual tax collection and remittance to what is now the best practice, which is electronic tax collection and remittance. Using electronic VAT collection and remittance, for example, will increase the country’s current VAT receipts by as high as more than 500%.
Our VAT rate should not be less than 10%. This is because we have the lowest VAT rate among peer economies. Take South Africa. Because South Africa has its VAT at 15% in 2018 it generated a whopping $25 billion from VAT alone against Nigeria’s N1.1trillion ($3.2billion) even though South Africa’s economy is smaller than Nigeria’s.
With VAT increased to at least 10% and with electronic VAT introduced, no doubt, more VAT receipts will mean more money going into public treasury, which should be made to go straight into essential economic development projects and social security programmes that will improve the lives of the people.
If we want to invest wisely and for healthy and productive citizens we should make sure that such programmes should include rural water, public healthcare, public schools, and public transportations. But to make all these possible and truly dynamic, we need to drastically reduce the current federal overbearing influence on the economy.