Wednesday, April 20, 2011

Issues in Nigeria’s 2011 Budget

The 2011 budget is supposed to signal the beginning of fiscal consolidation, but we now have another expansionary budget which is unimplementable. If we are to build our economy on a solid foundation and avoid the boom and burst of the past, it is critical that we embrace discipline in the way we manage public finances. We cannot continue like this – Olusegun Aganga, Nigeria’s Minister of Finance

Even in this electioneering period, we must not lose focus of governance. Budget is key to governance and in Nigeria; it has been an albatross, as perennially, the country keep experiencing low budget implementation. On Wednesday, 16 March 2011, both chambers of the National Assembly passed a harmonised budget of N4, 971,881,652,689. Out of the sum, N2,467,168,724,129 is for recurrent expenditure, N1,562,999,158,775 is for capital expenditure, N445,096,682,115 was earmarked for debt servicing, and N496,617,087,670 for statutory transfers. The budget has oil price benchmark of $75 per barrel, crude oil production of 2.3 million barrels per day, exchange rate of N150 to the Dollar, $5.4 billion for joint venture production, and seven per cent Gross Domestic Product (GDP) target.

Meanwhile, when the budget was presented by President Goodluck Jonathan on 15 December 2010, the total expenditure estimate for 2011 was N4.2 trillion out of which N1.005 trillion is for capital expenditure, N2.481 trillion was projected for recurrent (non-debt) expenditure, debt service got N542 billion with N196 billion for statutory transfers. Key economic assumptions in the budget provided for an oil production of 2.3 million barrels per day at a benchmark oil price of $65 per barrel. Exchange rate was put at N150 per USD$ while Joint Venture Cash Calls was $5.4 billion with a projected growth rate of 7 percent. Projected budget deficit was 3.62 percent of the GDP.

Just like the Finance Minister, I have issues with Nigeria’s 2011 budget. It would be recalled that during the budget presentation ceremony, the Senate President, David Mark vowed that the National Assembly (NASS) will slash overheads expenditure for all agencies under the three arms of government in order to release more funds to capital projects. According to Mark, “based on realities of our economic situation and the need to channel our scarce resources towards nation building, we must drastically cut down the cost of running government vertically and horizontally in the three arms of government as well as the three tiers of our federating unit.” He also observed rightly that the cost of running government has been increasing at an unsustainable rate and that we must all rise together and address it.

It is therefore shocking to learn that the National Assembly not only hiked the budget by over N700 billion, NASS unilaterally increased its budget from the initial N111.23 billion to N232,736,480,135. Part of the reasons advanced by the parliamentarians for the overall budget increase was the additional proposals received from the executive branch with adjustment, differentials and errors in the sum of N312 billion to augment Ministries, Department and Agencies (MDAs) key priority expenditure. It does seem the executive branch was not fully ready as at the time it presented the budget to the parliament in 2010. The explanation by chairman of House of Representative Committee on Appropriation, Hon. Ayo Adeseun that NASS hiked its budget “in order to establish the independence of the legislature and ensure its ability to check the excesses of the Executive” is very nauseating and ridiculous.

The second issue was that the appropriation bill was passed in spite of the declaration by the Speaker of House of Representatives that the parliament will not pass the appropriation bill unless the budgets of the 31 government agencies such as Nigeria Customs Service, Nigeria National Petroleum Corporation (NNPC), Central Bank of Nigeria (CBN) and the Federal Inland Revenue Service (FIRS) are submitted to the parliament. This is in accordance with provision of part 4, section 21, sub-section 1 of the Fiscal Responsibility Act. It is startling that government agencies can act with such impunity and disdain for rule of law, transparency and accountability and due process.

The other concern I have with the passed appropriation bill is the lopsided budget in favour of recurrent expenditure as against the capital vote. A nation that wants to achieve Vision 20: 2020 in nine years time cannot continue to put more resources on salary and allowances at the expense of infrastructural development. While the capital vote increased marginally from the initial N1. 005 trillion in December 2010 to N1.5 trillion in March 2011, the recurrent expenditure remain essentially same while there was a quantum leap in the statutory transfers from N196 billion to N496 billion. A whopping N446 billion has also been earmarked for debt servicing. In spite of oil windfall arising from the political uprising in North Africa and the Middle East, Nigeria in January floated a $500 million Eurobond while $900 million loan from the Export-Import (EXIM) bank of China was secured for the implementation of the $500 million Abuja-Kaduna Railway project and the $400 million National Public Security Communications project. Steadily, Nigeria is sliding into debt burden again.

Under recurrent (non-debt) expenditure, I found the N63,252,948,842 budget for the office of National Security Adviser, N67,604,822,204 for the Office of the Secretary to the Government of the Federation and N29,583,128,892 for the Presidency quite bloated and out of tune with the present economic realities. On the capital expenditure, I do not quite understand what the N100 billion allocated for presidential intervention project was meant to achieve. Already, the 2010 budget has lapsed on March 31 and the president is yet to sign the new budget as at the time of writing this piece in April. Gradually, the ground is being prepared for another failed budget. More importantly, I pray that all these huge figures will transform to better lives for Nigerian suffering masses.