Wednesday, October 31, 2012

Nigeria’s 2013 Budget and its many Controversies

Since President Goodluck Jonathan presented Nigeria’s 2013 budget to the joint sitting of the National Assembly on Wednesday, October 10, 2012, the Appropriation Bill has been greeted by many controversies. The budget has pitted the legislative against the executive arms of government leading to a needless media war among the two institutions. For one, the lawmakers are not impressed with the level of implementation of the current 2012 budget. It has been a perennial problem for Nigeria’s budget not to be fully implemented. The budgets are often presented to the legislature in December while the estimates are habitually unbalanced as the recurrent almost always outweighs capital expenditures while the presented and passed budgets are always in deficit. Aside the poor implementation of the previous budgets, 2012 edition inclusive, the Senate and the House of Representatives are also unhappy with the executive’s insistence on the budget being passed with minimal alterations or at best, as presented to the lawmakers. Of course, the lawmakers have come out smoking quoting Sections 59, 81 and 82 of the 1999 Constitution as amended as empowering them to tinker with the budget estimate as it is just a mere estimates.
It is in the light of this that the House of Representatives has insisted on increasing the benchmark of the budget from $75 the executive proposed to $80 while the Senate took a middle position and pegged its own benchmark for $78. The trend of the argument can be summarised as follows: In the opinion of the House of Representatives, increasing the benchmark to $80 will reduce the budget deficit and domestic debts by as much as 66 per cent. This decision was reached after the lawmakers had examined the Medium Term Expenditure Framework. However, the executive, particularly the Minister of Finance and the Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, is of the opinion that increasing the oil benchmark to $80 will affect Nigeria’s credit rating; make borrowing more expensive; lower down the Foreign Direct Investment; impact negatively on macroeconomic stability as instead of gaining $5 the country will lose $20. Furthermore, the Governor of the Central Bank of Nigeria suggested that rather than raise the oil benchmark, the National Assembly should make the Nigeria National Petroleum Corporation perform its role efficiently by checking bunkering and re-negotiating the joint venture agreements. He noted that raising the benchmark will reduce the amount available for savings which is needful given the volatility of oil price in the international market.
To my own mind, both parties are working in the national interest. While the executive is hammering on saving for the rainy day, the legislature is of the view that the rainy day is here already as there is a huge budget deficit and domestic borrowing which an increased oil benchmark will help to reduce considerably. What needs to be done is for both sides to work out an amicable resolution which might as well be the Senate’s $78 or less.
Another controversy plaguing the budget is the amount earmarked for each of the Ministries, Agencies and Department. The President’s budget speech highlighted some key allocations as follows: Works – N183.5bn; Power – N74.26bn; Education – N426.53bn; Health – N279.23bn; Defence – N348.91bn; Police – N319.65bn; and Agriculture and Rural Development – N81.41bn. Even though education, health and security (Ministries of Defence and Police) got the lion share of the 2013 budget, stakeholders in the education and health sectors have criticised the envelope for the two ministries as being too little. The education budget, which is about nine per cent of the total budget, is seen as being a far cry from the UNESCO recommended 26 per cent. The Nigeria Medical Association has similarly condemned the executive for the about six per cent earmarked for the ailing health sector which has made wealthy and not-so-wealthy Nigerians to take solace in medical tourism; an indulgence that makes the country to lose a whooping N81bn ($500million) annually. By far the most condemned sectoral budget for 2013 is that of the Federal Ministry of Agriculture; N81.4bn is seen as paltry. This is in the light of the threat of food shortage which the country will likely face in the heels of the nationwide flooding experienced in the country which has destroyed many farmlands.
There has also been rumpus on the lopsidedness of the share of the recurrent expenditure over capital expenditure as well as the content of the expenditures. President Jonathan had during the budget presentation said thus: “An aggregate expenditure of N4.92tn is proposed for the main budget of the 2013 fiscal year, representing a modest increase of about five per cent over the N4.7tn appropriated for 2012. This is made up of N380.02bn for Statutory Transfers, N591.76bn for Debt Service, N2.41tn for Recurrent (Non-Debt) Expenditure and N1.54tn for Capital Expenditure.” In essence, the share of recurrent spending in aggregate expenditure has been reduced from 71.47 per cent in 2012 to 68.7 per cent in the 2013 Budget, while capital expenditure aggregate share spending was increased from 28.53 per cent in 2012 to 31.3 per cent in 2013. Many analysts, including myself, are of the opinion that much as this step is in the right direction, the imbalance is still too significant. This is so because Nigeria is plagued with a huge infrastructural deficit which needs to be fixed for Nigerians to feel better impact of good governance.
Under the recurrent expenditure, I am amazed at the huge budget of the Presidency and the bulk sum of N150bn allegedly set aside for the National Assembly. According to media reports, “The Federal Government has earmarked the sum of N33, 538, 541. 00 for newspapers and magazines in 2013 fiscal year. Details of the budget…showed that Aso Rock would spend N1,510,196,766 on personnel; N7,476,942,490 on overhead and N8,987,139,260 as recurrent expenditure. In 2013, N7, 476,942 would be spent on local travels, transport and training; N1, 035,319,145 on international travels while N783, 893,950 would be spent on foodstuff and refreshment. Also, N133,175,453 was proposed for purchase and maintenance of generating sets; N19,250,000 on books; N2,879,000,000 on repair and renovation of buildings; N95,890,530 on computer software and N148,105,373 on electricity charges.” This is imprudent and against the letter and spirit of fiscal discretion that the President claimed in his budget speech.
In spite of its many controversies, the President did well by presenting the Appropriation Bill in October as against the tradition of December which invariably necessitates the extension of budget spending till March of the following year. The attempt to mainstream gender-budgeting into the country’s budget is also very commendable. Also praiseworthy are the stimulus packages for investors in solid minerals, aviation, transport and agriculture sectors. The Presidency’s intention of setting aside N100bn sinking fund for the payment of part of the domestic debts as well as the N273.5bn earmarked for SURE-P are also laudable. I sincerely urge the members of the National Assembly to put national interest above self interest and iron out their differences with the executive in a mature and patriotic manner. What’s more, both arms are controlled by the same political party, the PDP. It will be sad, very sad, if this budget is not ready for implementation from January 1, 2013.