23

Mar

BUDGET 2018: MATTERS ARISING 25062018

2018-06-25

The palpable 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. 

Clearly, the original N8.6Tn budget that the Executive laid before the legislature, on November 7 2017, is evidently different from the N9.12Tn, passed, in mid May, by the National Assembly, and later, endorsed, although, with reservations by President Buhari, on June 20 2018, i.e. almost 6 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.

Why was the budget passed, so late and how would it affect implementation?
As best practice, consultations for next year’s budget, would, normally commence between the Executive and the Legislature, as early as March – April of the current year. Consequently, the parties concerned, have between 8 – 9 months to effectively and satisfactorily resolve their differences, so that, budget passage before the year-end recess, becomes a mere formality, while, implementation will commence on January 1st of the new fiscal year. Regrettably, this has not been the case.

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

Presently, the recurrent budget allocation, which primarily comprises, salaries and general consumables, still, represents about 70 percent of the 2018 total budget. Furthermore, all monthly recurrent expenses payable upto 30th June can legally be disbursed, before Legislation, consequently, a delay in budget passage until June 30th, may not really create pressure on anyone who receives their salaries and emoluments from government. 

It is for this reason, that Mr President appeared compelled to assent the 2018 budget before 30th June, 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, do not receive salaries for just one month; such a challenge, might unfortunately, self justify public servants’ resort to ‘self -help’ in converting public assets and opportunities, within their control, to cash, in order to sustain their families. 

How does late budget passage affect the implementation of the capital budget?
Well, in deference to the law, despite the social and welfare benefits of improved infrastructure, the 30 percent allocation for capital expenditure, cannot be accessed, until Mr President, ultimately assents the budget, after its Legislative passage. Consequently, with the President’s assent to 2018 budget by mid June, there is just 6 months left, for full implementation of the critical infrastructure projects, which were already planned and scheduled for funding within the fiscal year. Predictably, a compression of such projects into 6 months would invariably result in slip-shod execution and will inevitably, also, create great opportunities for corrupt enrichment from well contrived revenue leakages.  

Ultimately, those projects which were budgeted, will invariably become partially completed or carried forward into the incoming New Year’s budget, even, when the related expenditure were already fully funded. Regrettably, therefore, with the President’s assent to the 2018 budget in June 2018, the impact of Capital budget implementation, will expectedly not be different from the dismal performances 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 budget amendments are not new, and have also characterized Buhari’s budgets 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, similarly trail the 2019 budget. Nonetheless, the issues of inchoate, ‘tweaked’ or bloated budgets, will probably become minimized, if the budgeting process commences early in Q2, with clearly defined schedules for regular consultations between the Executive and the Legislature, to appropriate within the explicit framework, earlier captured in the Medium Term Expenditure Framework, and government’s expectations, which are already expressed 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?” www.betternaijanow.com) 

So, shouldn’t we be impressed that the 2018 N9.12 Tn budget for 2018 is Nigeria’s largest spending plan ever?
In practice, the N9.12Tn budget is probably not larger, in real value terms, than the 2015 budget of N4.5Tn, when the naira exchanged for about N150 = $1. Thus, 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!

Is it not a positive development that Capital Expenditure was increased from N2.36Tn in 2017 to N2.87Tn in the 2018 budget? 
In practice, with annual inflation rate, still in excess of ten percent, the real value of the 2018 capital allocation, may not be significantly different from the 2017 allocation. Notably, however, according to the Finance minister, by June 2018, only N1.5Tn had been released out of the approved allocation of N2.36Tn in 2017. Invariably, with almost half of the year already gone, it is highly unlikely that the allocation of N2.877Tn capital budget for 2018 will be fully cash backed or implemented. 

Conversely, despite reports of reduction in ghost workers population, the application of TSA and the recovery of looted public funds and sales of government assets etc, the allocation for salaries and recurrent expenses has ironically increased from N2.99Tn in 2017 to N3.51Tn in budget 2018. 

With the reduction of budget deficit from N2.36Tn in 2017 to N1.97Tn in 2018, it seems government may have acknowledged public concern on debt sustainability?
Even if the deficit, reportedly, represents just 1.74 percent of GDP, it is still worrisome that over 40 percent of aggregate revenue is presently applied to debt service annually. It is also inexplicable, that the 2018 budget accommodates a deficit, when, fortuitously over 50 percent additional revenue, from above crude oil budget price, should have eliminated any need for borrowing. 

Regrettably, however, any surplus above crude oil benchmarks will, as usual, be consumed, alongside the N1.6Tn approved borrowing in the 2018 budget.

No allocation was provided for fuel subsidy, why? 
Invariably, if subsidy is also captured in the 2018 expenditure profile, rather than as a trading loss on NNPC accounts, the N1.95Tn budget deficit may infact, oppressively increase by almost 50 percent. 

Equally worrisome also, is Government’s reported collaboration with Niger Republic to establish a refinery in Niger while our own refineries have remained comatose!

So will this budget trigger an upswing in the Economy?
Well, President Buhari readily accepted in his budget speech that total government expenditure is barely 10 percent of total value of economic activities in Nigeria. In practice, the activities in the private sector generate over 90 percent of all incomes annually; nonetheless, the private sector will inevitably fail in its role as an economic engine, if inflation continues to depress consumer demand and restrain production, while cost of funds to real sector investors remain prohibitive at over 20 percent. 

SAVE THE NAIRA, SAVE NIGERIANS!!!