Professor Ukwu I. Ukwu, was Commissioner of Finance in the defunct East Central State and currently a professor of economics, Department of Economics, Ebonyi State University(EBSU). In this interview with MIKE UBANI, he contends that most projects are put in the budget to score cheap political points and further holds that the country lacks managerial capacity to implement its budgets.
When you hear of slow pace of budget implementation as the National Assembly is saying, does it mean the funds to implement the budget are not there, or the executive capacity to do so is not available?
First, let me say that budget implementation has always being an issue in governance in Nigeria. But when you look at it properly, you find out that the failure to implement the budget starts from the time the budget is being thought out. They say if you fail to plan, you plan to fail. A budget is an estimate of what monies are coming in; so how you spend the monies, translate to the things you hope to achieve. But it is also a very political exercise.
What makes the budget a political exercise?
In the Nigerian context, some of the things that get into the budget are things that you put in to sound good so that you can be praised, even when such things cannot be implemented. So, some of the things the executive put in the budget are simply a regurgitation of what happened last year. And when the budget goes to the legislature, they also have things to put in that budget to suit the interests of members.
The argument is that the executive is slow in implementing the budget. What is your reaction?
The 2012 budget was just signed in April this year by President Goodluck Jonathan, and it is supposed to last from January to December. If it was signed in April, and we are now in August, and if you say that the level of implementation of the budget is only 30%, I can say the government has done very well in terms of the period of time they have had to implement the budget.
In 2010, I headed a team that looked at budget implementation at the federal level on behalf of the Fiscal Responsibility Commission. What surprised me was in fact how much implementation was actually being done in spite of all the figures - that is if you take the global figures. If implementation had been done following due process, it was much less.
Why do you think so?
To start with, due process implies that before a project gets into the budget, the costing of the budget must have been done, then you know exactly step by step what you expect to achieve. But a lot of our projects get into the budget without all that hassles. And it is only when the project is approved that one says ah, this road is good, let’s do a feasibility study.
So in Nigeria, the preparation for budget execution starts after the budget has been passed rather than before. In the United States of America for instance, they are now discussing not the 2013 budget, but the 2014 budget.
They approve the budgets nearly 18 months before the actual budgets, and you don’t introduce an item (capital) of expenditure into the budget unless all the groundwork has been done. You ask yourself: Is there a policy, feasibility study, full costing, and so on, so that when you put a project into the budget, it becomes a firm thing.
And if you also firm your projections of revenue, unless something catastrophic happens - which means you can scale down a bit - you can take your budget as given.
And previously, when a budget is passed in good time before December, the minister of finance signs a release warrant, and that release warrant enables every agency of government to start spending money. If you have what is for you, you ask for authority to incur expenditure, - you know what your limits are, and the money is there, and when it is due, you are paid. But now it is not so, though the federal government is much better than the state governments in this regard because, since 2004, a lot of changes have come up in terms of trying to tighten up the budget process.
Before the Obasanjo regime came in, we got to a situation where budget did not mean anything because more money was spent outside the budget than within it. But we have gone past that stage now, though we still need to tighten up to make sure that projects that get into the budget are projects that have been fully costed, fully programmed, so that it becomes a routine to execute those projects.
Let’s come back to the issue of slow pace of budget implementation; what do you think is responsible for this development?
My worry really is not that the budget is not being fully implemented or that the government is slow in the implementation of the budget, but my worry is that the budget is implemented on a faulty basis.
What exactly do you mean when you say the budget is being implemented on a faulty basis?
The budget implementation is not based on proper analysis and proper follow up. What happens is that when you look at the total for a ministry in the budget, the ministry may spend something close to its provision, but if you now look at the sub-items, you find out that there is great inequality – a lot of distortions have taken place. Most of the money voted for the ministry may just go into three or four out of say 20 projects that they have. They can get away with that through virement and all kinds of things.
The result is that you don’t get the result that you expected. The outcome of the budget is different from the intent, even if the money is there. And also the process by which money is released, whereby you say there is cash backing for this project, so you can spend. In other words, the accountant general locks up some money for some favoured items.
Other items cannot now proceed because the money is not there, and yet, at the end of the year, quite a lot of the money has not been spent. So the government ties itself up by putting money where it cannot be touched, whereas other projects are wanting. And of course our recent experience tells us that we don’t always follow due process in some of the expenditures.
Can you give us one example where due process was not followed?
Take the obvious thing about fuel subsidy. We have been told of how many trillions of Naira was spent on fuel subsidy, and yet that fuel subsidy was provided for in the budget. So how come it that you spent three, four, five, ten times above what was provided for in the budget to pay for fuel subsidy? Who authorized the extra payment for fuel subsidy? On what authority did anybody say keep paying monies for fuel subsidy outside the budget provision? At that point, the whole financial control system obviously collapsed. And your guess is as good as mine, why that collapse was possible.
At what level were decisions taken to pay monies over and above the budget provision to certain people and certain institutions? Some ministries are perpetually shortchanged. A lot of the time, the money voted for agriculture, doesn’t get touched, except for the big projects that involve fertilizers – things that require billions of Naira.
But aid to farmers, training of farmers, improvement of seedlings and various other things - at the end you don’t get much spent on them. So, it is the pattern of expenditure that we are worried about – the integrity of the spending is the factor.
So, you think due process is good for the economy?
Yes. One of the most important achievements we have made is to have a law called due process that says, before you spend public funds, you must follow certain processes. The result is that when this law was introduced, everybody felt it was business as usual, and they sent in papers to say we have these projects, please approve. But the questions are: have you done the feasibility study; has the project been audited, and what are the alternatives and so on before you can start all these projects?
Now if they hadn’t done all these before the project was introduced into the budget, you can’t do anything. And unless they are stealing the money, you cannot spend it. The ministries are now beginning to adjust to the needs of the due process, and they are more proactive in preparing their programmes and also in seeing to what is happening.
Is due process responsible for the reported slow pace in the implementation of the budget?
That is what the people in the ministry will tell you. Which business has its rules and you say you are slow because you are following those rules. All you have to do is to understand the rules, and know how to use them to facilitate your work and protect everybody. The rules are there to protect us. So any ministry that cannot do its job properly because due process is slowing it down has a query to answer.
Can we say the Minister of Finance, Dr. NgoziOkonjoIweala, is correct by saying that no government in the world implements its budget 100%?
I think this is an overstatement. There are international standards. So, countries ensure that their budgets make a serious statement of intent, by striving to attain 100 per cent implementation level. But when you fail to achieve 100%, the difference shouldn’t be more than 5 to 10% slide.
And globally countries are scored on an annual basis through various global institutions, and I think we are way down on the list in terms of performance. So I don’t think the minister of finance should tell us that no country in the world achieves 100% budget implementation.
Let her give us statistics of how many countries in the world attain a certain benchmark of performance because these things are all written out internationally. In the grades of performance, where do we stand among other countries? That should be the question.