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Budgets: Planning With Mixed-up Targets



In this report, AHURAKA YUSUF ISAH takes a cursory look at Nigeria’s budgeting history and argues that the yearly allocations of 70% for recurrent and 30% capital retards development and encourages stealing.

The National Assembly had barely at middle of the year after fuddling and prevaricating for five months passed the 2017 Appropriation Bill on May 11, 2017, just as it increased the overall budgetary expenditure to N7.441 trillion from N7.298 trillion presented by President Muhammadu Buhari December 14 last year.

The lawmakers had disclosed that it was guided by the primary revenue parameters contained in the 2017-2019 Medium Term Expenditure Framework (MTEF) which is yet to be made public by the Budget Office for easy assessment. And in order to increase the expenditure aggregate, the lawmakers increased the arithmetic benchmark price for crude oil assumption from $42.50 per barrel proposed by the President to $44.5 per barrel, with the overtly optimistic benchmark production rate of 2.2mbpd; which are far from the reality on ground.

The Lead Director of Centre for Social Justice, Mr Eze Onyekpere, an economist had also said that a benchmark oil price of $44.50pb of crude oil was close to the prevalent market rate of 47pb barrel. According to him, the revenue assumptions in the budget, which though not overtly optimistic, may not be realised based on prevalent economic realities.

“At this rate, the sources of funding of the budget may not fully materialise. Although the benchmark production rate of 2.2 million barrels per day is realistic, it is imperative to note that Nigeria is not yet meeting the benchmark as current production figures still fall short of the benchmark. Also, with an approved exchange rate of N305 to a dollar, the budget still insists on a fixation that is not in tandem with reality. The gap between the approved rate and what is obtainable in the market is still very wide. A differential between N380 to one dollar and N305 creates multiple exchange rates in one country,” he said.

In other words, the National Assembly had opened the window for further increased deficit financing without letting the Nigerians in the know of it. This haphazard juggling of figures together without coordinated approach between legislature and the executive in the name of economic planning leads to nowhere other than muddled up development goals. While the facts required for development planning are in wants, the intended end result are also questionable with official padding, called ‘’critical budgetary needs introduced’’ in the budget ‘’su moto’’ or single-handedly by the National Assembly with startling   sum of N143 billion or 23.5% of executive’s proposed figure of N7.298 trillion, the budget or the mid-year budget can be said to be dead on arrival.

Shortly after Nigeria gained her Independence in 1960, the Federal Government recruited an American economist, Wolfgang F. Stolper to head the Economic Planning Unit of the Nigerian Federal Ministry of Economic Development. Stolper, a Harvard PhD and former student of Joseph Schumpeter played an important role in defining the economic policy of the newly independent state. He worked and produced the Nigeria’s First and Second Development Plans, an economic development blue print for the country. He wrote a caveat, ‘’Planning Without Facts’’ in the immediate aftermath of his planning experience or assignment. As the title indicates, Solper is concerned with the problem of planning in circumstances in which there are severe limitations on data and on time; arguing that the lack of statistical and social scientific knowledge about the country made planning exceedingly difficult.

Data from the National Bureau of Statistics shows that by the end of December 31, 2017 the three tiers of government in Nigeria would have spent N117.22 trillion or more, going by federal and states’ budget appropriations and statutory allocations to the 774 local councils since January 2005.

Of course, the end of the 2017 fiscal year marked Nigeria’s 18th budget since the return to the civil rule and total budgets of about N60.44 trillion by the Federal Government, with about N42.31 trillion spent on recurrent expenditures leaving about N18.13 trillion for development projects and a total debt stock in excess of N17 trillion (about $57.2 billion) as at December 2016.

The composition of the nation’s public servants where 70% of national budget is spent as recurrent is as follows: Federal executive, 472; federal lawmakers, 469; state executives, 2664; state lawmakers, 1,152; council executives, 3096; council lawmakers 8692; and federal/state judiciary, 1644, totaling 17,474, a mere 0.011 per cent of Nigeria’s 160,000 million population.

The administration of government in Nigeria is through three levels: Federal, States and Local Government Authorities. Similarly, budgetary allocations are shared among these Governments as follows: 52.68% 20.60% 26.72% for the Federal, States and Local Government Authorities respectively. Of the three tiers, while the Federal Government allocation, 52.68% is well publicized, the remaining 48.32% (for State and Local Governments) are not– most especially that of the Local Governments. Curiously, LGAs merely exist in a name as the third tier since the state governments have converted them as vessels for mopping up more allocations from the Federation account unchallenged.

According to Professor Victor Olugbenga Okorua  of the Agricultural Economics Department at the University of Ibadan, ‘’ So for instance at the Federal Level, at no time since the return to civilian rule in 1999, has the budget performed above 60% in any one year. Usually budget performance is far below 50%! Additionally the component of the budget that usually grossly underperforms is the capital vote! The recurrent budget nearly always performs between the 95% and 100% range!

‘’This disparity in performance is very instructive, because the component of the budget that funds infrastructural development is the capital vote; and it is the component that has repeatedly and serially grossly underperformed. It is perhaps the reason why between 2000 and 2012 there were well over 12,000 abandoned projects littering and cluttering the country’s landscape; projects valued at more than a whooping N7.7tn and with more than N2.2tn already expended in mobilisations fees!

‘’Besides, a presidential monitoring report on NDDC projects submitted early 2013 also affirmed that nearly 40% of NDDC projects have been abandoned; with only less than 20% projects awarded ever completed and commissioned. Now this is equally very instructive; to complete and commission a project, as we all know in our national experience is not the same thing as delivering a quality and long lasting product!’’, Okorua had to say.

An Accountant Mamman Mahmudu Aka’aba, said ‘’But what is even more worrisome, apart from the fact that the victim of budget underperformance is invariably always the capital vote; is the fact that no one bothers to do an analysis of why the budget has serially underperformed, and why it is incapable of performing in order to fix the problem.

Confirming this trend of wastefulness, a presidential monitoring report on NDDC projects submitted early 2013 also affirmed that nearly 40% of NDDC projects have been abandoned; with only less than 20% projects awarded ever completed and commissioned.

Yet no one ever makes any returns to the treasury with respect to what was not spent! Besides, percentage of the previous year’s unspent budget is not rolled over into next year’s budget proposal. In the 2013 Federal Budget, there was budgetary provision for 2,399 constituency projects for the constituencies of each of the 360 HoRs members and the 109 Senators; yet these constituency projects which cost our country more than N900bn from 2000 to 2012 alone are not visible anywhere in the country. And that is excluding the cost of the 2,399 projects in the 2013 appropriation act!

It is on record that Nigeria runs one of the most expensive democracies in the world, which is far above its financial limits, evidenced by the current financial crisis occasioned by ongoing crude oil price shock, as yearly budgets mostly run into deficits.

Nigeria, in about 18 years now, has had a running battle with budget implementation, with the main challenges ranging from abandonment of developmental projects and skewed votes in favour of recurrent expenditures.

The immediate past Director-General of Bureau of Public Procurement, Emeka Eze, said that the number of government projects currently abandoned across the country stood at 19,000 as at May 2016. There is also a manifest lack of visible evidence to match the acclaimed implemented figures and national growth record against mass poverty and joblessness.

The Minister of Budget and National Planning, Udoma Udoma, has claimed that about N3.577 trillion, or 58.7 per cent of the N6.06 trillion 2016 budget has been spent. This included N2.44 trillion for capital, non-debt recurrent and controversial service-wide vote expenditures, in addition to about N1.14 trillion, or 46.7 per cent paid out to service domestic and foreign debts.

But out of these figures, only N753.6 billion has been implemented on capital projects as at September 2016, out of a total vote of N1.8 trillion, six months after signing the budget into law and nine months into the fiscal year.

While capital expenditure is approached in piece-meal, with growth retarding challenges, the recurrent component has been fully drawn down. This is the way every successive leadership has run the economy.