One of the most important legislative imbalances the 9th assembly set out to correct is the haphazard and inconsistent budgeting cycle which has engendered proper implementation of the country’s financial appropriation.
In the case of Nigeria, public budgeting is expected to follow the Gregorian dating, beginning on January 1 and ending on December, 31.
The provisions of Section 82.1 of the 1999 constitution anticipated that the appropriation bill will have been passed before the beginning of a financial year. The constitution also considers delay in the budget passage as an aberration, such that new government expenditure is restricted and only functional spending, which is fixed to the corresponding period estimate, is allowed.
However, in the past two decades of democratic governance in Nigeria, the budget delay has become a norm, with the standardised budgetary calendar adhered to only twice in the past twenty years.
Sequel to this, the leadership of the 9th assembly shortly after its inauguration promised to return the financial laws to a January-December cycle to guarantee full implementation of many of the economic, infrastructural, social investments, and other developmental programmes.
Again, the early budget passage will allow for proper and better planning for both the government and the private sector. The entire financial architecture of our country would benefit from this. This includes project financing, contract execution timeline, project implementation, and performance monitoring. It will make public procurement predictable, business climate stable, and give confidence to investors.
Although, this promising experiment might not have impacted strongly on the economy, consistent practice of the system may be required to achieve the goal.
To this end, the House of Representatives on Thursday passed through the second reading a bill to regulate the planning, preparation, passage, and execution of the budget of the Federal Government of Nigeria.
The bill is particularly aimed at making the January to December budget cycle introduced by the 9th Assembly a law.
The member representing Zaria Federal Constituency of Kaduna State, Abbas Tajudeen was quite thoughtful to have initiated the legislation. The proposed legislation seeks to among others, define the budget cycle and timeline for each stage of the appropriation process.
Tajudeen opined that it was essential to ensure that the January 1 to December 31 timeline be embedded in the Act as the sacrosanct period within which every budget in the federation should be formulated.
Many Nigerians may not understand the negative impacts of budget delay on the economy probably because we have not perused a detailed comparative economic analysis of a consistent and consistent bugging cycle.
Centre for the Study of the economies of Africa in its 2008 analysis titled the ‘economic impact of Budget Delay in Nigeria’ of Budget delay impacts negatively on economic growth discovered an inverse relationship (-0.025) between the budget delays and economic growth. Specifically, the centre noted that a 100 days delay in the budget implementation tends to depress the economy by 2.5 per cent.
Similarly, the centre established that a comparison of quarterly performance indicated that growth is higher by about 1.82 percentage points in quarters after budget passage than before.
According to the center, several factors could explain this trend. First, the government contributes directly to the economy through government spending (transfers and capital expenditure), which means that budget delay depresses its contribution to GDP.
Secondly, other economic agent decisions are influenced by government fiscal plans, whether expansionary or contractionary policy. Uncertainty on government policy direction, therefore, amplifies the economic cost due to the delay. Lastly, the budget delay only affects capital expenditure, as recurrent expenditure falls within functional activities. This means infrastructural development which is a key enabler for economic growth will be significantly constrained.
Therefore, budget delay leads to poor budget implementation. Unsurprisingly, the poor implementation is more pronounced in fiscal years with considerable budget delay.
Legislation to check the delay in budgeting and budget implementation is very essential and long overdue as the constitution only mentions fiscal year for budget implementation but does not define it. If this is achieved, the government oils are remembered for good in the fiscal and economic history of Nigeria.