Minister for the Economy, Dr Ngozi Okonjo-Iweala
A week before the budget row came to the front burner, the House of Representatives Committee on Appropriation met with the Minister of Finance and Coordinating Minister for the Economy, Dr Ngozi Okonjo-Iweala, where the lawmakers extracted from her some explanations on the pace of budget implementation. In this piece, Onwuka Nzeshi re-visits that encounter and asserts that the present altercation could have been averted if the lawmakers had internalised some of the lessons that came out of the discourse
In the last 13 years of democracy, the budget has always been a source of fierce battle between the executive and the legislature. Both arms of government usually look forward to the budget season with trepidation. It is usually a season of mutual suspicion, manifesting in accusations of insufficient provisions for the Ministries Departments and Agencies (MDAs), desperate moves by some MDAs in connivance with parliamentary committees to get more, budget padding and accusations of poor implementation of the previous year’s budget.
The two arms of government always approached the budget table where the national cake is shared with daggers in their cloaks. This often resulted in what has become the annual budget row. The row has, however, differed in intensity and depends largely on the personalities in office at the Presidency and the National Assembly.
In the Beginning
In the days of former President Olusegun Obasanjo, a retired military officer-turned-politician, the tussle over which arm controls the budget was a full scale war fought with heavy political weaponry. It often ended in some casualties.
During the three-year era of late President Umar Musa Yar’Adua, it was a mild war. Although the legislature accused Yar’Adua of running the government at a snail speed, the legislature fought the budget battle with pity and caution given his prolonged ill-health and eventual demise.
In the current year, the House of Representatives has raised the ante of the budget war with the recent threat to impeach President Goodluck Jonathan over what they have described as the “slow and selective” implementation of the budget.
Unknown to the public, the row over the 2012 budget began several months ago. Indeed, it started as soon as the budget was passed by the National Assembly and signed into law.
Some legislators in the House had at that time alleged that there were a marked difference between what the legislature passed and what was eventually signed into law. The group of legislators claimed that during the budget defence sessions, they as members of their respective committees incorporated into the budget some projects but could not find those projects after the budget was signed into law. They accused the Committees on Appropriation in the House and Senate as well as the leadership of both chambers of betrayal, arguing that there must have been connivance between the leadership and the executive to deny lawmakers the privilege of having projects that legislators could call their own in the budget.
Somehow, the leadership of the House was able to wade through that crisis of confidence by explaining to aggrieved members that it was better to leave the budget proposal with minimal alteration and challenge the executive to implement it than to re-write the budget completely and fall into the trap of the executive later.
Nonetheless, the lawmakers were convinced that it was better that the trap was set by the legislature so that at in the fullness of time, the heat of budget implementation would be borne by the executive. This was how sleeping dogs were left to lie until the legislature began the midyear review of the budget.
The Row this Time
Chairman, House Committee on Appropriation, Hon John Enoh, disclosed that the 2012 budget was the first budget in about four or five years that had presidential assent without any request for amendments from the executive. Enoh explained that this was made possible because the National Assembly worked hard to make sure that the budget was not just passed early but passed with little or no alterations.
A week before the budget implementation arguments came to public knowledge, the House Committee on Appropriation had convened an interactive session with the Minister of Finance, Dr Ngozi Okonjo-Iweala, and her team where the committee laid the cards of concern on the table.
At that session, Enoh set the ball rolling by acknowledging media reports that the Federal Ministry of Finance was already at the verge of commencing consultations with various stakeholders on the 2013 budget. He, however, raised concern about the allegation that the executive was applying selective and discriminatory parameters in the implementation of the budget.
Enoh said, “I know that the Ministry of Finance is at the moment already holding consultations with various stakeholders for the 2013 budget. But it is our hope that we will do as much justice as we can in implementing the 2012 budget in order to give us some kind of good platform to approach the year 2013 budget.
“There are a few issues that bother us in the implementation of the 2012 budget.
“We would like to know what releases have been made; what amount is cash-backed; what amount has the MDAs spent so far and what is the optimism in the successful implementation of the 2012 budget.
“The figure for borrowing is about N744 billion. So we would also like to find out how much of this figure has been borrowed so far because the N744 billion is part of our expected revenue inflow that should assist the implementation of the budget and unless that is done we are setting a basis for this budget not to be properly implemented.”
In response, Okonjo-Iweala also acknowledged that the 2012 budget was the only budget in our recent history that was passed by the National Assembly with the “least variant” in terms of content. The budget, she said, had “only slight additions” compared to the budgets of previous years.
According to her, this cooperation had helped the executive arm of government in its attempt to deliver to Nigerians a budget of fiscal consolidation. Okonjo-Iweala, however, observed that as beautiful as the budget was, there were still some challenges impeding its implementation.
She said that though the budget was less expansionary than before, government was still having issues with the composition of the budget and the apparent allocation of too many resources to some areas where they were not needed and inadequate provision of funds to some critical sectors.
Okonjo-Iweala said, “We have instances in certain ministries where something like N14 billion is being moved from the main ministry to various parastatals. Some of them don’t need that kind of resource, they said, but others need it. But that means that the programmes for which that money had been set within the main ministry cannot now be executed. I am saying all this to explain why the implementation progress may not be quite as rapid as you might expect given the consolidated nature of the budget.
“When you look at the composition you find challenges. The Ministry of Agriculture is one example of this; I can cite other ministries such as power where such challenges have been experienced -money being moved from one category to the other.
“Water Resources has had quite a lot of their money moved to it and that is also a challenge because when you have much more than you planned getting that going and implementing it may also become a problem because you may not be geared towards handling that kind of volume of funds.
“I cite those as examples that we may collaboratively have to deal with to ensure that funds go only to areas where they are needed and can be effectively utilised because some may be over-funded. I hope that together we can find a way to address some of the problems on the way.”
Okonjo-Iweala disclosed that about N304 billion capital votes had been released in the first quarter and another N100 billion in the second quarter, making a total of N404 billion releases for both quarters. However, she explained, the total cash-backed amount was N239 billion for the first quarter while the utilisation rate was about N94 billion or 39 per cent. Apparently conscious of the low rate of fund release, she stated that the pace of utilisation of the funds released in the first quarter was a major factor that guided the second quarter releases.
“What we did was to look at those ministries that were quite frankly utilising their resources in the first quarter; we had to make sure that they had additional funds in the second quarter so that they were not held back in the work they had to do,” she said.
“You also have contractors who had done some jobs and have not been paid for quite some time and were threatening to down tools. We also tried to prioritise those jobs because we had certificates on work done and they had to be taken care of.
“If you look at where we started the implementation of the budget and where we are now it is not unreasonable but, of course, we must push faster and further so that by the time we make the third and fourth quarter releases we would have had a very respectable pace of implementation.”
The Coordinating Minister for the Economy gave assurance that in the course of the next releases efforts would be made to ensure that critical projects in water resources and housing sectors were funded, as these would benefit the people at the grassroots.
The minister reiterated the desire of the government to work harder on budget implementation but also reminded the lawmakers of the need to run the economy and gauge its performance in the context of what is happening globally. According to Okonjo-Iweala, the global economy is witnessing some uncertainties with the growth contractions in the Euro zone, slower growth in the United States and severe stress in countries such as Spain, Greece and Italy. As a result of these developments, she said, the governments in these countries had been making some slow but steady changes in their economies.
She explained, “Some of these changes mean that the kind of robust global demand that we were experiencing for our product (crude oil) may not continue to be the case. So we really need to see how within this economy we can manage any volatility in terms of global developments and uncertainties that may come.
“If you have been watching the price of oil you can see that in the first quarter average oil price was clearly above a hundred dollars and was approaching $120 and $122 on the average through the first quarter which was good performance, but it is now fallen. Sometime recently, it fell below $89 per barrel. It has inched up again to above the mid-nineties now, approaching a hundred dollars again. But that volatility is a key factor and that is what we are talking about.
“The other thing I want to point out with our dependence on oil is that the story is changing. The oil and gas map of Africa has changed. Previously, if you looked at that map 10 or 20 years ago, you will just see a few countries like Nigeria and Angola as the places that had oil. Now when you look at it, almost every country on the West Coast and East Coast and even Seychelles have discovered oil. In Uganda, Kenya, Mozambique, Ghana – everywhere now around the continent has got oil. So we also got to know that competition is emerging. We will not be the only game in town, therefore, the need to diversify our economy to also rely on other sectors that create jobs and bring income is even more paramount. That means that the performance of our macroeconomic management has to be even better than before and that going forward into 2013 we have to be extremely careful to maintain a budget of fiscal consolidation, to watch the way that we finance the budget and where we prioritise and put money into because the landscape around us is changing at an alarming speed and we may not have the resources that we had before and that is why we have also said that it would be very wise and prudent for the country to build buffers because even though our performance in terms of growth is not that bad, it has gone from about 7.3 per cent last year to about 6.1 per cent in the first quarter of this year, but we are vulnerable.
“We need to build up the buffers for this economy, meaning that we need to let Excess Crude Account grow larger than it has. I have suggested to Mr. President and the governors that ESCA should be allowed to build up to as much as $10 billion. It is presently at $5.8 billion which is good; it is inching up from about $4billion a few months ago and we need to let it grow to $10 billion so that we can have three months of expenditure to cover the whole country in case anything happens. By the same token we need to let the reserves grow. Reserves were growing and had gone up to about 37 per cent recently but has begun to inch back again on the back of global developments and uncertainties. We need to manage our money in a fiscally prudent manner such that we don’t unleash too much liquidity; don’t affect the exchange rate too much and we are able to grow our reserves. So those would be the parameters that we should be watching during this year as we implement the budget and the parameters we need to watch as we develop the 2013 budget.”
The Real Issues
In essence, the challenge of budget implementation goes deeper than the release of the budgeted funds MDAs of government. It encompasses a wide range of issues, including the availability of funds, the capacity of the MDAs to utilise the funds allocated to them, the macro-economic scenarios and implications of the release or non-release of the funds as well as the prevailing trends in the global economy.
So far, the raging controversy has revolved around the argument by the legislators that funds provided for in the budget have not been sufficiently released and the counter-argument by the executive that funds have been released according to certain parameters and peculiarities.
One would have expected that the great initiative which the House Committee on Appropriation exhibited in convening the midyear budget discourse should have been built upon rather than the present scenario. The details of that budget review discussion held between the House Committee on Appropriation and the Minister of Finance should have been food for thought for both sides. What was the essence of the motion on the budget on the last day before the House embarked on its annual recess? It is curious that the motion sponsored by the Chairman, House Committee on Rules and Business, Hon. Albert Sam-Tsokwa, sought answers to the same questions that the Committee on Appropriation presented and for which answers were provided at the engagement. Does it mean that the House of Representatives did not obtain the relevant information from its Committee on Appropriation on its interaction with the Minister of Finance? Even if the explanations of the executive were deemed unsatisfactory, is the current open war the solution to the perennial problem of poor budget implementation?
It is crystal clear that this altercation will not lead Nigeria anywhere near El-dorado. What has happened in the last couple of weeks, according to analysts, is that the government has chosen to dance naked at the market place. The trap which was set at the beginning of the journey has caught the big mouse and those who set the trap are gloatingly celebrating the game. Unfortunately, both the executive and the legislature are liable in one way or the other because it is their acts of omission and commission that have left the 2012 budget where it is today.
Investigations have shown that the real crisis here is the poor understanding of the essence of the budget to the life of the nation. There seem to be some individuals on either side of the divide who see the budget not as an instrument of national development but as a route to an annual harvest for personal enrichment. This warped sense of the budget corrupts the budget process right from the beginning when MDAs make their proposals for a new fiscal year. Cases abound where MDAs make provisions for one item repeatedly year in, year out and expect that funds would be allocated to them. In some situations, funds are deliberately allocated to duplicated subheads by the MDAs while those behind the fraud wait patiently to reap the proceeds of their deceit. Some of these lapses pass unnoticed until the execution stage, fuelling the usual speculation of budget padding.
Okonjo-Iweala came close to unveiling this point when she said that some funds had been allocated to areas where they were not needed and some MDAs that had genuine need for funds had very little or nothing. It means that the various standing committees in the National Assembly must re-examine their role in the budget process. It is not enough to gloss over fundamental issues in a process only to complain at the tail end of it.
It is also disappointing that the legislators never think deeply about developments in the global economy and the options open to Nigeria. All through this controversy, no legislator has addressed the issue of the future of the Nigerian economy and the option of saving for the rainy day. All the agitations have revolved around what has been earned as revenue and what must be spent. A certain legislator described the arguments of the minister in terms of prudent management of resources as an attempt by some people to put into the psyche of parliament that the country does not have enough money to fund its budget when all the revenue agencies had surpassed their targets for the year. “We have enough money. This country has enough money and we have to be careful because some people are trying to put into our psyche that we do not have enough money to finance our budget,” the lawmaker said.
No doubt, the House of Representatives has a constitutional right to insist on the full implementation of the national budget but analysts say they must also spare some thoughts on the future of the country. It is becoming obvious that the parliamentarians may have become so blinded by the present harvest from oil that they have consistently failed to look beyond their noses in terms of how best to deploy the available resources, including saving some of it.
From the utterances of some legislators, it seems their main concern is their constituency projects which signposts their personal achievement as key players in government and brightens their prospects to win the next elections. It is again, the peculiar situation where citizens tend to judge those in parliament and those in the executive using the same parameters. Nigerians expect both the legislature and the executive to hold more frank discussions on the budget and run the economy collectively.
As far as some legislators are concerned, it seems, tomorrow will never come and the business of the parliament is nothing other than demanding that the taps be opened for petrodollars to flow even if it means flowing needlessly into the drain. It appears that mutual suspicion and the penchant to resort to blackmail in order to score cheap political points are at the root of this struggle between the executive and the legislature.
It is high time those in government, either as ministers or as lawmakers, realised that they do the citizenry no good by playing to the gallery on the issue of the budget every year. It is high time that they all pulled from one end of the rope to get this economy out of the doldrums. They should all, like statesmen, think about the next generation and not behave like politicians who think only about the next election.