Nigeria's 2013 Fiscal Austerity Budget (4)

14 Nov 2012

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By Odilim Enwegbara, Email:

''Time for smart and timely capital budget implementation''
Each year, Nigerian government budgets a huge amount of money. Yet, the fiscal year ends with nothing to show for it. Why? Because capital spending — the only portion of the budget meant to address the people's needs — remains unimplemented. The question many could not answer is: Why do they not have difficulty implementing recurrent expenditure, but when it comes to capital spending, they have difficulty taking off the ground? Not knowing why is to be ignorant of the fact that those preparing our budget and those implementing it are all in connivance of ensuring the money is never spent. Returning it to the treasury for another recurrent fiscal year or sharing it is part of the carefully orchestrated agenda of helping the West choke Nigeria's economic rise. So, whenever you hear their fabricated stories about why the budget is never implemented, please don't buy those stories, no matter how appealing they may present them.

The good news is that the House of Representatives, afraid that if things continue the way they're going, they might become the casualty, with voters sending them on compulsory leave. Recently for this reason the House has refused to dance along with executive branch on this year's budget. Not only they now want a full departure from the nations' IMF-like fiscal austerity budgets, but they're seriously demanding that the 2013 becomes more grassroots-based, poverty reduction-focused, growth-driven, and job-centered. Afraid that this might never happen with an executive populated by so-called technocrats, unelected men and women who are not only out of touch with the country's realities, but who have truly nothing to lose should come 2015 Nigerians demand from PDP why it never kept the social contract it has with Nigerian masses as declared in its party's manifesto!

First on the list of disagreements is benchmarking of oil price. The Reasons the House is insisting on $80 per barrel of oil as against the executive's $75 for the 2013 budget are many. One, if having pegged the 2012 budget at $72 per barrel, we still have oil prices never below $90 in 2012, the insistence on $75 based on historical analysis, is a totally faulty analysis. Two, since the 2013 budget is expected to be hugely deficit financed, increasing the benchmark invariably should reduce the deficit and government's borrowings. Three, shouldn't high benchmark mean more revenue to government, revenue badly needed to be invested in the country's embarrassing infrastructure? Four, with government borrowing less, more and cheaper money becomes available to the private sector that's currently crowded out.

The truth is that since the huge difference is never captured in the appropriation act, government has all the flexibility about where to spend the money, of course excluding deploying it in paying down our domestic debt or financing our infrastructure. Given the public pronouncements of the Finance Ministry, it is certain her plans should be to use it in growing both our foreign reserves and our so-called Sovereign Wealth Fund. So, it's understandable why our lawmakers' insistence on not less than $80 per barrel is plausibly development-oriented and job-targeted.

Another important disagreement is regarding the nation's dwindling capital spending, without the executive giving government the right haircut. The insistence that the 2013 budget is an unnecessary austerity budget can only be understood when compared with some of our recent past budgets. Take 2010 budget. While the N4.6trillion budget had N1.8trillion as capital expenditure, the 2013's N4.92trillion only allocated meager N1.54trillion (less than about N300billion in 2010) as capital expenditure. So, should we call the 2013 budget a forward-looking or backward-looking budget? We should agree with the House that the proposed budget is anti-development.

The abysmal budget implementation too is making the House unhappy, especially hearing this year the same explanation given by the Finance Minister last year. Repeating this year the same last year's story about how institutional challenges with regard to procurement process have stalled the capital budget's implementation is being received by the House as a gross disappointment because definitely that too should be the expected story about the 2013 budget. For this reason, the House is rightly demanding: But given the awareness of these challenges, shouldn't there be a way out; shouldn't they be addressed once-and-for-all? Moreover, it's it illegal to be seeking lawmakers' approval of a budget that's designed to fail? Why expecting such unplanned budget to be unsuccessful?

The lateness of budget has generated fierce disagreements too. The tardy approval of the budget by the lawmakers is being blamed for the abysmal implementation of the budget. But is that true? Of course, there's no way a lately presented budget proposal shouldn't also be lately passed into law by the National Assembly? If virtually all modern economies' budgets are presented to lawmakers many months ahead, why presenting our budgets tardy — in the last quarter? Or isn't the whole lateness a carefully orchestrated game of trying to shift the blame as well as justify poor capital budget implementation?

The argument that the introduction of constituency projects during the approval stage of the budget is partly to blame for the poor outing of our capital spending seems to be lacking merit. Given that budget proposal remains a mere estimate until it is passed into law, lawmakers who have the last say in the appropriation bill, have the constitutional power to adjust the budget as they deem it fit. So, rather than blaming constituency projects' introduction as the reason for budget implementation failures, it could have been plausible if the argument is centered around lack of quality control measures in ensuring that funds meant for constituency projects are properly utilized and accounted for by the legislators. Singling out constituency projects as the cause of poor enforcement of the Public Procurement Act and the Fiscal Responsibility Act too can hardly hold water. True, the two acts are in place as the most credible public finance management reforms with the goal of engendering efficiency in the implementation of capital budgets. But shouldn't the process of implementing them come after the budget has been passed into law by lawmakers and signed by the president?

Had it been that both the executive and the legislature see budget implementation as an important litmus test of good governance, and the ongoing disagreement received in good fate, rather than sending out an army of media attackers and blackmailers to ridicule the House, dialogue and negotiation should have been seen as the best way out, since it's how to grow and strengthen democracy.

Having now heard from both sides, rather than dwelling on why the House has superior, it's time to seek the best way forward, especially since the ultimate losers are the Nigeria people? Let's start with the overhauling of our legislation on budgetary matters. The new should set specific dates and deadlines for budget presentation, approval, and implementation. The deadline for the presentation of the appropriation bill to the lawmaker should be not later than 30 April, passing the bill into law should never exceed September 30, and President signing it into law not later than October 15. Procurement processes and implementation planning shouldn't exceed December 15 so as to ensure implementation starts January 1 and ends December 30.

Early presentation has obvious advantages. First, it gives an ample opportunity for lawmakers to exhaustively deliberate on it and harmonization differences emanating from the two chambers. Second, there's enough time for procurement, implementation, monitoring, and evaluation planning. Third, the level of transparency that accompanies public participation makes budget more responsive to the needs and priorities of the citizens. Fourth, by promoting transparency and accountability in public fund management, it becomes a fiscal instrument for promoting strategic priorities, for delivering maximum value for money, and for ensuring that borrowing is purely for promoting growth and development.

In engendering improvement and transparency in project management, besides mandating that information is posted online for millions of Nigerians to freely view and comment about, the new law should also mandate a quarterly televising of progress reports on budget implementation so citizens could see for themselves not only how their money is being spent, but also how much public good it's promoting. If countries Kenya and Ukraine have grassroots involvement in both priorities projects identification and performance evaluation, why shouldn't we too have multi-stakeholder participation in ensuring our budgets meet set national goals?

Budget implementation has not worked because it does not come with clear templates on monthly cash flows, milestones, and deadlines. The absence of Annual Cash Plans and Disbursement Schedule as mandated by sections 25 and 26 of Fiscal Responsibility Act has made budget implementation abysmal. It's because of this lack of cash flow template that made the Minister of Finance and Federal Executive Council (FEC) to illegally disburse cash. And with such indiscriminate actions, rather than the weekly Wednesday FEC meetings being where national economic policies and strategies are sharpened, they've become a weekly lobbying ground for discriminatory budget implementation.

Addressing all these shortcomings require a proactive legislature, a legislature that not only wants to make sure that ours are growth-focused budgets, but also that the capital-intensive budgets are fully implemented to the benefit of the masses they represent. Taking the new-found responsibilities seriously should require lawmakers to immediately establish the National Assembly Budget Office (NABO), which like the US Congressional Budget Office (CBO), should be fully responsible not only for carrying out the proper re-ordering of budgetary provisions. Composed of some of Nigeria's finest economic policy specialists, NABO should be in place to moderate the executive's excesses, especially when it comes to setting targets for overall budgetary expenditures, for overall budgetary revenues, for deficits and public debts, as well as for providing lawmakers authentic periodic forecasts and analyses of economic trends and best programmatic policies and strategies.

While this is the last of the series about the 2013 federal budget, the budgets of Lagos, Kano, Rivers, Anambra, Delta, and Benue should be critically reviewed whenever they're announced.

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