BUSINESS ECONOMY PAGE
Notwithstanding the delay in the passage of the 2018 Budget effective implementation and transparency remain crucial to achieving better economic performance, James Emejo writes
In yet another unsavoury report on the state of the Nigerian economy in recent times, the World Bank had cut the country’s growth forecast for the year to 1.9 per cent from the 2.1 per cent it had projected earlier in April.
Of particular concern to the bank, was the contraction in the agricultural sector as the farmers and herders’ crisis across the country took toll on farm produce for most of the year.
Agriculture, a key sector for government’s diversification programme contributed a disappointing 1.19 per cent to Gross Domestic Product (GDP) growth in the second quarter of the year.
The GDP growth had slowed to 1.50 percent in Q2 from 1.95 per cent in the preceding quarter.
According to the World Bank’s pronouncement on the economy, in Nigeria, declining oil production and contraction in the agriculture sector partially offset a rebound in the services sector and dampened non-oil growth, all of which affected economic recovery.
“Nigeria’s recovery faltered in the first half of the year. Oil production fell, partly due to pipeline closures.
“The agriculture sector contracted, as conflict over land between farmers and herders disrupted crop production, partially offsetting a rebound in the services sector and dampening non-oil growth,” the Bretton Woods institution added.
Only recently, the Central Bank of Nigeria (CBN) had raised a red flag over the state of the economy, warning that the country’s much-celebrated exit from recession was being threatened after the GDP contracted in Q2.
All along, the argument had been that the dismal performance of the economy was as a result of delays in the passage of the appropriation bill, which had generated heated debate between the executive and legislature.
Though the budget was eventually signed into law by President Muhammadu Buhari on June 19, it was only recently that capital releases were made to some agencies.
The Minister of Agriculture and Rural Development, Chief Audu Ogbeh, had while explaining the poor performance of the sector in Q2, expressed disappointment that no capital releases had been made as at early September.
In fact, findings suggested that no meaningful activities were carried out in most agencies of government, which are critical to economic stimulation, while capital releases were delayed.
The CBN had, during its Monetary Policy Committee (MPC) meeting, harped on the implementation of the 2018 budget among other things to stimulate the economy.
It specifically called on the government to fast track the implementation of the 2018 budget to help jumpstart the process of sustainable economic recovery.
However, following reports of gradual releases of capital expenditure, attention has now moved to the need to ensure transparency and effectively monitoring of budget implementation, if the economy must move forward.
Director General, West African Institute for Financial and Economic Management (WAIFEM), Prof. Akpan Ekpo, warned that the slow implementation of the budget would slow growth and invariably development.
He also said there was need for better public information on the implementation.
In an interview with THISDAY, Ekpo said:”Yes, the budget was passed quite late for no sound reason. However, I do not think any aspect has been implemented. What we need to request is for government to inform the public on the performance of the budget.
“It is almost six months since the budget was signed. The slow implementation would slow growth and invariably development. The sluggish recovery needs push by government through the implementation of the capital component of the budget.”
He added:”The social programmes are also crucial for poverty reduction. There have been releases for capital projects.
“Hence monitoring and evaluation remain vital for measuring performance. The 2018 budget is being implemented. Our concern should be the speed of implementation.”
Also, economist and former Managing Director of Unity Bank Plc, Dr. Mohammed Rislanudeen, said the success of Economic Recovery and Growth Plan (ERGP) of government would depend on the implementation of the budget.
According to him:”Implementation of the budget particularly the capital aspect of the budget has over the years been challenged by lack of timely passage of the annual budgets as well as limited or lack of matching funds while recurrent as well as statutory obligations like loan repayments always get fully implemented.”
He said:”The situation is further accentuated in 2018 as politics seem to have taken more precedence over the economy with the unfortunate impasse between the National Assembly and the Executive arms of government.
“It need no emphasis that timely budget implementation will go a long way towards reflating the economy, improve GDP growth via improved economic activities with multiplier effect across all sectors, thereby reducing unemployment rate that been heading northwards peaking at 18.8 percent.”
Rislanudeen added:”Kindly note that both quarterly GDP and monthly inflation rates have recently surged and reversed the recovery trend to 1.5 per cent and 11.23 respectively.
“Indeed timely implementation of annual budgets is an integral critical success factor of the government’s economic recovery and growth plan before and after mild exit from recession in 2016 to 2017.”
Also, speaking with THISDAY on the issue, Professor of Finance and Capital Market at the Nasarawa State University, Keffi, Prof. Uche Uwaleke, said poor budget implementation remained a major constraint to growth of the economy.
He also called for reforms in the budgeting process to address current obstacles.
Uwaleke said:”Poor budget implementation especially with respect to the capital component has become a major drag on the country’s economic growth. A number of factors are responsible for this, including undue delays in the passage of the budget, the lengthy procurement process, which takes several months to conclude, non-release of funds in time as well as corrupt practices by officials of government.
“All these manifest in shoddily executed projects, abandoned projects that litter the country, costly projects as a result of frequent variations in contract price.
“The government’s fiscal year as enshrined in the constitution which is from January to December took into consideration seasonal factors. The delay in getting out the budget document especially since the return to democratic rule in 1999 hampers the execution of infrastructure projects, which are sensitive to weather conditions as contractors suspend work whenever the rains become heavy.
“Also, when money is not released in time or government officials take a large chunk of the contract fee as kickbacks, the contractor is hamstrung in delivering standard jobs.”
According to the university don, for a country like ours yearning for enabling infrastructure and human capital development, the importance of budget implementation cannot be over emphasised. Against this backdrop, the government should recognise the urgency to fast track the implementation of the 2018 capital budget in view of the fact that it was late on arrival.
“The National Assembly should cooperate with the executive in respect of any government borrowing programmes for capital projects provided for in the 2018 budget. Over the years, the level of capital budget implementation has been nothing to write home about.
“To break this jinx, a comprehensive budget reform is required entailing the entire process of formulation, legislative approval and Presidential assent, execution and control. This should be codified in a budget law that clearly spells out the time lines for various budget activities including sanctions for any breach.
“The procurement Act can also be amended to shorten the process as well as plug loopholes for abuses. The government should sustain the ongoing fight against corruption and public financial reforms.
“The finance ministry should ensure that funds are released on time and together with the ministry of Budget and National Planning put in place appropriate mechanisms for monitoring and evaluation. Funding shortages are best addressed through ramping up non-oil revenue and reducing the country’s vulnerability to oil shocks.”