Budget for Power, Works and Housing

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Fidelis T. Onyejegbu argues that investments in the sectors are not enough to address the needs of the people

The power, works and housing (PWH) sectors play vital roles in the growth and development of any economy such that getting it right in these sectors (alongside a few other sectors like education, health, agric., transport and services) almost guarantees the development of such economy.

These three sectors (PWH) represent a huge share of the infrastructural needs of Nigeria as a country and rightly so, there have been investments into these sectors by way of budgetary allocations and through Public-Private Partnerships (PPPs). The question is: are investments into these sectors enough to address the needs of the teeming Nigerian populace? We shall take a look at this by analyzing the Federal budgetary allocations to these three sectors with a special focus on the proposed 2019 FGN budgetary allocation to the Federal Ministry of Power, Works and Housing (PWH).

The proposed 2019 budget for the Federal Ministry of PWH is a total sum of N408.028 billion. This proposed sum represents a 5% of the overall 2019 FGN budget proposal of N8.826 trillion. The proposed sum (N408.028 billion) represents a 2.84% decrease from the actual sum allocated to the Federal Ministry of PWH in 2018 (N682.959 billion) and also represents a 2.88% decrease from the actual sum allocated to the ministry in 2017 (N553.713). In terms of capital to recurrent allocation balance, the ministry’s trend of budgetary allocation, between 2016 and 2018, has been between 92-96% for capital expenditure and between 4-8% for recurrent expenditure. For 2019, the proposed sum is disaggregated into 92.41% and 7.59% for capital and recurrent expenditures respectively. This trend of allocation is in order considering that the constituents sectors under this ministry require huge capital investments.

However, there is room for improvement looking at the current level of infrastructural deficit in the country. For power, a little over 60% of Nigerians have no access to electricity while the others that do have, do not have steady supply. In addition, there is problem of transmission capacity as the current transmission grid cannot carry more than 5,500 MW.

For housing, it was reported by the Centre for Affordable Housing Finance Africa that Nigeria has about 17-20 million housing deficit. In addition, not all contributors to the National Housing Fund are able to get funds to meet their housing needs. In the works sector, the poor state of roads in the country is reflective of the level of funds needed to ramp up the developmental efforts being made. In all, the available budgetary allocations and other infrastructural investments in these sectors have not been enough.

Furthermore, for the impact of the proposed 2019 budget of the ministry to be felt, there is need to address the problem of incomplete implementation of the budget. Looking at the capital budget implementation rate of the ministry as reported by the Budget Office of the Federation, it seems to be showing a downward trend. A 71.16% of the allocated N422.96 billion was utilized in 2016; 53.56% of the allocated N553.71 billion was utilized in 2017. It is a thing of concern that the sum of N66.99 billion, out of the allocated sum in 2017, was returned to the treasury by the ministry at the end of the budget calendar year.

The reason for this can best be given by ministry’s personnel. For 2018, out of the allocated N682.959 billion, only N122.18 billion had been released by the ending of September 2018 while only N45.07 billion of this sum had been utilized. It should be noted that the 2018 budget received presidential assent by June 2018. There is need for early release of capital budgetary allocations to guard against issues like incomplete utilisation of the allocated sum.

Moreso, there are other issues that need to be addressed. First and foremost is the need to grow the revenue base of the federal government to be able to allocate more funds for capital projects. A corollary to this is an aggressive pursuit of the economic diversification agenda as oil currently contributes less than 10% to the nation’s GDP. This could be achieved by implementing policies that would enhance investments in sectors like agriculture and solid minerals. Secondly, as the constituent sub-ministries under this ministry are critical for economic growth and development, they seem to be too many to be under one ministry and to be headed by one person. It is therefore recommended that the federal government should consider demerging these three sectors under this ministry.

In conclusion, a few other suggestions are needful.
Firstly, the priority of developmental capital allocation over the administrative capital and other aspects of recurrent expenditure cannot be overemphasized. This is against the backdrop of several line items that are budgeted for annually to the detriment of development capital component.

Secondly, more investment into the transmission segment of the electricity value chain is overdue. The federal government should either pursue more funds to invest in this segment through PPPs or privatize its ownership to capable operators to open the doors for investment in the sector so as to address the power transmission problem. Thirdly, there is need to make contribution into the National Housing Fund a basis for assessing the fund. This would ensure that more contributors would meet their housing needs through the Fund. Finally, roads infrastructure can be improved through a Road Fund and Road Management Authority Act that would raise funds from sources like toll gates, special surcharges such as fuel.

––Onyejegbu is Programme Officer, Public Finance Management, Centre for Social Justice, Abuja