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Tue. October 23, 2018
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Around the World, Across the Political Spectrum

Examining the Discontents of Nigeria’s Worsening Budget Crisis

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By Chambers Umezulike

In every financial year, governments run with a budgetary existence, which is a financial statement that presents its proposed revenues and expenditure. Being the only document of such importance, essential components of national plans, programs and policies are often operationalized through the budget. This highlights the essence of a clinical management of the budget process so that it can deliver results in the lives of a country’s people, stimulate the economy, and lead to overall national development.

However, resource-rich countries in Africa such as Nigeria have not substantially maximized the use of this document. The political elite have conceptualized the budget as a contraption for political patronage consolidation. This has occasioned a bloated recurrent expenditure for decades hovering around 70%, at the detriment of the capital component which could stimulate the economy and contract the country’s extensive infrastructural deficit. In recent times, the capital expenditure (CAPEX) has managed to hover around 30%. Even at this, corruption, patronage, mismanagement, poor costing, inflation, procurement inefficiencies, global oil price fluctuations and lack of an effective M&E system have often affected the implementation of capital projects. A key example is the Lagos - Ibadan expressway project which has had budgetary allocations for many years and yet unfixed.

In the nucleus of all this, what Nigeria has often not come to terms with, is the fact that the country is POOR. A fact that the national budget has often showcased. Take the recently passed 2018 budget for instance, the highest budgeted amount in the country’s history which stands at NGN 9.12 trillion (USD 25.2 billion). Regardless this being less than the budgets of several states in the United States, individually, it puts the budget per capita of the country for the financial year at NGN 45,000 (USD 124.8). In comparative terms with the country’s former economic comparators such as Malaysia with the 2017 budget per capita of USD 2,000, it becomes clear how paltry an amount this is.

In furtherance, Nigeria’s budget process is marred by several challenges and issues. Starting with budget preparation, for years, the federal budget is being prepared with limited citizen input and engagement. As such Ministries, Departments and Agencies (MDAs) just sit in Abuja and allocate projects to communities without the appropriate needs assessment to understand the priorities of such communities. These communities are not duly consulted prior to the projects selection which hampers the required public oversight during implementation. Those communities have limited knowledge about the amount, what contractors are to do specifically, if it was budgeted by the national or subnational governments and the likes.

Another critical issue is with budget content. Frivolous items have gotten a good share of the appropriated figures with most of them being budget line items that lack clarity. The Centre for Social Justice, a Nigerian non-profit organization has documented that this amounted to NGN 219 billion in the 2018 proposed budget. This happens while the critical social sectors are in short of required budgetary figures for capital projects. Social sectors have continuously been assigned smaller portions of the overall budget. The percentage allocated to the education sector for instance in 2016, 2017 and 2018, were 8%, 7.4% and 7%, respectively. The same low percentages were allocated to health, agriculture sectors etc. Budget realism has been another issue which has been accentuated with the country’s 2016 recession. Macroeconomic projections have been made over too ambitiously, from GDP growth rate, to oil benchmark, oil production rate, foreign exchange rate etc. While Naira battles the USD at NGN 360 at the parallel market, it was pegged at NGN 305/USD in the 2018 budget. GDP growth rate projection for the 2017 fiscal year was 2.5% while the economy actually grew at 0.82%. In addition, since the 2016 recession, it became clear that Nigeria has a revenue challenge which has been hitherto masked by high oil prices. Out of the NGN 2.24 trillion which was budgeted for CAPEX in 2017, only NGN 1.5 trillion was released. This was worse in the 2016 CAPEX budget execution. Non-oil revenue projections have been utmostly ambitious, in the 2016, 2017 and 2018 fiscal years, when the government knew fully well that such cannot be met as 80% of government earnings were still from oil.

The sad reality is that lessons are not being learnt from previous mistakes. The budget process has also been politicized. This has become   vividly obvious since the current administration resumed office. In actuality, the budget calendar crisis has deepened following the rancor that has existed between the executive and legislature. Late budget presentation to the National Assembly (NASS), then internal politicking to have it passed as late as possible, then presidential assent by mid of the fiscal year in focus have become frequent occurrences in the country. There remains no clear definition of when a financial year starts and ends in practice, within the country. Currently for the 2018 budget, the executive prepared the budget with limited consultations with the NASS especially on a ceiling for their constituency projects, and then NASS removed over 4,000 projects from what was presented and inserted over 6,000. The lack of collaboration and negotiation required by the both arms is costing the country so much. On the same note, regardless that many of the insertions were micro projects which ideally should not have a place in the national budget, they were done by legislatures that lack the needed technical capacity to cost, plan and conceptualize such exercise.

Lastly, the budget implementation phase has its own set of challenges. The most obvious being that citizens lack access to the required project implementation data to provide oversight. Releases are done without a breakdown of projects they are for. Post the procurement process, citizens have nanoscopic knowledge of selected contractors, revised project amounts in many instances, implementation timeline and even project specifics. The M&E departments of MDAs are overwhelmed resulting in the poor assessment of implemented projects across board. More sadly, flagged defaulters from the budget audits are not sanctioned appropriately. These challenges and issues are even more predominant in subnational budgets where governors micro manage the entire exercise, while prioritizing opacity, political patronage and mismanagement of funds, without being accountable to citizens.

To arrest this sad situation, it is important that the President assents the amended 1999 Constitution (Section 81) which has clarity on when the budget should be presented to NASS, when it should be passed and when it should be signed into law. Nigeria’s major problem is lack of sufficient revenues to run the country. The current global oil dynamics should have made the country learn several lessons. As such, diversification of the economy has to be in practice this time, as well as providing an enabling environment for investors. Without the diversification of government revenue sources, the country would be in bigger trouble in approaching years. CAPEX has to get to at least, 45% of the total expenditure moving forward, if the national budget can translate to anything substantial. The country cannot afford to keep paying salaries annually through the budget, with even borrowed funds. Operating a lean government and cutting down frivolous expenditure are really important so that the limited resources within the country can be channeled to relevant projects. Ultimately, transparency, accountability and establishment of systems through which there could be proper public oversight in budget implementation is paramount to ensuring a comprehensive budget implementation through which substantial development impact can be felt by the Nigerian populace.

Chambers Umezulike is a Development Governance Expert, Researcher and Writer. He can be reached through chambers.umezulike@gmail.com and on Twitter via @Prof_Umezulike

 

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