How Buhari’s cabinet hurts budget cycle

THERE are reasons to believe that the decision of President Muhammadu Buhari to constitute his cabinet in September 2015 (i.e. four months after his swearing-in) is hurting Nigeria’s budget cycle on which macroeconomic management efforts are hinged.

A key milestone in Nigeria’s budget cycle is the presentation of the Medium Term Expenditure Framework (MTEF)1 to the Federal Executive Council (FEC) by the Minister of Finance. The Fiscal Responsibility Act (FRA) 2007, in its Section 14, mandates the Minister of Finance to present this very important planning document to FEC before the end of the second quarter of each financial year – that is to say, this obligation came due for the Buhari administration on June 30, 2015 and, as at that date, there was no Minister of Finance in place to meet this important requirement of the Act.

In stipulating the June 30 deadline, the drafters of the Act had reckoned that it would give FEC ample time to “consider and endorse” the MTEF before the 31st of August – a deadline which Section 11(1)(b) of the Act stipulates for the Medium-Term Expenditure Framework for the next three financial years to have been laid before the National Assembly for their consideration. The Muhammadu Buhari administration has also missed this deadline given that it has failed to convey the 2016-2018 MTEF to the National Assembly for consideration and approval.

To understand the implications of these missed deadlines, one needs to understand that the MTEF is the platform on which the country’s annual budgets are constructed. Without a timeous 2016-2018 MTEF, there will be no timeous 2016 budget. The Act states as much in as lucid a language as legally possible when it states in Section 18 (1) that notwithstanding anything to the contrary contained in this Act or any other law, the MTEF “shall be the basis for the preparation of the estimates of revenue and expenditure required to be prepared and laid before the National Assembly under Section 81 (1) of Constitution.”
The MTEF gives perspective to the annual budget.

Many socio-economic goals, projects, programmes and policy inclinations take more than a year to complete and cannot be frozen in a single budget cycle. It is the MTEF that identifies those priority thoughts and spreads their presence and cost/revenue implications over a period that covers the next three years. Section 13 of the Act spells out an elaborate procedure for producing an MTEF. The procedure includes “public consultation on the macro-economic framework, the fiscal Strategy Paper, the Revenue and Expenditure
Framework, the strategic, economic, social and developmental priorities of government, and such other matters as the Minister (of Finance) deems necessary.”

The process will only commence after President Buhari appoints a Minister of Finance – even in acting capacity. Till then, fiscal planning is literally waiting in limbo.

Section 11 of the Act expressly requires that states of the federation be carried along in the process. Hence, it is not something that will happen in the corner of a minister’s office – or anybody else’s office for that matter.

When the President eventually appoints his ministers, as he has said he would, by the end of September 2015, the Minister of Finance, Minister of National Planning and other members of the President’s Economic Management Team will need some time to consider and adopt the existing economic vision or to articulate a fresh vision for the administration. They will also need time to sell that vision to the country that they rule as well as to the international community. Then they will need yet more time to create implementation frameworks that work. These things will not happen overnight. One doubts that they will happen in good enough time in 2015 to be useful in the judgement calls of domestic businesses, foreign governments and foreign investment vehicles concerning FY 2016. With the volatility in the world economy, this could mean a sidelining of Nigeria in key considerations.

Since the promulgation of the Act, President Buhari’s administration is the second that has inherited an MTEF, the first being the Goodluck Jonathan administration which in 2011 inherited not only President Yar’Adua’s MTEF 2011-2013, but the overarching Vision 20:2020 as well. The principle as well as the practice of rule-based fiscal responsibility management all over the world is for a new administration to adjust the existing MTEF in such a way that it accommodates the manifesto and outlook of the new administration while at the same time soft-landing the existing projects, programmes and erstwhile priorities (with which it disagrees) in such a way as not to create an economic shock. In this regard, the MTEF is a veritable change management tool. Failing to make expeditious use of it will be an unnecessary loss to the Buhari administration and the country it governs.

Without a 2016-2018 MTEF, all fiscal pronouncements remain, at best, ad hoc and for a $568.5 billion GDP sub-sahara African country, the corollary is too embarrassing to contemplate.

The MTEF articulates the projections, for the next three financial years, the underlying assumptions for those projections and an evaluation and analysis of the macroeconomic projections for the preceding three financial years; it also contains a Fiscal Strategy Paper setting out:

(i) The Federal Government’s medium term financial objectives,

(ii) The policies of the Federal Government for the medium term relating to taxation, recurrent (non-debt) expenditure, debt expenditure, capital expenditure, borrowings and other liabilities, lending and investment, and

(iii) The strategic economic, social and developmental priorities of the Federal Government for the next three financial years.

Finally, it contains an expenditure and revenue framework setting out: estimates of aggregate revenues for the federation for each financial year.

•Uwadoka is an Abuja-based fiscal enthusiast.