Money  

Many troubles of 2015 fiscal plan for new govt

Jonathan out, Buhari in

Jonathan out, Buhari in

Like the proverbial “old wine in new bottle”, the taste will always remain the same, but at the extreme, burst the bottle.

Nigeria’s budget has become predictable, even before its official figures are unveiled, because it is more of “cut and paste” rather than articulated development roadmap and at best, exists only in papers. The yearly implementation report is clear evidence.

For 2015, the stakeholders in the Nigerian project are concerned about the extreme point, where the old wine is now capable of bursting the new bottle. Of course, the new task is about 2015 budget with its multiplicity of challenges, manifesting tendency to create ripples that will spill over to 2016.

To understand the challenges, it is pertinent to begin the assessment from the known or little known. For example, Nigeria’s budget over the years has failed the implementation test, producing no general good for the average citizen.

The country has also been running heavy recurrent expenditure profile against lean capital or “regenerative” expenditure. It has so far accumulated huge debt portfolio, predisposing it to huge debt service bills.

Perhaps, it is also apt to add that some of the debts’ proceeds are now controvertible over their applications in the economy. Still, many of the items from the previous budgets till date, are inflated, duplicated and presented in ambiguous terms.

In 2015 fiscal plan, these anomalies seem ready to “burst”. Why? The debt burden, with its servicing, is at record high, and worse still, the 2015 budget is more that 20 per cent in deficit. Recurrent expenditure hit record high too, leaving capital expenditure vote at insignificant level.

Currently, the revenue generating capacity of the country is at low point, with uncertainties shrouding the main source of the revenue. Most important, a new government, is by exigency, made to swim in this uncharted terrain sort of.

Indeed, Nigeria’s 2015 budget as passed by the National Assembly (NASS) is a duplication of the previous years’ items in new document, lacking originality, as well as setting it sail to sustain the status quo, which is all about failures and excuses.

Besides, the incoming government would have to either confront greater challenges in managing the macroeconomic environment given the assessed headwinds in the budget or be forced to review the 2015 appropriation Act.

Already, the absence of clearly written line item on fuel subsidy in the N4.5 trillion total plan, has jolted the economy, with a 100 per cent rise in transport costs, which directly impacts on the prices of goods and services, with attendant fall in standard of living, while the first fiscal distortion in the 2015 budget took off by the payment of the N156 billion, charged against the fiscal document.
 
Specifically, the fiscal plan, which has N1.1 trillion deficit; lowest capital expenditure vote in the country’s history; and duplications of line items that serve as aid to fritter public funds, is a sustenance of the trajectory that has hallmarked the nation’s budgets in the last 10 years, but made worse this year with the provision and passage of 82 per cent recurrent expenditure; six per cent statutory transfers; and a paltry 12 per cent capital expenditure vote.
 
The budget’s general provisions have also showed not anchored on any high level national development plan, as it was not accompanied by an evaluation of the programmes financed with budgetary resources in 2014, against the provisions of Section 19(d) of the Fiscal Responsibility Act (FRA) 2007.

Despite the increment and subsequent marginal reduction in the recurrent expenditure profile by N0.5 billion to N2.6 trillion, the capital expenditure, which is the driver of the growth indices, was scaled down as well by additional N85.9 billion to N557 billion from N642.8 billion earlier proposed. This showed that the recurrent expenditure is approximately five times the capital expenditure, meaning that every five items consumed, only one is reproduced.
 
Already, the review of capital budget implementation for 2014, showed a 33.7 per cent performance, the same region for 2013 budget execution, which is very poor, considering the country’s population and acclaimed development pursuits.
 
The crude oil price benchmark, after several reviews, given the country’s exposure to revenue shortfalls caused by sole dependence on the commodity and the ongoing vagaries in the international market, was pegged at $55 per barrel and at N197/$.
 
The total budget plan is N4.5 trillion, representing a decline of 7.2 per cent from the 2014 appropriation at N4.69 trillion.
 
The 2015 fiscal plan consist of N376 billion for Statutory Transfers; N953 billion for Debt Service; N2.6 trillion for Recurrent Expenditure; and N557 billion for Capital Expenditure. The figures showed 6.6 per cent increase in recurrent vote and 65.4 per cent decrease in capital vote.
 
Of the total recurrent expenditure package, personnel cost is 70.2 per cent and 42.15 per cent of the total budget, in contrast to 36.8 per cent of the 2014 overall budget. However, one-third of the personnel cost is spent on politicians, retinue of aids, directors, Permanent Secretaries that are less than 2500 in number, compared to core civil servants estimated at 26000.
 
The debt provision at N943 billion is 22 per cent of the overall budget in 2015, representing 32.4 per cent increase over the level in 2014 and the third consecutive increase- N559 billion in 2012; N591 billion in 2013; and N712 billion in 2014.
 
In terms of ranking of Ministries, Department and Agencies (MDAs) with the highest allocations, which also embodies objectionable items and figures ahead of the approval, the Ministry of Finance is first, with 39.6 per cent, including the controversial Service Wide Vote; Education followed with 11.3 per cent; Defence, 8.2 per cent; Police, 7.6 per cent; Health, 5.9 per cent; Interior ministry, 3.6 per cent; NASS, 3.4 per cent; and Youth Development, 1.7 per cent.
 
The 2015 budget is projected to be funded by retained earnings f N3.6 trillion, made up of N1.92 trillion oil revenue and N1.7 trillion non-oil revenue, representing 53/47 per cent contribution. The retained revenue plan represents 3.4 per cent drop from N3.7 trillion for 2014.
Reactions

“Drafted on the assumption of $53.0 oil benchmark; exchange rate of N190/$; 2.3 million barrel per day crude oil production; 5.5 per cent Gross Domestic Product (GDP) growth rate; and 1.1 per cent deficit to GDP ratio, we think the 2015 appropriation bill as passed by the National assembly seemed disconnected with present realities in the economy in a number ways.

“The most telling among the shortcomings of the budget includes the outright exclusion of fuel subsidy payment by both the Upper and Lower Chambers,” analysts Afrinvest Securities Limited said.

Meanwhile, there seems to be a deepening of the nation’s development challenges, with the debt service provision hitting the N900 billion-mark for the first time and the capital expenditure profile for the over 170 million population put at about 12 per cent of the entire budget. The development may also mean that 88 per cent of the nation’s budget for 2015 is meant for consumption, which would spell a damning effect on growth, wealth creation and other economic linkages in 2016.
 
“For Nigeria to proceed on the path of sustainable development at this point, non-oil revenue should exceed oil revenue. It should review its Internal Revenue Generation’s projections and the implementation of the FRA provision on the operating surpluses of MDAs.

“Tax revenues, waivers and exemptions must be reviewed, while luxury surcharges, proposed Treasury Single Account and disclosure requirements must be given more ‘bite’. Unfortunately, the legislative backing for the new luxury taxes has not been mentioned by both the Executive and Legislature till now,” the Lead Director, Centre for Social Justice, Eze Onyekpere, said.
 
With the assessed budget deficit of N1 trillion and growing uncertainty in achieving the revenue target from the sale of crude oil due to unstable international market activities on the commodity, coupled with non review of tax laws to back the new luxury surcharges, record high recurrent expenditure profile and ridiculous capital expenditure plan, it is obvious that the 2015 budget is headed to the path of previous ones, with consequent spill over effect in 2016.
 
An Economist and Public Affairs analyst at African Heritage Institute, Dr. Uzochikwu Amakom, said the budget was “huge joke” unbefitting of the country’s profile as the biggest economy in the continent, lacking ingenuity and at its “best” only shows laziness and photocopy of old items, with only a change of figures.
 
Amakom, while proffering the way forward, said the Medium Term Expenditure Framework should always precede the budget, made ready and sent to the NASS by June and before the legislative break and proved before the presentation of the budget, which should be based on it.
 
“Continued variation between policy, planning and budgeting will sustain the underdevelopment of the country. The national budget should be anchored on long term and high level policy documents such as Vision 20:2020.
 
“The template for budget preparation sent to MDAs should be reviewed and made to recognise differentiation in various ministries in terms of roles, duties and mandates. This should not remain the omnibus it is currently. The new template must cut down the assessed frivolities in line items that are rampant now,” he said.

Also, an Abuja-based Development Consultant and Executive Director, OJA Development Consult, Abuja, Jide Ojo, in a note to The Guardian, titled: “Crucial Issues Before President Buhari on Nigeria’s 2015 Budget”, noted that there are many challenges with the implementation of the 2015 budget.

“The issue is the over reliance on oil revenue. The monoculture of Nigeria’s economy is having negative impact on the country. There is the challenge of dwindling oil revenue in the international market; oil theft with about 100,000 barrels per day being lost to illegal bunkering; lack of accountability and transparency in the oil and gas sector of the economy; the non-passage of the Petroleum Industry Bill (though the House of Representatives passed it on Thursday, May 28, 2015, there was no concurrence of the Senate). 

“The low revenue base of the country to finance the budget has resulted in a situation where over 20 of the 36 states of Nigeria could no longer pay salaries of their workforce as and when due. This is because of the drastic reduction in the federal allocation to the states and local government. Even the Federal Government has had to borrow to pay salaries of its workers.

“Governments at all levels are most likely not going to be able to implement both the recurrent and capital expenditure of their budget as passed by their respective legislative arms. It is therefore incumbent on the government to prioritise its programmes and projects and take on those within its lean resources.

“The new administration of President Muhammadu Buhari will also do well to run a lean government be ensuring that the extant 42 member cabinet is trimmed down considerably within constitutional provision. There is a need to cut down on the number of political aides, presidential air fleet, State House budget. The same should apply to the governors and local government chairmen,” Ojo said.

The expert also advised the new government to roll out its economic blue print so that investors can have a clear direction of the government and how they can key into it, as well as widen its non-oil income by imposing tax on some luxury items like exotic cars, private jets, foreign wines and spirits (alcoholic drinks like champagne).

“Government should remove subsidy on petroleum products and allow forces of demand and supply to determine the price. More public, private partnerships need to be encouraged. Many of the current white elephants projects initiated by the outgone administrations should be discontinued and probably sold off and the proceeds used to fund some key infrastructural projects.

“The turnaround maintenance of our four petrol refineries should be of utmost priorities and if this cannot be achieved, they should be sold off. Government should also decisively deal with the challenge of oil theft and willful vandalism of oil and gas pipelines. 

Above all, early submission and passage of the budget is important and should be the new culture. Likewise is proper implementation of the yearly budgets.
 
Meanwhile, Onyekpere has canvassed the review of the fiscal plan by the new administration on assumption of duties to foil the impending economic challenges and retrogression that would beset the country with the current budget.
 
The activist noted that the 2015 budget lacked not only evaluation indices, but visibly lacked coordination and capable of derailing the thought processes that were originally meant to create wealth, attract foreign investments and ensure the alignment of monetary and macroeconomic policies.
 
He also warned that the Ministry of Finance and the Budget Office of the Federation should desist from the usual behaviour of keeping away budget estimates, including implementation reports, from public domain, especially

Receive News Alerts on Whatsapp: +2348136370421


No Comments yet

Related