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2015 budget: Between hopes and realities

By Chijioke Nelson
03 February 2015   |   11:00 pm
The 2015 fiscal plan of the Federal Government, currently under consideration, has been assessed again as the “business as usual”. CHIJIOKE NELSON highlights some sectoral issues. THE above statement was credited to the Finance Minister and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, as part of her budget presentation speech.   But a critical…

Okonjo-Iweala

The 2015 fiscal plan of the Federal Government, currently under consideration, has been assessed again as the “business as usual”. CHIJIOKE NELSON highlights some sectoral issues.

THE above statement was credited to the Finance Minister and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, as part of her budget presentation speech.

  But a critical look at the financial projections of the 2015 fiscal proposal may well show that the economy will be greeted with excuses by this same time next year. First, inequality can never be tackled by mere expression, but by government’s deliberate efforts in the areas of social welfare and infrastructure development. At present, the gap is wide and the 2015 budget proposal made a laughable provision in terms of Capital Expenditure projection to offer real hope for the laudable promise.

  The current economic challenge occasioned by the free-falling crude oil prices and aggravated by the country’s waste of opportunities and resources in non-diversification of revenue base, would also mean that in 2015, the budget would be supported by more borrowing, with consequent increase in debt service bills, perhaps, pushing it to a trillion naira mark. Moreso, the challenge of oil thieves will hamper the ability to produce more barrels of oil for sale even at the lower price, thus impacting on the revenue base further.

 For example, Nigeria’s debt deals over the years, are now set to bring Nigeria up for another brand of headwinds with the debt service provisioning for 2015 appropriation bill resurging to a new high of N943 billion. With this, Nigeria would be spending more on debt service than capital expenditure (investment) this year- N310 billion more, representing 48.84 per cent of capital expenditure.

 The controversial Service Wide Votes included in the budget by the Presidency rose from N301.84 billion, being 6.05 per cent of the 2014 budget, to N348.69 billion, representing 7.82 per cent of the 2015 proposal, which runs counter to the austerity measure claims of the Federal Government.

 What now, is the hope and evidence to deepen our efforts at becoming a non-oil dependent economy? Is it only by tax regimes? Who is worse off now? It is the same people that the minister has raised hope of elevating from the inequality trap.

  At the Civil Society Summit on 2015 Federal Budget organized by the Centre for Social Justice (CSJ), in collaboration with Citizens Wealth Platform and Ford Foundation, the previous budgets’ performances were assessed and benchmarked against the proposed 2015 appropriation.

  An economist and analyst, Dr. Uzochukwu Amakom, noted that the current document, despite being well intentioned, is fraught with many fundamental gaps. For example, the first gap was between recurrent and capital expenditures in the 2015 budget, which he said is high enough to trigger inflation.

  “The budget 2015 is projected to have a fiscal deficit and this will increase money supply. With increase in money supply, rise in general price level becomes inevitable. Another major concern is the financing of the budget deficit. A budget deficit financed with government’s domestic debt instrument like treasury bills and bonds would serve not only to mop excess liquidity but also to curb inflation. Unfortunately, that is not the case here.

  “Three budgetary issues are likely to affect interest rate in 2015. First, a deficit of N755 billion (representing about 0.79 per cent of GDP) must be financed. Second, inflationary pressure has an impact in determining interest rate: it tends to raise the market interest rates. Third, the expected real Gross Domestic Product ((GDP) growth of 5.5 percent could have an implication of increasing interest rate if oil price remains less than the benchmark price,” he said.

  According to him, the increase of over five per cent on the recurrent expenditure proposal in 2015 budget compared to 2014, indicated the direction of the government in increasing money supply and that the acclaimed austerity measure is for the rest of impoverished Nigerians.

  There is also assessed missing link in the 2015 GDP projection, with the absence of the delineation of economic growth drivers for the period and an evaluation and analysis of the performance of macroeconomic projections.

 The major fundamental challenge, he pointed out, is the ability of the nation to translate the growth figures targeted and those achieved towards improving the welfare of the citizens.

  The Lead Director of CSJ, Eze Onyekpere, said that Nigeria’s economic misfortune is not basically a matter of plummeting revenue profile, but a strong grip on the public finance by corruption and misplacement of priorities.

 “In this period of austerity measures, let the Presidency and the National Assembly lead the way in the adjustments. They will soon discover that Nigerians are wonderful followers. Specifically, the two arms of government should slice their votes by a minimum of 50 per cent,” he said.

  But wondering the fate of the nation’s budget implementation, he decried intrigues around the proposed scrapping of the Fiscal Responsibility Commission, which according to him is a clear indication of toleration of corruption. “This is one of the ways to entrench fiscal irresponsibility and consolidate on corruption. How would the budget work without effective monitoring of the use of fund? How can you scrap an agency that is making money, but leave the ones that are consuming the money without being accountable.”

 The President, National Association of Nigerian Traders (NANTS), Ken Ukoha, in his analysis of the 2015 budget proposal of the Ministry of Trade and Investment, noted that the over N10 billion projection was a mixture of realities and frivolities.

  Out of the proposed sum for the sector, only N300 million, representing 2.94 per cent is for capital expenditure, while N9.89 billion (97.06 per cent) is for recurrent expenditure. The recurrent budget was further divided between personnel and overhead costs, with the former put at N8.05 billion (78.99 per cent of the total), while the later got N1.84 billion, representing 18.05 per cent of the total.

  The 2014-2016 MTEF provides for 26.22 per cent capital expenditure and 73.78 per cent recurrent to guide government spending, but when the ratio of capital to recurrent budget for Trade and Investment is considered accordingly, the MTEF provision is potentially violated, with a 2.94 per cent capital budget proposal. The violation of the provision implies that the sector would miss the planned contribution to the targets of the Transformation Agenda.

  But Ukoha explained that in as much as there is a declining revenue expectations and it is recognized that capital projects suffer in such cases, to reduce the ratio of capital to recurrent expenditure for the sector to that level suggests that little understanding of the role of trade infrastructure prevails. What now would be the driving force of the overheads? What ought to be the case is that in as much as capital budget may not attain the prescribed ratio, the overheads would have been cut and the savings put back to the former.   

  Another fundamental flaw of the sectoral proposal was that the 100 per cent of the capital budget proposed for the sector was allocated to the main ministry, leaving the 16 agencies within the sector with no capital vote. This obviously implies that there will be no development projects for those agencies in the 2015 fiscal year.

  Given the clear implication that any MDA with no capital projects may not have anything to contribute to national development, the 16 agencies are rendered completely irrelevant for economic progress except that the staffers remain employed and that reduces the other economic and social burden of citizens’ unemployment. 

  But is it not ridiculous and strange that the sixteen agencies “with no-capital projects” have overheads budgeted for the year? Ideally overheads usually cover items such as maintenance of vehicles, payment of electricity, water and telephone charges that are incurable in the course of implementing capital projects. Since there is no capital projects planned for the agencies, to what effective and efficient use shall the proposed overheads for the MDAs be put?

  “The Lagos International Trade Fair Complex has personnel cost but no overheads and capital costs implying that staff will just be paid salaries for doing absolutely nothing at all. They just come to the office, idle away and get paid at the end of the month. What a waste!

  “Five of the MDAs have zero allocation for personnel charges though they have overheads budget. One is curious about whether there shall be no staff to be paid salaries and allowances in 2015 in the concerned MDAs. If there are no staff, who applies the overheads and reiteratively, on what are they to be spent?

 “What the whole scenario portends is a conclusion that budgetary figures proposed by most MDAs are arbitrary and perhaps thoughtless. If this is wrong, why would an MDA with a dedicated department for preparing budgets commit the errors observed in the sector budget proposals?,” he queried.

  Another observed anomaly was in the provision for travel and trainings. Specifically, in terms of size, the total sum for these travels and trainings were put at over N238 million, which is 12.98 per cent of the overhead budget. 

  If officials of the ministry have to use this amount to undertake travels and trainings, it means that the ministry will conduct or attend about 47 trainings/travels at an average of N5 million for each.

  Given that there are only 53 working weeks in the year, it means that the ministry will either be attending or conducting a training for 48 weeks. Is this practical? And given that there is only N300 million for capital projects, is there no need to further investigate how much projects the ministry can implement and then correlate it with budget for training and travels.

  Besides, there are observed duplications in the proposal under local trainings. How is this item different from the earlier trainings proposed in the same budget?

  Ukoha however noted that while it is argued that the budgets for these items are over-bloated, their necessity is recognized and the middle position is for the amounts allocated to those trainings and travel be reduced by 70 per cent, while the savings are reallocated to necessary capital projects for other agencies.

 Also in the Ministry Agriculture and Rural Development Sector, NANTS president harped on the need to prioritise agricultural development as a natural alternative to the fast failing oil sector.

 However, the ministry, which proposed N39.2 billion, representing 0.9 per cent of the total budget, also planned to expend N30 billion on personnel cost and N2.2 billion on overhead cost, while capital projects would gulp N6.94 billion, across the 41 agencies.

  Further analysis showed that the main ministry would take N12.82 billion, with N7.33 billion for recurrent expenses (57.25 per cent); N5.48 billion for capital projects; while personnel costs put at N7,07 billion and overhead at N260.63 million make up the components of the recurrent bills.

  But the flurry of duplications and questionable figures, which have marked the sector’s previous budgets, unfortunately repeated itself in the midst of austerity measure and dwindling revenue.

  These items, like in other ministries, include travels and trainings, frivolous electricity bills, water rates, Printing of non-security documents- overbloated and duplicated, Drugs and medical supplies- repetitive and conflicting with National Health Insurance Scheme policy, uniforms and clothing- frivolous as uniforms were procured in 2013 and 2014 and the use of “maintenance” in all manners.

  Besides the maneuverings with the mentioned items, some other capital projects appeared in the budget like seeds, seedlings, among others. Again, a comparison of federal allocation to agriculture development and food security to the regional benchmark of 10 per cent, the present proposed budget is a far cry from meeting the target.

 Although a lot of efforts has been made towards diversification of economy, given the impending failure of the international oil market, Nigeria needs to harness to the fullest its agricultural potentials. This may require more tenacity, diligence and re-prioritisation and it is the way the country must go.

  Another analyst, Emeka Ngene, while discussing the health sector’s proposal, pointed out that it was less than 15 per cent sector allocation benchmark of the World Health Organisation, which countries such as Rwanda, South Africa, Botswana, Niger, Malawi, Zambia and Burkina Faso have met since 2001.

  Capital to recurrent ratio is also less than the Medium Term Expenditure Framework (MTEF)-prescribed level of 26.22 per cent capital and 73.78 per cent recurrent  expenditure, but commended observed low overhead, adding that more can be done to make funds available for capital projects.

  However, the observed inconsistencies, like in other ministries were streaming as out of the 128 MDAS, 39 had no personnel costs; all the 128 MDAs have overheads; and no capital budget for 58.

  The argument is that every MDA should have the three components of personnel, capital and overhead budgets otherwise the MDA should be removed completely from the budget. So, is it possible that there MDA without personnel? Why would such MDA exist and as well be allocated overhead?

  Like other MDAs, the budget is still fraught with repetitions and questionable items, including budgetary allocations.

The 2015 in the sector, according to Ngene, has much to do with lack of commitment to meeting the targets and poor capacity of budget crafters to review policies and synchronise it to match national plans. The above also implies that the targets set for the health sector in the Transformation Agenda and Vision 20:2020 such as reducing infant mortality, reducing maternal mortality, greater child immunization, reduced incidence of HIV/AIDS and reduction of malaria incidence cannot be met as funding gap of about 56 per cent exists. 

  “The gap exists not only because the nation suffers from reduced resources, but rather because of poor resource allocation practices and resource management. This manifests in the way and manner that budget crafters spuriously allocate overheads to items. 

  “Some of the overhead items are repetitive, ritualistic, over-bloated or ‘un-monitor-able’ therefore amounting to resource wastage. This paper has argued that if the wasteful proposals by MDAs are review to reasonable items and sizes the nation will make some savings that if ploughed back to capital budget will help in increasing the capacity of the sector to meet its policy targets,” he said. 

  He said National Assembly (NASS) must now rise up to their responsibility to reconsider the template issued by Budget Office to MDAs for submitting their yearly budget proposals, and order them to make their items MDA-specific as a foil against the prevailing abuses.

  NASS should also speed up effective oversight over MDAs expenditure of allocated funds to curtail fund diversion, as well as look closely into the strategies proposed for managing the ‘economic storm’ arising from the revenue shortfalls expected in 2015 and ensure that they are implemented in ways that do not inflict additional burden on the average Nigerian.  

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