BUDGET: Endemic Delays, Economy And ‘The Change’
IT is no longer news that the national budget processes have long been associated with delays even to the point of change in fiscal year end date. However, what has become news and an addendum to the usual is that the ‘change’ administration towed the same line.
Since the return to democracy in 1999 (16 years), Nigeria’s yearly budget processes have never been concluded two months into the period, but mostly four months, with one signed six months into the fiscal year.
Indeed, for the actual change that every Nigerian has been expecting to be fulfilled, a marked turnaround needs to be not only communicated, but also observed and felt by all. How?
The new administration, riding on the mantra of ‘Change’ would not only need to implement budget to the letter, but must start by rebuilding confidence in the document and this must take the form of starting the processes early and finishing it on time too, as well as get rid of the fictitious figures.
Unfortunately, either by commission or omission, the first and highly anticipated change budget has posted a sign of the old trajectory. Blame it on late constituting of cabinet or negligence on the part of the civil servants who usually lay the groundwork for the exercise and who should have articulated the processes such that at the appointment of the ministers, everything would be fired off, it is the same.
While the next hurdle, yet untouched, is the usual firework by the legislators on what is tenable and untenable in the document’s line items, opinion is divided already over the processes and anticipated outcome. Surely, the legislators would soon embark on end of year holiday, delaying further the process.
Some say that it may not be business as usual, because most legislators are newcomers who have not mastered the art of “rub my back, I rub your back”, adding that no body would want to be a scapegoat under the current campaign of anti-corruption, starting from the inclusion of fictions items to repetitions that fritter public funds.
Others are saying that, everything is the same, basing their arguments on the fact that “ juicy committee” sentiments at the National Assembly are pointers to expectations of opportunities to take advantage of, including the national budget.
Whatever, 2016 budget has already stirred various positions of warning signs, mixed feelings, outright apathy (let us wait and see), which portends a challenge to the new administration.
For the 2016 budget, whether mooted or actually declared to be N8trillion, is a function of funding sources, which must be approached with caveat.
Historically, Nigeria’s debt service bill has been on the increase, especially in the last seven years, with a record high reached in the current budget, which puts it at about N943 billion.
More so, the uncertainties that has arisen and those yet to come from the non-implementation of 2015 capital budget; government’s sliding revenues; non-convergence of fiscal and monetary policies; macro-economic headwinds- falling Gross Domestic Product, rising inflation, increasing unemployment, insecurity, among others, are currently painting a gloomy picture for 2016 fiscal projections.
The Managing Director of Red Star Express Plc, Sule Umar Bichi, while drawing a contrast between early budget passage and the reversed case, said the real sector operators are usually the first to get the hit and heat.
According to him, every organisation involved in production, import and export, with huge numbers in its employ, would always want to know the direction of government at the beginning of each year to guide its own budget, but where that is not forthcoming, the fastest signal will be “uncertainty”.
“The delay will only increase the level of uncertainty. The earlier, the better and a guide to business projections and internal planning as well. This is a general situation to all real sector operators, because no business operates without budget, but the government’s own will show the direction,” he said.
According to him, the delay budget will even affect investment, not only for local operators, but also those who want to come in.
For the Head of Research at Afrinvest Securities Limited, Ayodeji Eboh, with unveiling of the cabinet, which was five months belated, one would expect expedited actions, including the budget matters.
According to him, the economic issues must be encapsulated in the national documents immediately to resuscitate manufacturing and attract foreign direct investment and portfolio capital.
“The fact that the appointments were delayed for five months in a period of deteriorating macroeconomic fundamentals has set expectations high for them. Important policy decisions lie ahead and the market would expect the Finance Minister to work out a coordinated policy framework (including the national budget) along with monetary authorities to respond to the macroeconomic challenges of slow growth, heightened inflationary pressure, declining reserve buffers and exchange rate uncertainty,” he said.
An Abuja-based public affairs analyst and Executive Director of OJA Development Consult, Jide Ojo, said the delay in the presentation of the 2016 budget has to be seen in the context of a habit of the executive.
According to him, under the immediate past government of President Goodluck Jonathan, he managed to present budget in October only once; all other times were in December.
“Now we have a new government inaugurated in May, but did not have cabinet until November. That is another reason the 2016 budget will be late. This is unhealthy.
“Just some two weeks ago, precisely on November 18 the president presented a supplementary appropriation of N465.64 billion to the National Assembly. That is when it became clear that 2016 budget would be late in coming. As we speak the fiscal strategy paper and medium term expenditure framework is not in place and all we are hearing is that government plans to have a budget of over N8 trillion. We wait to see,” he said.
Ojo noted that the implications of the delay in budget presentation will hurt the economy as investors will hold back on any commitment of their resources until they have a clear policy direction of government indicated in the expected budget estimates.
Even government contractors will be wary of deploying their resources to do government contracts until they are sure of government’s financial outlay for the sector in which they are executing contracts.
Already, due to the heavy indebtedness of government to the sector, many of the contractors have moved out of sites and are unlikely to return until they are sure government has something for them in next year’s budget.
“The entire private sector is also being affected by the budget delay as they do not yet know what will be government’s economic blueprint for the incoming year.
“For me, government’s concerns and priorities for 2016 budget should be the diversification of its revenue base through the non-oil sector focused funding to bridge the dwindling resources from the oil and gas sector.
“Allocations should also be made for solid mineral exploration, agriculture, tourism, taxation and sports, which are some other money spinning areas.
“Government should be bold enough to do away with fuel subsidy in the budget and use the savings therefrom to finance the many infrastructure deficits such as roads, education, health and electricity. There is a need to ensure that our petroleum refineries work at optimum capacity otherwise they should be privatised.
“Also, government should look at the challenges facing operators in the electricity sector and help them to solve it so that there can be better electricity generation, transmission and distribution which will concomitantly stimulate the economy particularly the small and medium enterprises’.
“Government also need to assist the financial sector to make sure that interest rate on loans is in single digit and that banks lend to real sector by making provision of guarantees in some specific sectors that offer employment,” he added.
A civil society activist and Lead Director of Centre for Social Justice, Eze Onyekpere, said the situation of the 2016 budget shows that the executive is not yet ready for the budgeting process since the Medium Term Expenditure Framework (MTEF) must first be approved before the budget is prepared.
Baring his fangs, he said that it is not the way to ‘change’ that we are yearning for, but a continuation of the norm of late budget preparation, approval and late commencement of capital budget implementation.
“There is no excuse for this lateness because the government had all the time since its inauguration to prepare for the 2016 budget. It rather chose to engage itself in unnecessary delays with the late appointment of Ministers and seeming inaction to start the process of resolving the fiscal and monetary policy challenges facing the nation.
“The legislature that should have reminded the executive of the need to start the preparation on time was also enmeshed in its own challenges, which were engineered by the hierarchy of the ruling party,” he said.
According to him, considering the enormity of the economic challenges the new government inherited, one would have expected a more expeditious approach to ensuring that the budget which kick starts economic activity is planned ahead of the commencement of the New Year.
“For 2016, there should be an expansionary budget that drives economic activities and the focus should be in three key areas of infrastructure development, job creation and investment in the social sectors.
“The budget and its fiscal policy should be crafted in a way and manner that its investments can reduce inequality through investments in small and micro enterprises, agriculture and its processing through the value chains and empowerment of the labour force.
“Support for clusters in the key strategic industries that employ a lot of persons in the trade and production hubs should be given priority,” he said.
Onyekpere pointed out that while social benefits must be provisioned in the budget to tackle inequality, it would be “economically suicidal to start the payment of the proposed N5000 handouts to the poor without an adequate database to know who actually is entitled to benefit.”