Budget Preparation, Moving Against Traffic, As Officials ‘Struggle’ To Produce MTEF

By Mathias Okwe, (Assistant Business Editor, Abuja)   |   29 November 2015   |   4:49 am  
Osinbajo

Osinbajo

• Already In Default Of The Fiscal Responsibility Act Provisions
• Officials Maintain Sealed Lips

WHEN in September, The Guardian engaged Nigeria’s Vice President, Prof. Yemi Osinbajo, in a roundtable on Nigeria’s economy, focusing largely on the President Muhammadu Buhari’s Economic Blueprint and the 2016 Federal Government Budget, he reeled out plans by the administration to rein in the much hyped recession threat raised by the Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefile.

Osinbajo equally spoke on how the 2016 Budget preparation, which he said, had been flagged off by the National Planning Commission, in conjunction with the Budget Office of the Federation and the Federal Ministry of Finance. He was unequivocal in his statement that the budget would check wastage in public finance management through the novel zero budgeting strategy so that scarce resources can be deployed to providing services to lift millions of Nigerians from the poverty trap.

The Vice President revealed that the Medium Term Expenditure Framework (MTEF), which is the precursor to the Budget itself, as well as the Fiscal Strategy Paper (FSP), which details the implementation plan of how the projections for the spending plan would be actualised, were soon to be ready for presentation to the National Assembly for approval, from where the Budget proper would be anchored.

The Vice President said: “What we are doing at the moment is on the MTEF in particular and we expect that it would be submitted to the House of Representatives in the National Assembly very shortly. We also have a lot of ministries already working and we would be sending guidelines to them for the zero budget process.”

However, two months after those declaration and nearly one month after the inauguration of the Federal Executive Council, the country is yet to have an MTEF nor the FSP in line with the provisions of the Fiscal Responsibility Act (FRA 2007), which prescribed that the two instruments must be produced four months to the beginning of a new fiscal year (that is August) and secure approval of the National Assembly before the Federal Ministry of Finance or as it is currently constituted, the Federal Ministry of National Planning and Budget can proceed to produce a budget based on the approved MTEF.

But as at Friday last week, neither the Budget Office of the Federation nor the Ministers of National Planning Commission and Budget have been able to come up with any report on MTEF. Several visits to the two offices, including the Federal Ministry of Finance, met brick walls, as none of the officials were willing to comment.

While the Minister of Finance, Mrs. Kemi Adeosun, and the new Permanent Secretary in the ministry were said to be out of Abuja, the Director General of the Budget Office of the Federation, Mallam Aliyu Yahaya Gusau, declined comment on the matter.

One of his aides told The Guardian that his boss would not talk on it, “because they are still meeting on the issue. He advises that you should exercise patience until they have concluded on the matter.”

At the National Planning Commission headquarters on Thursday evening, the two ministers were not available. Attempts to get the Permanent Secretary to comment were thwarted, as an aide referred our reporter to the Ministry’s Director of Finance and Accounts, who it was said to be in the know of the progress. But unfortunately, the Officer too had already left the Office.

From all indication, given the pattern and space with which the Buhari Economic Team member are going, they may not eventually adhere to the provisions of the 2007 FRA, which specifies the procedures to be adopted in the preparation of a Budget, which included wide consultation with stakeholders such as the civil society organisations for inputs into the document to enrich it and make it representative.

The Act provides that such consultations shall be open to the public, the press and any citizens or authorised representatives of any organisation, group of citizen, who may attend and be heard on any subject matter properly in view.

Odilim-EnwegbaraFor the avoidance of doubt, Part 2 and 3 of the Act , which deals on the conditions for the production of the MTEF and the Budget states inter alia :
Medium Term Expenditure

• The Federal Government after consultation with the states shall –
Not later than six months from the commencement of this Act, cause to be prepared and laid before the National Assembly, for their consideration a Medium-Term Expenditure Framework for the next three financial years; and

• thereafter, not later than four months before commencement of the next financial year, cause to be prepared a medium – term expenditure Framework for the next three financial years.
The framework so laid shall be considered for approval with such modifications, if any, as the National Assembly finds appropriate by a resolution of each House of the National Assembly.
The medium-term expenditure framework shall contain:

• A Macro-Economic Framework setting out the macro- economic 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;
A Fiscal Strategy Paper setting out:

• The Federal Government’s medium term financial objectives,

• 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,

• The strategic economic, social and developmental priorities of the Federal Government for the next three financial years,

• An explanation of how the financial objectives, strategic, economic, social and developmental priorities and fiscal measures set out pursuant to sub-paragraph (i), (ii) and (iii) of the paragraph relating to the economic objectives set out in section 16 of the constitution.

• An expenditure and revenue framework setting out:

• Estimates of aggregate revenues for the Federation for each financial year, based on the predetermined Commodity Reference Price adopted and tax revenue projection,

• Aggregate expenditure projection for the Federation for each financial year in the next three financial years,

• Aggregate tax expenditure floor for the Federation for each financial year in the next three financial years:
Provided that, the estimates and expenditures provided under paragraph (D) of this subsection shall be:

• Based on reliable and consistent data certified in accordance with section 13 (2) (b) of this Act;

• Targeted at achieving the macro-economic projection set out in subsection (2) (a) of this section;

Consistent with and derive from the underlying assumptions contained in the Macro-economic framework, the objectives, policies, strategic priorities and explanations in the Fiscal Strategy paper;

• A consolidated Debt Statement setting out and describing the fiscal significance of the debt liability of the Federal Government and measures to reduce any such liability; and

• A statement describing the nature and fiscal significance of contingent liabilities and quasi 0fial activities and measures to offset the crystallization of such liabilities.
Aggregate expenditure ceiling
The estimates of:

• Aggregate expenditure and the aggregate amount appropriated by the National Assembly for each financial year shall not be more than the estimated aggregate revenue plus a deficit, not exceeding three per cent of the estimated Gross Domestic Product or any sustainable percentage as may be determined by the National Assembly for each financial year.

• Aggregateexpenditureforthefinancialtearmayexceedtheceilingimposed by the provisions of subsection (1) of this section, if in the opinion of the president there is a clear and present threat to national security or sovereignty of the Federal Republic of Nigeria.

In his own intervention, a development economist, Mr. Odilim Ewegbara, said from 2015 budget’s N4trillion to 2016 budget’s N8trillion is a welcome development, which left to him, should be as high as N10tn.

This way, he explained would move from mere consumption budgeting where over 80 per cent is spent on recurrent to investment budgeting, where at least 60 per cent is spent capital projects. Which is mostly in infrastructure will drastically cut down the current high cost of doing business in Nigeria associated with high infrastructure deficit and the high cost of infrastructure to our real sector firms.

Ewegbara spoke more on how government could raise funding for the expansionary plan: “ First, with Treasury Single Account fully enforced, government money has now warehoused in the CBN all its money. This reason alone, makes government borrowing its own money kept in the country’s commercial banks at supposedly zero interest, at such cutthroat interest rates as high as between 13 per cent and 15 per cent as time past. So, the money wasted in borrowing its own money is now saved and could be used in bringing down fiscal deficit next year.”

He added, “one of the ways to both raise tax revenue and give Nigerians world-class road infrastructure is for government to reintroduce toll fees on our highways by concessioning most of the country’s highways along with insisting on e-collection where 10 per cent of all the toll fees is remitted to government in in the form of tax. Another source of tax revenue should be the introduction of carbon tax, where all auto number plates are renewed annually with a fee based on engineer capacity and types of automobiles. That too can earn government as high as $1.2tn annually.”

He noted that removing budgeting from finance ministry is good for the country, because it now makes those who are saddled with the responsibility of planning to be the ones to be saddled with coming up with the country’s budget estimations, which normally is part of planning. Because they are responsible for coming up with our short-term, medium-term, and long-term planning, annual budgeting should be part of their short-term planning assignments.

In fact, by moving budgeting to planning ministry, government should expect a thorough process, including possible early budgeting beginning with setting specific deadlines for budget presentation, approval, and implementation. This is good because early among budget benefits include providing an ample opportunity for lawmakers to exhaustively deliberate on it and harmonise differences emanating from the two chambers. Another is the fact that there is enough time for procurement, implementation, monitoring, and evaluation planning. High level of transparency accompanies public participation in budgeting with the needs and priorities of the citizens fully accommodated, to the extent that by promoting strategic priorities it also delivers maximum value for money, along with promoting growth and development.

Besides budget planning, he said the new ministry should be the one to be saddled with the full responsibility of making sure that each year’s budget is maximally implemented, which was lacking in previous governments, because the finance ministry was overwhelmed with both budgeting and implementation, along with fiscal policy-making and implementation, supervision. With budget now domiciled in the planning ministry, budget should come with clear templates on monthly cash flows, milestones, and deadlines, which means the presence of Annual Cash Plans and Disbursement Schedule as mandated by sections 25 and 26 of Fiscal Responsibility Act will bring the badly needed fiscal sunshine into budget implementation in a way that makes abysmal budget implementation a thing of the past.

In other words, with cash flow template accompanying next year’s budget, there is no doubt that the weekly Federal Executive Council (FEC), rather, than being reduced to mere weekly lobbying ground for discriminatory budget implementation, becomes truly where national economic policies and strategies are sharpened and fine-tuned along with implementation appraisals.



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