Will Timely Submission, Quick Passage End Cycle of Low Budget Performance?
The inability of the federal government to fully implement its annual budgets is cause for much concern, as delay in the passage of appropriation bills and the signing of such bills into law have become despairing attributes of the budgeting process.
The Senate is worried. With less than three months to the end of the year, only about 14 per cent of the N2.177 trillion capital component of the 2017 budget has been released by the executive. The 2017 budget of N7.441 trillion was signed into law by Vice President Yemi Osinbajo – then acting president – on June 12. The legislators are “concerned that since the 2017 budget was assented to by the president, about N310 billion has been released by the federal government to ministries, departments and agencies as funding for capital projects, which is far too low to stimulate the economy to address our present economic challenges ,” according to a motion passed by the upper chamber on September 26.
The motion sponsored by Senator Gbenga Ashafa, who represents Lagos East on the platform of All Progressives Congress, and six others, also says the Senate is, “Worried that the governor of the Central Bank of Nigeria, in line with the prevalent concern of financial analysts, stated during the Monetary Policy Committee meeting of the bank, which took place on 25th July, 2017, that ‘the government needs to move quickly to start capital expenditure spending as contained in the 2017 budget to reflate the economy in a way that will impact Nigerians positively’.”
Dilemma The federal government seems to underscore the challenge of budget implementation with its recent pronouncements. Minister of Finance, Mrs. Kemi Adeosun, highlighted the problem recently when she announced plans by the government to rollover about 60 per cent of the capital projects in the 2017 budget to next year’s budget.
“We had a rollover from the 2016 to the 2017 budget,” Adeosun told the Senate Joint Committees on Finance and Appropriation on October 3.“There was no stoppage in terms of capital spent as projects simply continued.”
She said, “The way in which we allocated the fund, the priotisation was according to the objectives of the economy and growth plan. We were focused on project completion. So we priotised projects that were nearer to completion, that were critical in the first releases of capital.
“We need more of your support. We have a number of resolutions that we need to complete international borrowings.”
Economic progress on all fronts in the country has been hampered by poor budget performance. Since the beginning of the Fourth Republic in 1999, the average performance of national budgets has remained below 50 per cent.
There seems to be no end in sight to the problem of poor budget implementation. Successive administrations have taken various steps to try to implement their budgets. But there has not been an effective strategy to fix the terrible shortfalls in budget execution.
Hamstrung by Rollover In the 2017 second quarter and mid-year budget implementation report published by the Budget Office of the Federation, the government said it delivered over 1.2 trillion in capital budget in 2016. It said this significantly contributed to the country’s exit from recession with a real GDP of 0.55 per cent in the second quarter of 2017, after five consecutive negative growths.
According to the report, “The sustenance and strengthening of these reform initiatives is therefore the driving force of the 2017 budget implementation.”
The government has upped attention to capital expenditure. But there are fears that the poor release of funds for capital projects and the adverse effect on economic activities may result in the country’s return to recession.
The government said it faced difficulties in the implementation of the 2017 budget in the second quarter mainly due to the extension of the 2016 capital budget to May 5, 2017,“effectively halting execution of the 2017 capital budget in the first half of the fiscal year. The execution of the 2017 budget was also adversely impacted by the late passage of the budget as well as the shortfall in expected oil and non-oil revenue receipts.”
The rollover of capital projects to the next year’s budget has been largely caused by the late commencement of the budget year. This is a function of the late submission of the Appropriation Bill to the National Assembly by the executive and the subsequent late passage of the budget by the federal legislature.
The Nigerian constitution defines a financial year as,“Any period of 12 months beginning on the first day of January in any year or such other date as the National Assembly may prescribe.” By this provision, the budget year is expected to run from January 1 to December 31, but it may be adjusted to any other period, as long as it runs for 12 months. Records show that except in 2001 and 2007, when the budgets were passed before January 1, the country has seen a tradition of late submission and late passage of budgets since the Fourth Republic. The budget submission and assent period has run from October to July. Even when budgets are submitted before January 1, the processes of passage and assent have dragged on for between two and six months.
Poor Budget Formulation Experts have attributed the weak capacity of government to implement its budgets to various causes, principally, sloppy budget formulation, especially, lack of credible income projections; extra-budgetary spending; inconsistency in actual and reported expenditure; and corruption and diversion of funds.
The President Muhammadu Buhari government has placed a lot of emphasis on capital expenditure since coming to power in May 2015. In the 2016 budget, capital expenditure increased from N557 billion in the 2015 budget to N1.8 trillion, taking 30 per cent of the 2016 budget. Capital expenditure took 29 per cent of the 2017 budget. Both cases represent the biggest allocations to capital spending the country has seen in several years.
But only about 40 per cent of the 2016 budget was actually implemented.
New Borrowing In an attempt to improve the performance of the 2017 budget, the president has asked the Senate to approve a loan of $5.5 billion to fund the budget. The 2017 budget has a deficit of N2. 356 trillion, with a projected quarterly fiscal deficit of 589.19 billion, to be financed through privatisation proceeds ( 2.50 billion), foreign borrowing ( 266.88 billion), domestic borrowing (FGN Bond of 313.57 billion), and sale of government properties ( 6.25 billion).
“However, none of the financing items materialised in the second quarter of 2017,” according to the Budget Office of the Federation.
Buhari’s letter to the Senate, which was read at Tuesday’s plenary by Senate President, Bukola Saraki, said ,“Accordingly, the Senate is requested to kindly approve the following external borrowings: Issuance of $2.5 billion in International Capital Market through Eurobonds or a combination of Eurobonds and Diaspora bonds for the financing of the Federal Government of Nigeria’s 2017 Appropriation Act and capital expenditure projects in the Act.
“Issuance of Eurobond in the ICM and/or loans syndication by the banks in the sum of $3 billion for refinancing of maturing domestic debts obligations of the Federal Government of Nigeria, while looking forward to the timely approval of the National Assembly to enable Nigerians to take advantage of these opportunities for funding.”
The National Assembly is still considering the