Onigbinde: Getting the States to Disclose their Budget is War
The chief executive of BudgIT, Mr Seun Onigbinde at a recent forum organised by members of the Finance Correspondents Association of Nigeria in Lagos, expressed disappointment over the opaque budgeting system in most states in the country. He also urged t
What is your take on a recent comment by one of the officials of governments that part of the looted funds has been deployed to fund the current budget?
Based the budget analysis we have seen, there is no amount of recovered loot has been put into the budget. It is only in 2019-2020, that the Medium Term Expenditure Framework (MTEF) outlined a plan to put out almost N300 billion in the budget. But that is still in 2019 and that means there is no certainty today that the 2018 would have any inflow of recovered funds. I think that is also what the Socio-Economic Rights and Accountability Project (SERAP) has been arguing about. If you are making a lot of noise about funds that have been returned and recovered, then show us who recovered these funds, how much have you recovered and how quickly can you start mainstreaming these funds into governments. But we have not seen that. There was a bill that was supposed to be on the looted funds but till now, that bill has not been passed. There should be a guideline or framework on what to use the looted funds for. Should it be for education or health? What framework are we going to use for the allocation? We may move into that same cycle where that looted funds would be re-looted again, using another format.
What is your organisation doing to expose corruption in states’ budgets?
That was why we did the state of states report. The problem about states is the same problem with Lagos state whereby states don’t publish their budget. Before a state can publish their budget, it is war. It is war to get a state government to publish its budget, except Kaduna, and Kogi recently. Even Osun state, I have not seen Osun state budget for eight years. So how do you interrogate on the basis of facts. So how do state governments not get into trouble when they do things on their own? But we can’t be everywhere because we don’t have the resources and manpower to be everywhere. But if we build stronger partnership with media organisations as well as FICAN, our mileage can be much higher.
Constituency project is always an issue in our national budget. Where did our legislature get that idea? Also, the perennial argument between the National Assembly and the Executive over who has more powers to alter the budget, how best can it be resolved?
The first question about constituency project, I would say it is a standard in the United States. Legislators also in the US have a bit of discretion to nominate projects in the budgets. So it’s a standard there too. It is just that the legislators’ job stops at the nomination level, not that they influence the contracts like the ones we normally see in Nigeria. Here in Nigeria, if you want to rest as a Minister or as a head of an agency, you possibly are going to do a lot of back door with the legislator(s) to delivers the projects.
Now on the issue of the usual tussle between the executives and legislatures, the constitution says, “the budget is an instrument of the law,” meaning that the budget is a typical legislation. So if the executive submits a legislature, the legislature has wide powers to tamper with the budget. They can add, reduce or insert and do whatever. But where their authority stops is on the implementation of those budget items and that is where the executive needs to be much stronger. They can put whatever they want in the budget, but the executive would decide how they are going to implement the budget. Presently, there is no offense for not implementing the budget. The offense is if you overstate or understate what has been allocated in the budget or you over disburse money. But there is need for much more cohesion between the executive and legislature. It is the same government where the All Progressive Congress is the majority government in the National Assembly and the executive. So if the government has a single vision about what they want to do, why is the budget a problem? It comes back to the conversation I had earlier that Nigeria’s budget is a contract vending machine more than a planning document, because a typical budget would first of all bring all the arms of government together and look at the goal of APC that is in power. If for instance, their objective is to build the second Niger Bridge, 100 hospitals or 100 schools, then everything you see in the budget in terms of allocation would follow that pattern. But everyone wants to stuff things into the budget so that it becomes a legal opportunity to procure. So that is the problem really. So, if we see the budget as more of a planning tool, most of the things we see around would hardly come up.
When this government came in, they talked about zero budget, why are they no longer using that budgeting system and the LagosBadagry expressway project, I don’t think your organisation has tracked it enough. Why is the project dragging for too long?
For Lagos-Badagry expressway, when you assume something was packaged by private people and World Bank was involved, you would assume that standards and ethics would have been followed. But somehow, Lagos state has not done well with that project; especially with the eight years of Babatunde Fashola. That loan was not optimised. And unfortunately, the currency has moved against Lagos state government because you borrowed in dollars at N165 to a dollar and now you are paying back at almost N400 to a dollar. If you track Lagos state’s Federation Account Allocation Committee (FAAC) funds, it has dwindled to almost N400 million, because the external debt deduction are being taken from source. And it is becoming much larger as they go. That is why we are warning states to be careful of external debts. Because with local debts, there could be a bailout from the federal government or you re-schedule your debts for a longer period. But for external debt, you don’t have the options of the federal government that receives its monies in dollars. But for states, whatever money that is given to states is going to be monetised in naira. So if you borrowed at N165 and you are now paying at N315 or more, you are to going to be more hit when there is a currency risk. So it is a thing we are trying to warn states against. Don’t see cheap loans and start jumping into the frying pan.
On zero budgeting, I don’t think it can exist. If we go by textbook of zero budgeting, that cannot work in Nigeria. Why can’t it work? You have thousands of abandoned projects and you say you want to do zero based budgeting. Zero based budgeting means that you are going to start afresh every year and consider every single project. But we are in the phase of development and most of our projects are rolled over. There are three-year projects. So you cannot do something halfway and then come the next year to consider a new project. I think what we need more is the same envelope budgeting we have been doing, but we need to make it much clearer and improve the process. If you look at the priority of the APC government, it is clear- infrastructure- which is roads, rail and power. That is why almost 50 per cent of the capital allocation is spent by just two ministries – Ministry of Power, Works and Housing and Ministry of Transportation. So what the government ought to do is make sure the projects are well detailed enough. What they do is that when a capital expenditure N400 billion, they allocate that N400 billion, then the ministry would then decide what they want to do with that money. Money should be disbursed from the treasury on the basis of the project. They should not just give bulk sum to a ministry who can then decide they want to buy ambulances or computers and then call that capital projects. Disbursements should be on the basis of priority of projects. To say we are doing zero based budgeting, I think that is a big, fat lie.
You spoke earlier about the need for states to stop taking foreign loans and borrow more locally, at a time the federal government is considering raising more external debts, how can we reconcile that?
For the federal government, you can understand why they are doing external debts. But for states, i don’t think so. The federal government’s revenue from oil is paid in foreign currency so the foreign lenders do not even need to come into Nigeria before they collect their monies. They can debit your JP Morgan account in the US and collect their monies. But state government does not have that luxury. Also federal government guarantees a state government bond. So for states, they don’t have that luxury of dollars compared to federal government. And then for the federal government, I don’t think this approach is good. You are borrowing at an incredible pace. You have out borrowed the whole private sector. So is this how we are going to continue? We hear of countries borrowing at two per cent, but we say because of inflation, we are borrowing at 19 per cent. That math does not work out for me because you are emasculating private capital in the system. The public sector alone cannot give you growth. The sector that can give you growth is the private sector. And if you are emasculating that private sector by high interest rates, how are you going to develop?
What is your opinion on the 2018 Appropriation Bill that was recently presented to the National Assembly?
The budget as presented shows that the government would continue its philosophy of expanding infrastructure, on expanding debts and deficits and also putting more money to capital allocation. I guess this is the last lap of President Muhammadu Buhari’s budget presentation before election start. There would be a lot of pace for the implementation of this budget. A lot of Nigerians are looking forward to this budget to see if there would be actual and tangible achievements by this administration. So it is important that the National Assembly also considers this in the passage of this budget. We have a short window of governance next year because there would be more politicking. So, before politicking starts have the budget passed so that we can also factor in the procurement cycle which takes about three months and then we can get the projects implemented and then have results to show to the electorates next year. So I guess that is why this budget is really important. It is also important that the federal government puts a proper thinking to raising revenues. Most of the assumptions for the revenues are just bloated. The federal government needs to think of how they can expand VAT, company income tax and how they can build other opportunities that can pay tax, because what we are seeing right now is that there are so much huge assumptions on revenue.