AYADE AND THE MYSTERIOUS BUDGET TEMPLATE

Missang Oyama challenges the Cross River government to name sources of funds to execute the unprecedented deficit budget

There is need to preface this piece with some clarifications on what a budget signifies in any given economy. In a nutshell, a budget is an expression of government financial role in the growth process of an economy. It is the most comprehensive financial document used within a given year to plan, co-ordinate and manage the economy. The budget addresses operational efficiency and performance indices of government on the basis of fiscal targets, formulated expenditure policies and strategic allocation of resources.

A state or public sector budget can be better appreciated as a portent short term economic planning instrument used to lay the background for the achievements of projected medium and long terms economic development goals. A public sector budget is also a tool for accountability and transparency in government revenue receipts and expenditure within a specified time period usually one year. Apparently, our local economy in Cross River State is largely bedevilled by an appalling misery index and failed infrastructure. It goes without saying therefore that with the inherent multiplying socio-economic contradictions stirring so starkly in our faces, a well-articulated budget could form the framework to foster growth and development in the local economy going forward.

For us in Cross River State, it has inadvertently become a yearly ritual of some sort for Ayade to brandish a series of alluring plans that stirs the hope of an average Cross Riverian for a better standard of living and improved economic condition. Sadly, more than a large chunk, perhaps over 95% of these plans has often remained in the realm of unfulfilled, fanciful and flowery promises with the local economic indices getting rather dangerously adrift.

Our recent history has shown that the Cross River State budgeting system under Ayade is built on quicksand with a self-inflicted burden of perennial lack of appreciable implementation. It should be noted that Gov. Benedict Ayade had his full scale fiscal year in 2016 where he announced a budget of N350b which he christened, “Budget of Deep Vision.” In the subsequent year (i.e. 2017), the governor backtracked a bit by announcing a budget of N301b tagged, “Budget of Infinite Transposition”. However, a N700b expenditure framework was announced in the said year to run for three years upfront to 2019 on the back of the State’s Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP).

When Cross Riverians thought they have had enough of outrageous budget estimates without commensurate developmental strides, Gov. Ayade appeared like a bolt from the blue with another shocker. On November 30, 2017 he stood in the hollowed chamber of the State House of Assembly and announced a mind-boggling expansive budget of N1.3trillion tagged, “Budget of Kinetic Crystallisation” for the 2018 fiscal year. As expected, he made the headlines as the first governor in Nigeria’s budgetary history to hit the N1tn mark in budget estimates. Not even Lagos State adjudged as the sixth largest economy in Africa with a robust economic base could ever make such headlines at this time ahead of Cross River with very weak and almost nonexistent local economic structure. What a paradox! “Wonders”, they say, “shall never end”.

Apparently, the state runs the traditional incremental budget template but the questions economic and financial pundits find extremely galling are: What is the rationale behind Ayade’s unprecedented and humongous increase in the state’s budget estimates? Has the World Bank opened its vault to Ayade without the knowledge of Cross Riverians? Could it be a mere obsession for figures or an inordinate knack for media hype on the situation of our badly stressed local economy? How does he arrive at his projections and forecasts? How well has he performed with respect to percentage implementation of the last two budgets? These are some salient questions that beg for answers and they are not farfetched judging from the well-known dire financial strait of the state and the rudimentary level of our economy in spite of the bogus budget estimates we have seen in the last two years.

This is a state that can hardly raise N1bn per month as its internally generated revenue (IGR), in addition to the backlog of a huge debts profile mostly being serviced at source. Ayade’s measure of expanded budget becomes more ridiculous and nauseating when considered from the perspective that most of the state’s bank loans are tied to Irrevocable Standing Payment Orders (ISPOs) duly registered with the Office of the Accountant General of the Federation (OAGF) with regard to direct deductions from the state’s monthly allocation from the Federation Account. These sums up to the fact that Cross River State has a highly depleted monthly revenue allocation from the Federation Account. Besides, in running a deficit budget there is a standard threshold of not more than 3% of GDP that should be applied according to the Fiscal Responsibility Act. Ostensibly, this act has not been domesticated at the Cross River State level but it could serve as a guiding light in the state’s budgetary process.

I’ve read a few narratives from some of the governor’s aides that were capitalised in staunch endorsement of his “audacious” N1.3tn 2018 Budget of Kinetic Crystallisation. What I find entirely strange in these narratives is the strenuous attempt to extrapolate that Senator Benedict Ayade is simply reinventing the wheels in our entire budgetary process and he is set to bring it up to speed with conventional budgeting system. This sounds laughable and constitutes a brazen display of crass ignorance of the principles of budgeting and public finance. A budget estimate of N1.3tn is an indication that Cross River State is proposing to run about 98% deficit budget in 2018 fiscal year with an increase of over 300% from the last budget estimates. This should not be. It is amusing that such a “landmark” budget would be proposed in a pre-election year with all the distractions in governance that will ensue as a build up to the 2019 general elections. Obviously the governor will be desperately angling for what many consider as an undeserved second term bid.

I’ve read some extracts from the governor’s budget speech on the reasons for the expansive budget proposal where he alluded to expected inflows from foreign investors on his “Signature Projects”. This is a grave error and extremely hollow disposition of a man who should know better. Since when did investors fund become part of a state budget? This argument is not only speculative but also against the well-known principles and practice of budgeting. Investors’ fund does not in any way constitute part of a state budget. This is alien to budgeting and public financial management.

At best, what should have been done was to capture the state’s counterpart funding in the projects in the event of a Public-Private Partnership (PPP) as the model of investment. The expected tax receipts from the investors and would-be employees’ taxes could be captured in the budget NOT the investors fund as proposed by the governor. In any case, the idea of making provision for tax receipts from an investment outlay with an unpredictable maturation period as a line item in a budget with a one year life span amounts to a mere academic exercise which is not practicable. Again, for a budget that is constrained by a time lag of one year for its implementation, the financial contribution of the state to a project as a cost centre in the proposed estimate should be restricted to one year and not the entire gestation period of the project which could be more than a year.

A key rule in budget presentation is a report on the performance and percentage implementation of the previous budget. How far has Ayade implemented the last budget of N305bn?

Oyama, a Public Policy Analyst, wrote from Lagos