From bogus budget to revenue losses

Marcel Okeke, a practising economist and consultant in Business Strategy & Sustainability based in Lagos, is a former Chief Economist at Zenith Bank Plc. He can be reached at: obioraokeke2000@ yahoo.com; +2348033075697 (text only)

UNCHARACTERISTI CALLY, PRESIDENT MUHAMMADU Buhari, known for his taciturnity, equable and unruffled mien, practically ‘lost his cool’ on December 31, 2021, while assenting to the 2022 Appropriation Bill and the 2021 Finance Bill. The President was visibly irked by the ‘huge additions’ to the original budget estimates that he handed over to the National Assembly on Thursday, October 7, 2021. Specifically, he said: “I must express my reservations about many of the changes that the National Assembly has made to the 2022 Executive Budget proposal,” lamenting that, “the 2022 Budget that I just signed into law provides for aggregate expenditures of N17.127 trillion, an increase of N735.85 billion over the initial Executive Proposal for a total expenditure of N16.391 trillion.” He complained further that “provisions made for as many as 10,733 projects were reduced while 6,576 new projects were introduced into the budget by the National Assembly.”

This implies that the National Assembly not only ‘hiked’ the N16.391 trillion budget presented to them to N17.127 trillion, but also ‘introduced’ additional 6,576 new projects into the document; thus making the budget much bigger, with a whooping deficit of N5.10 trillion. Notably, Mr President had vested much hope for improved revenue (in 2022) on the operations of Government-Owned Enterprises (GOEs). This much he assured the National Assembly while presenting the 2022 Appropriation Bill. According to him: “we have stepped up implementation of the strengthened framework for performance management of government owned enterprises (GOEs), with a view to improve their operational efficiencies, revenue generation and accountability.” He said the 50 percent cost-to-income ratio imposed on the GOEs in the Finance Act 2020 has contributed significantly to rationalising wasteful expenditures by several GOEs and enhanced the level of operating surpluses to be transferred to the Consolidated Revenue Fund (CRF). “I solicit the cooperation of the National Assembly in enforcing the cost-to-income ratio and other prudential guidelines during your consideration of the budget proposals of the GOEs, which I am also laying before you today,” the President pleaded with the National Assembly.

But unsurprisingly, the President said, “we plan to finance the deficit mainly by new borrowings totalling 5.01 trillion Naira, 90.73 billion Naira from Privatisation Proceeds and 1.16 trillion Naira drawdowns on loans secured for specific development projects.” And, apparently in line with the President’s plea, the Senate, on Tuesday, 1 February 2022, tasked the GOEs, “to make N3 trillion yearly to reduce Federal Government’s borrowings and deficits in the 2022 budget.” President of the Senate, Ahmad Lawan, who spoke during an interactive session on the need to improve Internally Generated Revenue (IGR) of the Federal Government, further charged the agencies to prevent wasteful spending, while promising that the Senate will be strict in its oversight duties.

All these, however, pointedly show that the ‘bloated’ 2022 Federal Budget is, from the outset, being threatened by paucity of funds. Senate Committee Chairman on Finance, Solomon Adeola, at the same IGR parley, lamented that there was insufficient funds for the implementation of policies and projects captured in the 2022 budget. Adeola said for the government to reduce and eliminate deficit budgeting, which has characterised Nigeria’s budget over the years, effort must be made to minimise borrowing to fund projects. But the borrowing spree has continued unabated. The 2022 budget deficit is to be financed mainly by borrowings, with targets from domestic sources, N2.57 trillion; foreign sources, N2.57 trillion; multilateral/bi-lateral loan draw-down, N1. 16 trillion; and privatisation proceeds, N90.7 billion.

Unfortunately, the GOEs are in dire straits, as it were, with each of them performing far below their revenue targets. For instance, at the IGR confab, the Director General of NAFDAC, Professor Mojisola

Adeyeye, lamented that the 2018, 2019 and 2020 budget of the agency were not passed by the National Assembly, leading to warehousing of revenues generated by it for capital expenditure. On his part, Comptroller General of Nigeria Customs Service, Col Hameed Ali (rtd), said some provisions of the 2022 Finance Act had robbed Customs of its operational mandate on some revenue collections. He specifically cited section 22 and 61(a) of the Act, incapacitating Customs from collecting some taxes like import duties. Ali said, “when the law was signed, it did not state clearly the extent and scope of the taxes and levies in question,” adding, “however, the amendment is so wide and open that it has hindered our ability to collect levies and other collections at NCS.” The NCS boss declared: “We have consulted with our lawyers and the conclusion is that the Act is confusing and if othbusiness a.m. commits to publishing a diversity of views, opinions and comments. It, therefore, welcomes your reaction to this and any of our articles via email: comment@businessamlive.com