The return of January to December budget cycle

The biggest achievement for the Ministry of Finance Budget and National Planning in 2019 is the return of Nigeria’s budget cycle of January-December, an unprecedented feat that has almost been forgotten in the country’s economic space.

For many, the signing of the 2020 budget into law by President Muhammadu Buhari earlier in December 2019 has brought a ray of hope for Nigeria.

This is coming seven years since the country managed to achieve this feat. Although commendable, some Nigerians, however, opined that the Buhariled administration couldn’t have achieved this much-talked leap if not for the perceived “rubber stamp” leadership of the National Assembly.

The emergence of Ahmed Lawan as the Senate President and Femi Gbajabiamila as the speaker of the House of Representatives as their unalloyed allegiance to the president helped in achieving the feat.

However, the Ministry of Budget and National Planning also played a major role.

The timely encapsulation of the yearly budgets, the 2020 one in particular, was the result of the ministry’s salient, yet bold efforts towards the early presentation of the budget.

In the past, Nigeria had persistently failed to achieve a regular budget calendar and as a result, it has been difficult for organisations globally to match their budgets to the Nigeria business units.

Also, the private sector in the country has been in the dark over the future of their businesses for every first quarter to second quarter in some instances due to the unpredictable budget law.

Traditionally, and since the return of democracy, Nigerians have woefully watched how series of budgets were signed into law mid-year. It is not shocking to them, anymore, that budgets only get signed into law in May, 5 months already into the budget’s lifespan.

Experts had in the past explained that the delayed passage of budgets has done immeasurable harm to Nigeria’s economy over the years with infrastructure projects suffering the most because of the late implementation of the budget given that it drives economic developments.

There is also the issue of delayed local investments because investors wait until the budget is passed before making the decision of coming to invest and it cripples jobs and wealth creation.

With the early passage and signing of the 2020 budget which the president assured would be consistent, Nigeria’s fiscal year will revert to the prescribed 12 calendar months from January to December and with a 12-month fiscal calendar budget, the private sector and even development partners will easily align their projects, plans and programmes with the country’s new budget cycle and this will in turn bring about a lot of gains for the country.

Economists and expert’s advice that FG should create a medium-term sector strategy to constantly review the midterm expenditure framework.

This would guarantee sustainability by ensuring early and consistent presentation of the country’s budget and passage.

On the 2019 budget, experts have raised concern on the N3.8 trillion budget deficit indicating that FG is borrowing at a faster rate and that the CBN has been augmenting its position with unfunded deficits, with experts explaining that Nigeria needs a deeper interrogation of its revenue profile especially on the efficiency of tax collections explaining that there are a lot of leakages with the many agencies that are collecting tax.

Economists and experts are of the view that Nigeria still lack a comprehensive spending data stressing that there should be a publication of actual spending data of projects.

President Buhari, in 2019, signed the bill into law in December, and the N10.59 trillion budget is based on an oil price benchmark of $57 per barrel, a daily production estimate of 2.18mpd and an exchange rate of N305 per dollar.

The spending plans for the budget also include a value-added tax increase from 5 per cent to 7.5 per cent expected to increase the tax to revenue ratio.

This is to boost the country’s revenue figures given that the country’s revenue is still relatively small because it is heavily dependent on oil and with oil price hovering above the $50 per barrel mark and the depreciation in the country’s currency.

More pragmatic steps needed to be taken to increase revenue because current trends in the oil and non-oil sector shows that Nigeria might struggle to pass the N5trn revenue mark generated in 2018, which is increasingly not enough to meet the rising debt service, personnel cost and resources required for capital expenditure.

Nigeria’s revenue to GDP ratio is less than six per cent while its tax to GDP ratio is less than five per cent.

The Minister of Finance Budget and National planning, Zainab Ahmed who, in a recent gathering, said the Finance Bill which was presented to the National Assembly aims to amend seven existing tax and fiscal policy laws including Company Income Tax Act, 2004; Value Added Tax, 2007; Customs and Excise tariff Consolidation act, 2004; Personal Income Tax Act, 2007; Capital Gains Tax Act, 2007; Stamp Duties Act, 2007; and Petroleum Profit Tax Act, 2004, will soon be signed by President Buhari.