Nigeria Budget 2017: What Are The Issues?

By

Otive Igbuzor, Ph.D.

otiveigbuzor@yahoo.co.uk

Executive Director, African Centre for Leadership, Strategy & Development (Centre LSD)

1.    BACKGROUND

The budget is perhaps the most important instrument for the development of any modern state apart from the constitution. It can be argued that it is only through the instrumentality of the budget that government can allocate resources to deliver services to the people especially the poor and excluded. But in Nigeria, there are a lot of blockages to effective budgeting. First and foremost, the budgetary process is not participatory. Citizens and communities do not participate in formulating policies and agreeing on projects that go into the budget. Meanwhile, it has been documented that wherever participatory budget is implemented, it has expanded citizenship, empowered excluded groups, redefined rights, deepened democracy and stimulated civil society.[1]

Secondly, the budgetary process is not open. Corruption in any country starts from the budgetary process. In very corrupt countries, the budget is done in secret. Releases are done without the knowledge of citizens. Procurement information is not made available to citizens and corruption is guarded and protected. This is why civil society organisations in Nigeria have been advocating for an open budget system.  A budget is regarded as open if citizens have access to the key budget documents; have high level of involvement in the budgetary process and have access to procurement information.  As a matter of fact, democracy will be meaningless if the citizens do not participate in how government raise and spend money. This is why the tool (Open Budget Survey Tracker) developed by the International Budget Partnership (IBP) is a very useful instrument. It surveys the availability of eight key budget documents to members of the public: pre-budget statement, executive budget proposal, enacted budget, citizens’ budget, in-year report, mid-year review, year-end report and audit report. The Pre-budget statement is meant to disclose the parameters of the budget proposal including macro-economic assumptions. The enacted budget is the budget that has been passed into law by the legislature. The Citizens’ budget is a simplified version of the budget proposal that the average citizen can understand and relate with. The in-year report is a monthly or quarterly report of budget implementation. The mid-year review is a comprehensive update of implementation in the first half of the year. The year-end report is the annual report of implementation. The audit report is the audited annual account of the government.

 Thirdly, the priorities of the budget are not in accord with the development challenges of the country and there is no synergy between plans, policy and budget. We have always argued that there is the need for better public finance management across the world because of increasing inequality and non-inclusive growth. The past five decades have witnessed monumental changes in the world. Global economic wealth has increased sevenfold and average incomes have tripled.^[2] Yet, poverty has increased to record high levels. The major problem is that wealth is concentrated in the hands of a few people while majority of the people live in abject poverty. The UNDP in its 1998 report documented that the three richest people in the world have assets that exceed the combined Gross Domestic Product of the 48 least developed countries. A report by Oxfam in 2014 indicated that the 85 richest people in the world have wealth more than half of the world’s population (3.5 billion people). In Nigeria, for over ten years (1999-2015, there was increasing economic growth before we slipped into economic recession in 2016.  But at the same time, poverty was increasing. The budget must therefore prioritise pro-poor programmes and the challenges of poverty.

Fourthly, there are several frivolous expenditures in the budget that will not stand any reasoning and logic. For instance, the Centre for Social Justice documented N668.8 billion frivolous expenditure in the 2016 budget. They include N3.91 billion allocated annual reporting maintenance of villa facilities; N322.4 million for linking of cable to drivers rest room at the villa; ; N213.8 million for linking of cable from guest house to generator house etc.

Finally, the institutions and mechanisms for oversight of the budgetary process are weak. In any modern democracy, the legislature, civil society and media are expected to play oversight functions in addition to the internal control system put in place by the executive.  There is also the need for synergy and co-ordination between the Executive and NASS in budget preparations.

2.    THE 2016 BUDGET AND LESSONS LEARNT

The 2016 budget was the first budget prepared by the President Muhammadu Buhari administration who was sworn in as President on 29^th May, 2015. The budget was approved by the National Assembly in May, 2016. The Centre for Social Justice (CSJ) has been analysing the Federal Budget for more than a decade. It has been documented that between 2013 and 2015, the FGN consistently ran budget deficits and most of the funds were used for recurrent consumption expenditure.[3] The 2016 budget project to have crude oil production of 2.2 million  barrels per day; deficit of N2.2 trillion, benchmark oil price of $38 per barrel and average exchange rate of N197 to US $. Some scholars have consistently argued that some of the assumptions of the budget especially the projected crude oil production and exchange rate are not in agreement with the economic realities of the country.

Agriculture as a great contributor to GDP and employment creation was regarded as one of the key drivers of the Nigerian economy but only 1.25 percent of the budget was allocated to Agriculture in 2016. Similarly, the environment was recognised as one of the key drivers of the economy. But the environment is facing a lot of challenges including oil spillage, erosion, desertification and shrinking lake Chad. But the 2016 budget allocated only 0.32 percent to Agriculture. Over the years, Nigerians have complained about the falling standard of education. But the Federal government allocated 8.77 %; 10.55 %; 10.75 % and 7.92 % of its overall budget to the education sector in the years 2013; 2014; 2015 and 2016.[4] 

It has been recognised that there is a huge infrastructure gap in the country. Nigeria is estimated to be in need of between 17million to 23 million new housing units to meet its housing deficit.[5] But the FGN budgeted 0.65 %; 0.46 %; 0.16%; and 1.13 % of its overall budget for housing in the years 2013, 2014, 2015 and 2016 respectively. Nigeria has a total road network of 194, 200 kilometres, comprising 34, 123 km of federal roads (17 percent); 30,500 km of state roads (16 %) and 129, 577 km of local government roads (67 %).[6] According to the National Integrated Infrastructure Master Plan (NIIMP), Nigeria needs an investment of $22 billion over the first five years and then an additional $4 billion in urban road which requires a provision of $5.2 billion per year. Meanwhile, only about 65,000 km have been paved throughout the country. But the FGN allocated 3.83 %, 2.85 %, 1.00% and 4.84 % of its overall budget to the works sector in the years 2013, 2014, 2015 and 2016 respectively.

LESSONS LEARNT FROM THE 2016 BUDGET IMPLEMENTATION

There are a lot of lessons learnt from the 2016 Budget implementation. First and foremost, the  engagement by citizens and citizens’ groups produced some positive reports in terms of reduction of frivolous expenditure. For instance, CSJ documented a total saving of N71,954,532,546.00 from the 2016 budget.   Secondly, the budget was passed very late and will definitely affect the performance of the budget. Thirdly, there was low capacity in understanding the new budgetary approach of zero base budgeting on the part of public servants and civil society. In addition, the level of citizens’ engagement especially at subnational levels was low and there was no structured process for citizens’ engagement. Moreover, Civil Society strategies of advocacy, partnership and networking, tracking and monitoring, participation in public hearing and social media can make some difference in the budgetary process.  For instance, engagement by civil society has led to some improvement in the openness of National Assembly budget. It is now itemized instead of the block budget without breakdown and the National Assembly held a consultative meeting with civil society on the budget for the first time. Finally, some scholars have consistently pointed out that over the past few years, the budget size has not been  realistic and the projected revenue inflows were over-optimistic (in the light of actual performances in recent times).

3.    THE MAIN ISSUES WITH THE 2017 BUDGET

The 2017 budget is the second budget to be presented by the President Muhammadu Buhari administration. The budget tagged budget of recovery and growth was based on an Oil benchmark crude oil price of US$42.5 per barrel; an oil production estimate of 2.2 million barrels per day; and an average exchange rate of N305 to the US dollar; target Gross Domestic Product (GDP) growth rate of over 2 per cent; and target inflation rate of single digit; as well as a deficit of N2.36 trillion (about 2.18 per cent of GDP). [7] The 2017 budget is a continuation of the 2016 plans but adjusted to reflect new additions made in the Economic Recovery and Growth Plan.[8] The proposed capital expenditure is 30.69 percent. The projected exchange rate of the naira against the dollar in the 2017 budget is N305 to the US dollar.

In 2017, a total budget of N7,298,507,709,937 was proposed. The allocation to Agriculture was N123,440,807,622 representing 1.69 percent of the total budget and an increase of 37.8 percent from the 2016 budget. The total health sector allocation was N304,190, 961, 403 representing 4.17 percent.

The allocation to education in the 2017 budget was N540 billion in 2017 up from N369 billion in 2016; N492 billion in 2015; N493 billion in 2014; N426.53 in 2013 and N400.1 billion in 2012.

It is very clear that allocation to education is very low in Nigeria especially when compared to other African countries: Burundi -16.59 % in 2010; 14.98 % in 2011; 16.43 % in 2012 and 17.24 % in 2013; Benin-25.02 % in 2012; 22.34 % in 2013; and 22.23 in 2014; Ethiopia 26.30 % in 2010; 29.67 % in 2011; 30.54 % in 2012 and 27.02 in 2013; and Madagascar- 19.78 % in 2011; 20.33 % in 2012 and 13.99% in 2013.

In the 2017 budget, there are special initiatives with social inclusion benefits including provision of N100 billion for  a new social housing programme;  N50 billion for each geopolitical zone to set up special economic zone; N20 billion to revive export-expansion grant; N15 billion to recapitalise Bank of Industry (BOI) and Bank of Agriculture (BoA) and N500 billion special intervention programme. 

The two ministries that received the highest recurrent expenditure are interior (N482.37 billion) and Defence (N465.87 billion).

Compared to the past, there are some positive improvements in the 2017 budget. There is a slight improvement in capital budgetary allocation although the change is not big enough. There are some progressive initiatives in line with the ideological commitment to social democracy including social protection initiatives and social housing. There is marginal increase in budgetary allocation to agriculture, education and infrastructure but still insufficient to cause transformative changes.

Therefore, the historical challenges with budget in Nigeria including concerns with the budget process, content of the budget as well as implementation challenges remain unresolved.  The process issues include the fact that citizens and communities do not participate in the selection of projects that go into the budget; Legislators are not consulted on the selection of projects into the budget; and oversight of the budget process by the legislature, civil society and the media is weak.  Furthermore, the Public Accounts Committee which was very popular in the second republic has become very ineffective and there is still confusion on the limits of legislative power in appropriation.

The content issues include low budgetary allocation to sectors that will have impact on the lives of citizens such as Agriculture, health, education and agriculture. For instance, while the budgetary allocation by Republic of Benin and Ethiopia is more that 20 percent of the total budget since 2012, that of Nigeria is less than 10 percent. Similarly, frivolous expenditure has continued over the years. For instance. Foodstuff and caterial materials had a budget of N92.6 million in 2016 and N123.2 million in 2017; newspapers had a budget of N10.2 million in 2016 and N28.3 million in 2017 (This translates to 387 newspapers per day at N200 per newspaper for 365 days).[9] Finally, the high level of recurrent expenditure that will constrain development. The implementation issues remain the challenges of implementation has been a recurrent decimal and the late passage of the budget and a laborious procurement procedure have not been addressed.

The process, content and implementation issues constitute a blockade to the budget process making effective and efficient service delivery difficult.

4.    THE WAY FORWARD

From the above, it is clear that the budgetary process can be improved by addressing the process, content and implementation issues. There is an emerging consensus among civil society that the following issues need to be addressed going forward:

1. Promoting citizen engagement in the budgetary process from selection or projects through implementation to monitoring and evaluation.
2. Civic education: social, economic and political resilience, budget literacy, comparative analysis of best practice in budgeting
3. Partnership among those working on budget issues
4. Engaging the government: on promises made during elections, development plans, interrogating budget assumptions and engaging legislators.
5. Advocacy and Campaigns: creating Transparency and Advocacy Champions
6. Budget monitoring: Tracking of budgets
7. Capacity Building for legislators, CSOs and the media on the budgetary process

ENDNOTES