Home Finance The recurring trouble with Nigeria annual budgets

The recurring trouble with Nigeria annual budgets

by Business News Report

By Omoh Gabriel, Business Editor
Every year the executive and the legislative arm of the federal government of Nigeria text their power base and flex muscles on who is in charge of the national resources and how it must be allocated as a scarce resource. What is upper most in their minds is who is entitle to the lion share among the various arms of government. It is about dispensing political favours self interest. Last year the budget was unduly delayed by the legislature tactics of arm twisting. This year it is taken a new dimension, not so much of a fight between the executive and the legislature, it is now between the executive on the one hand and the two houses of the National Assembly on the other hand. In all of this it is who is superior to the other that has beclouded members of the National Assembly not so much of delivery the dividend of democracy to the citizenry.
The problem that stare the nation in the face is budget implementation. Unfortunately the 2010 has not addressed it. The federal civil service as presently constituted lack the capacity to fully implement yearly budgetary allocation to ministries, Departments and Agencies. The situation has been such that President Umaru Yar’ Adua when in came into office has to order Ministries, Departments as well as Agencies to return unspent budget. Several billions were recovered. How can a country that is in a hurry to catch up with the rest of the world has unspent capital budget year-on- year. This unspent monies were meant for capital projects that were never executed. The recurrent component of every budget is always fully spent. The situation got so bad that last year the federal government had to set up an inter ministerial budget monitoring committee. The committee has not made any appreciable head way as the 2009 budget has been poorly implemented.
Take for instance the question of power supply on which the President rode to power the Minister of Finance Dr. Mansur Muhtar early this year disclosed that there are a lot of public expectations from government on the Power Sector towards meeting the targeted 6,000MW by the end of this year. He said it was on account of this that the sector was given priority in the allocation of resources in the 2009 budget. and that huge sums have been released since to finance the various power projects.
The Minister spoke at a meeting between members of the Budget Implementation Committee and the Chief Operating Officers of the various Generation (GENCOS), Transmission (TRANSCOS) and Distribution (DISCOS) companies within the Power Holding Company (PHCN).

Dr Muhtar further stated that “monitoring of capital projects would be a continuous process, especially at the ministerial level and Power remains one of the critical sectors needed to deliver on the promises made by the present administration. But as at the time of laying the 2010 budget before both house of the National Assembly not much has been achieved.
In the case of Works and Housing the situation is far worse. Roads are in deplorable state. The minster is said to be hardly available to approve memos sent to him. Even things as little as signing documents to regularise land purchased from the federal government in Lagos and certificate of occupancy are said to be at the minister table in the last six months without any action.
As admitted by the Minister of Finance ‚Äúof course, in relation to the implementation of the budget, we have experienced problems and challenges. We have had revenue shortfalls, a 30 per cent shortfall in revenue in the first half of the year, and overall also implementation challenges in part due to implementation and absorptive capacity, delay in starting up the budget. So, we have lots of resources now tied up in the Central Bank, capital releases that have been made that are not being spent, and we’re pushing hard to really facilitate project implementation.
Now in this overall context really we have huge–we will continue to face, huge financing gaps to meet our infrastructure needs; and therefore, our resource needs continue to mount and we expect to receive support. We did get $500 million from the World Bank Fast Track Facility. We had envisaged going to the international capital markets to raise $500 million bond, but we could not do it because of the conditions and this Fast Track facility was very useful and very timely and very appreciative. We have also gotten support from ADB. We are discussing a $200 million facility also, Fast Track, fast tracking of IDA facility, so we in this context we pushed for additional resources‚Äù.
Infrastructure development topped the Federal Government’s agenda in the N4.07 trillion budgetary proposal for 2010 laid separately before the Senate and the House of Representatives yesterday. Shamefully for the current National Assembly members this is the first time since the commencement of the fourth republic that the sitting President did not perform the ceremony of personally presenting the government’s financial plan before the National Assembly as is the global practice. It was also the first time that the two chambers separately received the budgetary proposals in their chambers. The politics of Nigeria budgeting is a show of power not a commitment to the welfare of the people. How will the common man benefit from the tussle over which arm of the national assembly the budget is presented. To the man in the street that is immaterial. It is the content of the budget and its proper handling in resources allocation to bothers him. How the 2010 budget will create more job opportunities, curb inflation, ensure security of lives and property and the stability of the exchange rate. How members of the two chambers understand these basic economics is in doubt.
The proposed spending is 32 per cent higher than in 2009 and, if approved, will push Nigeria even further beyond a 3 per cent deficit target set under a 2007 fiscal responsibility act. This would mean that the National Assembly would have to accept first that the President be allowed to undertake some borrowing and sending beyond what the fiscal responsibility bill allows him as a public officer.
Around a third of the planned budget is non-recurrent spending targeting areas including critical infrastructure, the power sector and development in the Niger Delta, the restive heartland of the country’s mainstay oil industry. But what is the assurance that if approved the executing ministries have the capacity to execute the project faithfully for the over all interest of the nation is the question on the lips of all Nigerians because the purpose of the 2010 budget according to the President is to accelerate economic recovery through targeted fiscal interventions intended to further stimulate the economy and support private sector growth. If this is the case the implementation of the budget will give the President some concern as non of the budget he has been asked by the National Assembly to implement has ever been fully implemented.
The Budget statement said N1.37 trillion was budgeted for capital expenditure and N2.011 trillion for recurrent, non-debt expenditure. The spending plans for Nigeria, which vies with Angola as Africa’s biggest oil producer, assume oil output of 2.088 million barrels per day (bpd), a benchmark oil price of $57 and an exchange rate of N150 to the U.S. dollar. The budget parameters seems realistic though but highly inflationary. Has this government what it takes to curb inflation even with the plan deregulation of the down stream sector of the petroleum industry? Given that the deficit will likely exceed targets established under fiscal responsibility guidelines ‚Äì this is no surprise given that priority areas are infrastructure and the Niger Delta. The accountability of spending in these two areas will be crucial to sustain the confidence of local investors,” he said. Yar’Adua said improving power infrastructure was a top priority and that Nigeria aimed to double electricity capacity to 10,000 megawatts (MW) by the end of 2011. But the government is yet to achieve the 6,000 mw target for December 2009. Intermittent power supply is a major brake on economic growth in Nigeria. Yar’Adua said the utilisation of budgetary allocations for 2009 had been “below expectations”, raising questions about how effectively government would spend the additional funds.
In the short-term, the expansionary element, will be positive for growth, equities and also, somewhat perversely, bonds, which are being driven by a combination of flight to quality by banks and pension funds together with repeated liquidity injections into the market. However, when combined with inflationary risks from fuel price deregulation and possibly poor food production over the next few months, there is a danger inflation can head back towards 18 per cent year-on-year by mid-2010.” The 2010 spending plans target economic growth of 6.1 per cent and headline inflation of 11.2 per cent.
Out of the N4.07 trillion budgetary proposed expenditure for 2010, N1.37 trillion is earmarked for capital expenditure, N2.011 is proposed as recurrent expenditure, N517.071 billion is proposed for debt service and N180 billion is allotted for statutory transfers. Among the beneficiaries of the statutory (first line charge) are the Niger Delta Development Commission (NDDC) N35.6 billion, the National Judicial Council N91 billion and Universal Basic Education, N44.3 billion.
Another N9.3 billion is earmarked as the NDDC’s share of excess crude distributed in 2009.
The National Assembly has an allocation of N127.7 billion in the budgetary proposal for the 2010 financial year.
Details of the budgetary estimate further show that the highest sectoral allocation was given to the Ministry of Works with N249.4 billion followed by Education with N249.08 billion, Defence N231.99 billion N216.4 billion; Health N161.84; Federal Capital Territory Administration N158.00 billion; Power N156.8 billion The Ministry of Niger Delta Affairs has an allocation of N64.3 billion while
The benchmark for oil revenue is fixed at $ 57 per barrel while the exchage rate for the dollar is N150 to the dollar. The Senate is expected to commence debate on the budget today.
Many Senators including Senator Ahmed Makarfi, chairman of the Senate committee on Finance were yet to study the budgetary proposals as at press time. However, Senator Manzo Anthony (PDP, Taraba North) welcomed the budget as an ambitious effort to fast track infrastructure development.
“It is an ambitious budget with significant capital projects. It would appear that even greater emphasis is being placed by the President on infrastructural projects. The deficit is a concern but it is an issue that can be managed,’’ he said.

Related Posts