2015 Federal Budget: “Public Resources Should Be Appropriated To Work And Be Of Benefit To All” – Citizens Wealth Platform (CWP)
The Civil Society Summit on the 2015 Federal Budget was convened by Centre for Social Justice on January 28th and 29th 2015 with the support of the Ford Foundation to review the 2015 proposals with a view to make inputs to align the proposals with the reality of the austere times and best practices in fiscal governance. Participation was drawn from non-governmental and faith based organisations, professional associations, the media and other citizens groups. The Summit was held under the umbrella of Citizens Wealth Platform which is dedicated to ensuring that public resources are made to work and be of benefit to all. The Summit made the following observations.
(A) The 2015 budget titled “Transition Budget and Hope” is based on key assumptions that are not realisable. This includes the benchmark price of crude oil at $65, exchange rate of N165=1USD, GDP growth rate of 5.5%. It was presented very late in the year and at a time the Medium Term Expenditure Framework 2015-2017 (MTEF) had not been approved. The budget is not anchored on high level national planning frameworks including Vision 20:2020 and its implementation plans. With the expiry of Vision 20:2020’s First National Implementation Plan 2010-2013, and the absence of a follow up implementation plan which should have been the Second NIP 2014-2017, the budget rests on nothing.
(B) The MTEF and the Budget still made provisions for oil theft in arriving at the crude oil production of 2.2782mbpd. Leakages still abound in the system including the non remittance of operating surplus and other Independently Generated Revenues of MDAs. It is rather absurd in the face of these leakages for FGN to be taking steps to scrap the Fiscal Responsibility Commission which as at the end of the 2013 financial year had recovered N336.6bn in operating surplus of scheduled corporations. Scheduled corporations are using different accounting systems leading to different calculations of operating surplus for agencies having similar income and expenditure. However, the proposals for cutting down on overheads, the full implementation of the Treasury Single Account (TSA) and Government Integrated Financial Management Information System (GIFMIS) are steps in the right direction.
(C) The budget is made up of recurrent non debt expenditure, statutory transfers, debt service and capital expenditure in the sums of N2,616.01bn (60.03%), N411.84bn (9.45%), N943bn (21.64%), and N387.11bn (8.88%) respectively. Essentially, the key allocations indicate a budget of consumption. A paltry capital vote of 8.88% in an economy with a huge infrastructure deficit is clearly not the way to economic growth and development.
(D) The budget proposal is suffused with a lot of inappropriate, unclear, frivolous and unduly bloated expenditure heads. Examples include: the Presidency proposes N732.4m for food and catering, welfare packages of N328m, rehabilitation and repairs of Villa buildings at N826m – a line item that has attracted more than N12.624bn since the 2011 budget; National Assembly’s demand for N150bn and a further N40bn for constituency projects; Secretary to the Government of the Federation to spend N1.142bn on welfare packages, N27,346 everyday (including Saturdays and Sundays) on newspapers and periodicals, subscription to professional bodies of N339.2m; allocating N776.089bn to the Slush Fund/Ghost Account called “Service Wide Votes” contrary to the Constitution and fiscal governance laws; Ministry of Finance demanding N175m for welfare packages and N51.4m for refreshment and meals, Budget Office of the Federation demanding N106.7m for welfare packages. Pray, what is welfare package for an MDA that has fully made provisions for its personnel vote? As usual, the Ministry of Agriculture repeats the yearly nauseating joke of “improved seed”, “fungicides”, “herbicides”, “inorganic fertilizer” and “organic fertilizers”, mentioning them so many times and demanding billions of naira. Clearly, these cannot be the priorities of the average Nigerian!
(E) CWP has identified the sum of N304,573,835,128 (Three Hundred and Four Billion, Five Hundred and Seventy Three Million, Eight Hundred and Thirty Five Thousand, One Hundred and Twenty Eight Naira) only as possible savings from the 2015 federal budget proposal. This sum is merely indicative of what can be saved. We did not exhaust all the possibilities by going through all the agencies under the respective Ministries. The full details can be found online at http://csj-ng.org/blog/frivolous-expenditure-in-2015-federal-budget/. The Budget Preparation Template sent to MDAs encourages frivolity and wasteful expenditure as it does not differentiate between MDAs considering their statutory duties and peculiarities.
(F) Statutory transfers to the National Judicial Council, National Assembly, Niger-Delta Development Commission, Universal Basic Education Commission, Independent National Electoral Commission, Public Complaints Commission, and National Human Rights Commission are stated as lump sums without any details or disaggregation. There is no law authorising lump sum statement of allocations. Stating statutory transfers as lump sums is not acceptable in a constitutional democracy founded on the rule of law and the sovereignty of the people. Indeed, no agency of government, under any guise, is allowed to spend public resources in a way and manner and for purposes not known to citizens – see section 48 of the Fiscal Responsibility Act (“FRA”).
(G) The Budget proposes to spend N555.89billion more on debt service compared to capital expenditure. The debt service amounts to 243.6%% of capital expenditure provision. At the same time, debt service amounts to 26.17% of the retained federal revenue. Given the significant decline in capital expenditure, funds are being borrowed to finance recurrent expenditure. For 2015, FGN plans to borrow N570b from internal sources whilst our capital expenditure is N387billion. The implication is that we are borrowing N183b more from internal sources than the amount required to fund capital expenditure.
(H) The FRA (S.41) allows borrowing only for human development and capital expenditure but Nigeria’s debts have been increasing in geometric proportions in the last couple of years with no concrete improvements in human development and critical infrastructure. Also, the President and the Minister of Finance have failed, refused and neglected to present overall limits on Consolidated Debts of the Federal, State and Local Governments to the National Assembly for approval as demanded by S.42 of the FRA.
(I) The Petroleum Industry Bill is still pending before NASS. Also, subsidy has been provided for kerosene in the sum of N91.03bn. However, previous subsidy did not reach the intended beneficiaries and there are no plans in place to stop the continued subsidy scam.
(J) The proposals for education and health do not meet national and international standards demanding 26% of the budget to education and 15% to health respectively. The funding for infrastructure (roads, power, etc) and agriculture is also meagre.
(K) The bloated MDA personnel vote of N1,836.73bn which gulps 42.15% of aggregate expenditure is not sustainable. The delay in the full implementation of the Integrated Payroll and Personnel Information System (IPPIS) has contributed to the high figures. The Government White Paper on the implementation of the Oronsaye Committee report merely scratched the surface and did not address the MDAs and issues that will reduce the wage bill.
(L) Two critical bills that will enhance infrastructure development vis, the Federal Road Fund Bill and the Development Planning and Projects Continuity Bills are still pending before NASS.
The Summit thereafter made the following Recommendations (full budget review and recommendations are available at http://csj-ng.org/blog/review-of-2015-federal-budget-proposals/
Recommendations for NASS
(1) The benchmark price for crude oil should be reduced to not more than $50 per barrel. The excess (in the event of an increase in oil price) should be saved in the Excess Crude Account. NASS should take cognisance of the prevailing realities in the foreign exchange market in arriving at the exchange rate.
(2) Halt the steps so far taken by the Executive to scrap the Fiscal Responsibility Commission and strengthen the Commission for the enhanced performance of its duties.
(3) In the spirit of the austerity measures and the legislative oath of office, use a tooth pick and comb approach to review all the proposals and identify more waste and monies that can be saved. As shown in the publication of inappropriate, unclear and frivolous expenditure by CWP, a minimum of N304,573,835,128 can be saved. When this is combined with the savings from kerosene subsidy, it comes up to over N395.5bn, which can be re-programmed to capital expenditure. The line item referred to as “welfare packages” should be expunged from the budget. NASS and the Presidency-State House should cut their votes by not less than 50%.
(4) Disaggregate the statutory transfers and provide details of the allocations just like the budgets of other MDAs.
(5) Increase capital expenditure to a minimum of 30% of the budget through savings from the budget heads referred to in Resolution 3 and prioritise the passage of critical bills that will enhance infrastructure development including the Federal Road Fund Bill and the Development Planning and Projects Continuity Bill.
(6) Insist that new borrowing proposals from the executive should be accompanied with the list of capital projects, their cost benefit analysis and the terms of the borrowing which should not exceed 3% per annum interest rate as required by the FRA, and meticulously review the proposals before approval. Also, insist on the President submitting proposals for the setting of the Consolidated Debt Limits as required by section 42 of the FRA before approving new borrowing.
(7) Ensure the passage of the Petroleum Industry Bill before the end of the current legislative term in May 2015 as this is imperative for enhanced accountability and transparency in the oil sector, increased revenues accruing to the Federation Account and to stem the unceasing demand for Joint Venture Cash Calls.
(8) Increase the votes to agriculture, education and health particularly their capital allocations; increase the total education and health budget to reflect international standards. The increases should come from the savings earlier identified and new IGR recoveries from blocked leakages in the system.
(9) Abolish the subsidy on kerosene since the target beneficiaries will never benefit from the subsidy and there is no feasible plan to stem the subsidy scam.
Recommendations for the Executive
(1) To properly manage the value of the naira against major international currencies would require the avoidance of the creation of new money. This would imply the direct allocation of foreign exchange earned from oil to the three tiers of government, in a secured form rather than monetising it by minting new naira. This is the recommendation of Vision 20:2020 that has since been ignored by the monetary and fiscal authorities.
(2) Take steps through the National Planning Commission to formulate the Second National Implementation Plan of Vision 20:2020. The full implementation of the TSA; ensure that IPPIS covers all MDAs and be used as a basis for computing personnel costs; and implement other reforms such as the GIMFIS.
(3) Withdraw the circulars seeking to scrap the Fiscal Responsibility Commission and support the Commission to recover the operating surplus of scheduled corporations. The Ministry of Finance should prepare new budget templates that take cognisance of the peculiarities of MDAs, reduction of waste and frivolity and evidence based budgeting. The Accountant-General of the Federation should harmonise the accounting system to be used by all scheduled corporations.
(4) Stem the tide of oil theft by implementing the recommendations of the Nuhu Ribadu Petroleum Revenue Special Task Force on finger printing of Nigerian oil to ascribe the status of legality to oil obtained and sold by the Nigerian authorities to licensed operators. With a database and standardised technology, oil theft can be reduced to a minimum.
(5) Reduce the bloated recurrent expenditure through a proper review, White Paper and implementation of the Oronsaye Committee report.
Signed: Eze Onyekpere, Convener CWP; George Hill Anthony of Niger Delta Budget Monitoring Group, Abiodun Oyeleye of New Initiative for Social Development and Idris Miliki of Centre for Human Rights and Conflict Resolution.