The capital component of the budget, as distinct from the recurrent expenditure, is the part of the budget that makes the greatest impact on the lives and welfare of citizens. Recurrent expenditure focuses on payment of salaries of personnel and overhead costs. It is a fact of life that government is run by individuals who need to be paid and overhead costs incurred to ensure smooth governance and administration. But the public servants constitute less than one per cent of the population and as such, resources dedicated to maintaining them have a fairly limited impact on all the citizens.
The capital component of the budget is divided into administrative and developmental expenditure. The administrative component is the capital that facilitates the administrative machinery of government. Developmental capital builds infrastructure and provides the founding blocks for economic growth and development. It is therefore in this context that funding of capital expenditure, especially developmental capital, is seen as the hallmark of successful budget implementation. At the federal level, over the years in Nigeria, over 78 per cent of the actual budget figures have been dedicated to recurrent expenditure, leaving little or nothing for capital expenditure. The average capital expenditure as a percentage of the overall budget in the last 10 years is less than 22 per cent. This simply means that the bureaucracy takes care of itself and millions of Nigerians just have to find a way to sort themselves out.
Fast forward to the Buhari administration, a song has also been made of the 70 per cent and 30 per cent ratio for recurrent and capital expenditure respectively. The 2017 federal budget provides a clue to the long-drawn puzzle of capital budget implementation in Nigeria. Since the budget was enacted, up till the last one week, the Federal Government has claimed that the releases for capital expenditure come up to N450bn, out of a capital budget projection of over N2tn. And this includes the proceeds of the N100bn Sukuk Bond. However, the Minister for Power, Works and Housing, Babatunde Fashola, was widely reported in the media as denying having received the proceeds of the N100bn Sukuk Bond. Effectively, this puts the capital spending at N350bn. At all times material to this discourse, the Federal Government has asserted that resources to implement the budget are not available.
About a week ago, the Minister for Finance, Mrs. Kemi Adeosun, told a delegation of 30 investors from France that the Federal Government was about to release additional N750bn for capital expenditure bringing the total releases to N1.2tn. This announcement from the minister throws up many posers. First, Nigerians only heard of this proposal when the minister was addressing a foreign delegation. Maybe, this was not meant for the ears of Nigerians. The second issue is that this looks too good to be true. A government that had been complaining about the paucity of funds just a few days ago, from where did it get N750bn from? The third issue is whether the government had done the foreign borrowing it proposed? The fourth, did the Federal Government order, ala Idi Amin-style, the Central Bank of Nigeria and the country’s security and mint company to print money not backed by value? Fifth, did the revenue collecting agencies do some overnight magic? Or, is there any special fund unknown to Nigerians from where this money came? Where exactly is this money coming from? Other posers include: With the planned release of this money, when will the implementation of the 2017 budget end? When will contractors mobilise to site to start using this money? Going round Nigeria, nothing is happening in terms of physical infrastructure as contractors have not been mobilised and they are therefore not at the work sites.
There is something fundamentally wrong with a system of fiscal governance that fails to release funds for the implementation of the capital budget over a period of six months and suddenly pumps resources into the system as the fiscal years draws to a close. Does the system have the absorptive capacity to soak this up at the same time? Would this not have made sense to gradually put the funds into the system? Proper planning and sequencing dictate that funds be released proportionately the year round, except for projects that demand either the wet or dry season for their intervention. Proper planning also demands that funding is arranged either prior to the commencement of capital budget implementation or simultaneously, so that there will be no time lag between budget approval and implementation.
Nigerians had in the past been regaled with stories of end-of-year contract bazaars when funds available at the end of the year were simply spent by Ministries, Departments and Agencies of government because they have been appropriated, contrary to the common sense of the Financial Regulations that funds must not be spent simply because they have been appropriated. Thus, enhanced transparency leading to value for money needs to be mainstreamed throughout the system to address this challenge.
In the circumstances, it has become imperative for the Minister of Finance to publish the allocations to the respective ministries and the particular projects which the funds will be invested in. It is not sufficient, like the administration claimed last year, to have spent N1.2tn when there was no evidence of specific works (roads, bridges, railways, hospitals, schools) completed or taken beyond their former state of disrepair. This is in line with the demands of transparency, accountability and open governance. Simply throwing up figures without evidential backing is nothing but cheap propaganda and this is no longer in vogue in modern governance. The demand is for information to enable Nigerians follow their money. This is a demand very easy to meet except for any government that has something to hide. The Federal Government simply needs to walk the talk.