The 2018 budget cycle seems to have revved up its engine in preparation for full acceleration. In the outgone week, the draft Medium Term Expenditure Framework 2018-2020 was reported to have been presented to the National Economic Council. The MTEF sets the parameters that undergird the revenue and expenditure for the next three years and specifically is the basis for the preparation of the 2018 federal estimates by the executive. It also sets out policy priorities and the direction of economic and fiscal governance within the medium term.
The MTEF consists of a macro economic framework, the fiscal strategy paper, revenue and expenditure framework, consolidated debt statement and a statement describing the nature and fiscal significance of contingent liabilities and quasi-fiscal activities and measures to offset the crystallisation of such liabilities.
However, the MTEF is coming late when the provisions of the Fiscal Responsibility Act are considered. The FRA demands that the MTEF should be ready for consideration by the Executive Council of the Federation before the end of the second quarter in the year being the month of June. But it is better slightly late than being very late. There is also the question of consultation with stakeholders in civil society, labour and organised private sector, etc. The FRA anticipates a situation where consultations will be done during the preparation of the MTEF so that any input from the consultation considered useful can be made a part of the MTEF. The Budget Office of the Federation has scheduled the consultations for July 27 and 28 in Abuja and Lagos respectively. These consultations need not be perfunctory as in previous years when the purpose was simply to fulfil all righteousness and tick the boxes so that it will be on record that there were consultations. For deliberations at the consultation to be meaningful, the Budget Office of the Federation should immediately upload the draft MTEF to its website to enable participants read and prepare their inputs before time. Merely presenting a maze of figures on a slide show within the space of 40 minutes and expecting participants to make immediate inputs will not serve the purpose.
Walking back a little, questions are generated over the background of the MTEF and the accountability and transparency of the entire budgeting system. By the end of July 2017, it is not a best practice that the full year budget implementation report for 2016 is still not available. The excuse that the 2016 budget implementation ended in May 2017 is not tenable. It has been more than two months thereafter. Pray, on what parameters shall we consider the propriety of new figures and policy directions that will be unveiled in the MTEF 2018-2020 when the report of previous budget work is not available? The macroeconomic framework sets out the macro-economic projections, for the next three financial years, the underlying assumptions for those projections and an evaluation and analysis of the macroeconomic projections for the preceding three financial years. In previous years, the presented frameworks did not present any rigorous assumptions upon which the projections were made; neither did it give an account of the previous forecasts and how they performed. The foregoing underlies the importance of information being in the public domain.
The MTEF 2018-2020 provides the opportunity for the start of new thought process that begins to lay less emphasis on the receding oil rents. It is also an opportunity for government to lay all the cards on the table for the citizens to make a choice. The level of economic rot in terms of unemployment, inflation, capacity utilisation, etc. is not flattering. No Nigerian is happy about the scenario and we seek opportunities to be part of the economic revival process. The federal administration should note that this is the last MTEF and budget it will prepare without heavy politicking being in the air. In the last year of any administration, politics usually trumps governance including economic governance. Thus, this is an opportunity to perform as part of the scorecard that will be presented to Nigerians in 2019.
The debt situation should be handled with caution. The mantra of spending our way out of recession through heavy borrowing does not seem to have produced the desired magical result considering that we are still in recession with the ballooning debt profile. And the investments of the proceeds of debts have not always been made in regenerative capital expenditure which will provide the capacity for payback in the future. We need to stick to the letter of the FRA which outlaws borrowing for capital expenditure. Its provisions for a proper Cost Benefit Analysis are also imperative if debts and borrowing will produce the desired impact. It is this writer’s proposition that projects to be funded with debt instruments must be capable of generating revenue. Also, if the debts are denominated in foreign currency, the project’s link with capacity for economic growth that will generate foreign exchange ought to be scrutinised. We cannot continue the blind borrowing considering the huge debts accumulated since the life of the present administration. The emphasis should be on attracting more investments instead of creating new sovereign debts.
This is now the time for the executive and the leadership of the legislature to enter an honest dialogue on the parameters and projects of the budget to avoid the perennial ugly exchanges over their respective roles in the making of a budget. These exchanges, allegations of padding and insertions and the lack of proper policy focus in budgeting have contributed in no small measure to Nigeria’s perennial budget underperformance.
It is also time for the Federal Government to engage states in a meaningful dialogue to ensure complementarity and collaboration on key projects. For instance, the Federal Government always proposes the rehabilitation of primary health care centres across the federation, a task which ideally is not part of its mandate. However, considering the very poor nature of health indicators and standards across the federation, there is an imperative for such interventions. Going through the budget documents of many states shows provisions being made for the recurrent and capital expenses of some primary health centres. Thus, instead of starting to build and equip a fresh centre, the Federal Government should support the standardisation of centres already being funded by state governments. This is to ensure that capital equipment will be used after their provision in centres that already have adequate human resources and their services are in demand in the community.
Policy and project continuity should be the watchword especially in sectors where early gains are beginning to manifest. Agriculture leads the way in this direction. For a sector like power which has consistently underperformed over the years, new thinking is required and maybe, new personnel to drive the process across the value chain may be the answer.