Reconfiguring The 2015 Federal Budget (1).

Reconfiguring the 2015 federal budget (1)

February 16, 2015 by Eze Onyekpere

The National Assembly will reconvene on Tuesday, February 17, 2015 and an important part of its work schedule will focus on the consideration and approval of the 2015 federal budget. A review of the underlining issues in the recurrent and capital expenditure proposals in the light of dwindling oil revenue and the need to rethink our fiscal policies is imperative. Evidently, the proposals presented by the executive fiscal authorities do not add up and a lot of adjustment needs to be done by the legislature to arrive at a budget that can serve the needs of the Nigerian people.

An aggregate expenditure of N4,357.9bn has been proposed for 2015. This is a decline of 7.2 per cent from the approved 2014 budget of N4,695.19bn. These figures do not include SURE-P; with the inclusion of SURE-P funds, the decline between 2014 and 2015 is 10.1 per cent. This expenditure figure consists of N412bn for Statutory Transfers (for the National Assembly, Judiciary etc.), N943bn for Debt Service, N2,616bn for Recurrent (Non-Debt) Expenditure and N387.11bn for Capital Expenditure. The recurrent expenditure increased by about 6.56 per cent while capital expenditure decreased by 65.4 per cent.

The recurrent expenditure is gulping as much as 60 per cent of the entire budget, against the 52.29 per cent in the approved 2014 budget. Of the total N2.616trn budget for the recurrent (non-debt) expenditure, personnel consist of 70.2 per cent of the total recurrent expenditure, and 42.15 per cent of the aggregate 2015 budget expenditure. In 2014, personnel cost was only 36.8 per cent of the overall budget. Overhead expenses cover 7.61 per cent of total recurrent expenditure and 4.57 per cent of the aggregate Federal Government 2015 proposed budget (this was 5.37 per cent in the approved 2014 budget).

The same measures that have been proclaimed since 2006 are still the panacea government offered to bring down recurrent spending; only to have it escalating. The rising personnel costs after “ghost workers” have been purportedly weeded out from the federal service and other reforms, such as the Integrated Personnel and Payroll Information System, kicking in is a bit confounding. The IPPIS needs to be extended to all MDAs before the end of the 2015 financial year. The IPPIS got a total of N3.5bn in the proposal. In as much as we need to extend the IPPIS to all MDAs every year since 2006, it gets a huge vote and no progress commensurate to the sums invested seems to have been made.

What exactly are we paying for? Does it cost so much? The National Assembly should clarify this before approval. It is unfair that less than one per cent of Nigerians should be getting 42.15 per cent of the overall budget, up from the 36.8 per cent they got in the 2014 allocation. The N1,836.73bn for MDA personnel costs is an allocation that needs appropriate action geared towards reducing the same in the short, medium to long terms. To cut down recurrent expenditure, the implementation of the recommendations of the Oronsaye Committee with reasonable modifications is therefore most imperative.

It is also important for future budgets that the template sent to the MDAs for budget preparation be streamlined. There seems to be structural challenges with the budget preparation template. It does not differentiate between MDAs considering their statutory duties and peculiarities. Thus, every MDA must ask for a vote for security services, uniforms, printing of security and non security documents, maintenance of IT equipment and all manner of consultancy services. The MDAs ask for a vote for welfare after they had made full provisions for the salaries and remuneration of their members of staff. Pray, what manner of welfare is this that is not covered by the staff remuneration? There are provisions for medical expenses and supplies after full provisions had been made for contributions to the National Health Insurance Scheme. In a period of austerity, the MDAs still dedicate millions of naira to the repair of office furniture. But how much do you need to buy new furniture? The MDAs demand money for refreshment and meals as if they are running a restaurant chain while requests are perpetually made for purchase of library books in an anti-intellectual environment. Nigeria still intends to pay for pilgrimages against the constitutional bar on adopting state religion.

We have graduated to a system where every MDA votes money for budget preparation and administration while maintaining accounts and finance departments and employing qualified accountants and other professionals. The National Assembly must be on the look-out for the difference between “rehabilitation”, “repairs” and “maintenance” of a building to the extent a particular building gets votes for the three different “issues”.

At a time of lean resources, the Federal Government capital budget proposal brings home the wrong steps of the current and previous administrations. A capital expenditure proposal of N387bn (8.9 per cent of the total budget), down from the N1.119tn (23.85 per cent of the approved 2014 budget); this is a huge decline of approximately 65.4 per cent. It is unexplained how with less than 7.2 per cent decline in the budget figures (2015 compared to 2014), the capital budget gets a reduction of 65.4 per cent.

Thus, it is not about paucity of resources but the prioritisation and choice of the fiscal authorities in the strategic areas for investment. For an infrastructure-deficient economy, this level of capital expenditure cannot grow the economy nor support human development. And the challenge is that if tradition is to be followed, in no year in the last 10 years has the Federal Government released and cash-backed up to 80 per cent of budgeted capital expenditure or utilised more than 60 per cent of the appropriated capital budgets. For instance, as of the end of September 2014, only 16.85 per cent of the appropriated capital expenditure for 2014 had been utilised. If the N102bn appropriated for SURE-P in 2015 is added, the figure for capital expenditure will come up N489bn which is still a paltry 11.2 per cent of the overall budget.

With declining oil prices and the collapse of fuel subsidy, no money may likely accrue to SURE-P in 2015. Now is the time to rethink the issue of fuel subsidy and have an honest non-sentimental debate around the issue of the sustainability of the subsidy regime. The time for this debate is ripe considering that the Federal Government is hardly subsidising anything now. Emotions will be attached to the issue if we start the debate at a time of high oil prices.

In the interim, the sum of N91.03bn has been set aside in the MTEF 2015-2017 (being considered with the budget) for kerosene subsidy. It is obvious fact that kerosene is hardly available to Nigerians at the subsidised price. Thus, the target groups do not enjoy the subsidy; the subsidy money goes to the middlemen and their collaborators in the regulatory agency. It is the recommendation of this discourse that kerosene subsidy be removed and the N91.03bn re-programmed to capital expenditure.

The Federal Government therefore needs to adjust its priorities to restore the capital budget to not less than 25 per cent of the budget. A lot of frivolous, wasteful and unclear expenditure proposals suffuse the budget estimates and saving in excess of N304bn has been identified by the Citizens Wealth Platform in its published recommendations to be sent to the National Assembly.

The leadership in the executive and legislature need only the political will to do what is right to restructure the budget. If the budget approval process panders to political considerations, this discourse sees the need for the amendment of the budget or a supplementary budget immediately after the elections whether the incumbent stays or the opposition wins.

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