Part One deals with the preliminary and background issues including the fact that the budget came very late in the year at a time the MTEF was yet to be approved. The budget seems not to be anchored on any high level national development plan. It was not accompanied by an evaluation of the results of programmes financed with budgetary resources in 2014 as demanded by S.19 (d) of the FRA). It did not also contain other development targets as demanded by S.19 (e) of the FRA. The review of capital budget implementation for 2014 showed the implementation of a miserly 33.7% of the overall capital vote.
Part Two starts with the key assumptions in the budget. The benchmark price of crude oil is $65pb at a time crude oil price plummeted below the benchmark. The Review notes that planning with statistics which the planner knows to be wrong is a waste of time. Crude oil production was stated at 2.2782mbpd and the reasons for the relatively low volume include oil theft. Nigeria lacks crude oil metering facilities to determine the actual quantity of crude produced. The budget fixed the exchange rate at N165= 1USD at a time the naira was suffering depreciation and trading above the benchmark. The budget proposes an aggregate expenditure of N4,357.9bn for 2015. This is a decline of 7.2% from the approved 2014 budget of N4,695.19bn. This expenditure figure consists of N412billion for Statutory Transfers (for National Assembly, Judiciary etc.); N943billion for Debt Service; N2,616billion for Recurrent (Non-Debt); and N387.11billion for Capital Expenditure. Compared to the 2014 figures, the recurrent expenditure increased by about 6.56% while capital expenditure decreased by 65.4%.
The recurrent expenditure is gulping as much as 60% of the entire budget, against the 52.29% in the approved 2014 budget. Of the total N2.616trillion budget for recurrent (non-debt) expenditure, personnel is 70.2% of the total recurrent expenditure, and 42.15% of the aggregate 2015 budget expenditure. In 2014, personnel cost was only 36.8% of the overall budget. Overhead expenses cover 7.61% of total recurrent expenditure and 4.57% of the aggregate FGN 2015 proposed budget (this was 5.37% in the approved 2014 budget). In the 2015 Budget, debt service is expected to increase while capital expenditure is projected to decline. The debt service of N943bn is 22% of the overall regular budget. The proposed 2015 debt service expenditure is a 32.4% increase compared to the 2014 figures. Debt service has been on the increase in the past three years. It rose from N559bn in 2012 to N591bn in 2013 and N712bn in 2014. Part Two further reviewed the fiscal deficit and new loans, statutory transfers, service wide votes, SURE-P and the kerosene subsidy. It noted the need for NASS to cut down its vote by not less than 50% and the need for the removal of subsidy on kerosene.
Part Three deals with the allocations and priorities. Ranking the first ten MDAs with the highest allocation, it can be seen that the Ministry of Finance got the highest allocation and stands tall with 39.64% (including service wide votes and debt service); Education (including UBEC) got 11.29%; Defence 8.23%; Police Formation and Command got 7.56%; Health 5.91%; Interior 3.59%; National Assembly 3.44%; Office of the National Security Adviser 1.93%; National Judicial Council 1.68%; and Youth development 1.65%. On the average, the MDAs have 87% recurrent expenses and only 13% capital expenses. The Part noted the adoption of frivolities as priorities.
Part Three also reviewed human capital development in education and health and returned a verdict of the need for increased funding. Education and health got paltry votes of 11.29% and 5.91% of the budget respectively. It further reviewed agriculture, which got 0.90% of the overall budget and called for increased funding. The proposed increases should come from savings from frivolous, wasteful and unclear expenditure already document and published by the Citizens Wealth Platform. Labour and productivity and housing were reviewed and strategies for improvement were recommended.
Part Four is about revenue projections and its management. The 2015 Budget of N4.46 trillion (inclusive of SURE-P) is to be funded from a retained revenue of N3.602 trillion made up of oil revenue of N1.918 trillion and non-oil revenue of N1.684 trillion (implying a ratio of 53% oil revenue to 47% non-oil revenue). The retained revenue of N3.6 trillion represents about 3.4% drop from N3.7 trillion for 2014 Budget. For Nigeria to proceed on the path of sustainable development, non oil revenue should exceed oil revenue. It reviewed FGN’s projection for IGR and called for the implementation of the FRA on operating surplus. Tax revenues, tax waivers and exemptions were reviewed; luxury surcharges, the proposal for a Treasury Single Account and disclosure requirements were also reviewed.
The Review ends in Part Five with recommendations. It is imperative to point out that the recommendations go beyond issues involved in the 2015 budget approval process and includes steps that should be taken to improve the entire budgeting system.
- MTEF, Budget Preparation and Approval
1.1 The MTEF should precede the budget. It should be ready and sent to NASS in late June before the mid-year legislative break. The MTEF should be approved before the presentation of the budget which should be based on it.
1.2 The budget should be sent to NASS in early September and should be approved by NASS before the end of the fiscal year in December.
1.3 The budget should be anchored on long term and high level policy documents such as Vision 20:2020. Continued variation between policy, planning and budgeting will ensure Nigeria’s underdevelopment.
1.4 The National Planning Commission should take urgent steps to prepare the Second National Implementation Plan of Vision 20:2020. The President needs to support this initiative; the Transformation Agenda cannot take the place of the long term plan in Vision 20:2020.
1.5 The template for budget preparation sent to MDAs should be reviewed. It should recognise differentiation between MDAs in terms of mandate, roles and duties. It should not be an omnibus template applicable to all MDAs. The template should cut down on frivolous line items.
1.6 The Ministry of Finance and the Budget Office of the Federation should ensure that the budget estimates are placed in the public domain through their respective websites. Denying the public of budgetary information is not only absurd but a violation of the rights of Nigerians to be governed in a democratic manner.
1.7 The 2015 budget estimates should be accompanied by the evaluation of the results of programmes financed with budgetary resources in 2014.
1.8 Future budgets should be prepared with milestones and indicators of success in terms of number of new jobs; targets for the rights to adequate housing, health, access to water, education, etc.
- Key Assumptions
2.1 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.
2.2 FGN should mobilise the security forces to police oil production and transportation. As such, crude oil production benchmark should be increased to not less than 2.5mpd. Oil theft should be reduced to the minimum.
2.3 Nigeria needs to procure crude oil metering facilities at all stages of production and transportation to be able to provide reliable information and data for economic planning.
2.4 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 money 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. Thus, the exchange rate used in the budget proposal is not realistic and should be adjusted using the above recommended methodology.
2.5 The passage of the PIB is imperative to reduce the demand from the Treasury for Joint Venture Cash Calls.
- The Fiscal Items: Expenditure
3.1 FGN should adjust its priorities and restore the capital budget to not less than 25% of overall expenditure. The accompanying compilation of frivolities in the 2015 budget shows areas where the adjustments can come from.
3.2 All borrowing for capital expenditure should be captured in the budget estimates and form part of the funding and revenue of the budget. They should not be treated as extra budgetary funds.
3.3 To cut down recurrent expenditure, FGN needs to implement the recommendations of the Oronsaye Committee with necessary modifications as demanded by economic realities of Nigeria.
3.4 FGN should take steps to recover the N160bn stolen by ghost workers and prosecute those who were responsible for the loss.
3.5 The full implementation of the IPPIS and rolling it out across all MDAs has become imperative. The IPPIS should not be a project in perpetuity that takes forever to extend to all MDAs.
3.6 The Presidency should seriously consider cutting down its expenditure. The austerity measures provide an opportunity for the President to lead by example.
- Debts and Borrowing
4.1 Debts and new loans should only be incurred in accordance with sections 41-44 of the FRA. On no account should debts be incurred for recurrent expenditure.
4.2 The President with advice from the Minister of Finance should set the debt limits for the three tiers of government and submit same to NASS for approval in accordance with section 42 of the FRA.
4.3 For improved transparency in debt management, the Fiscal Responsibility Commission and the Debt Management Office should consider a collaboration to publish the details of Nigeria’s debts and the projects for which the loans were incurred.
- Statutory Transfers
5.1 The Minister of Finance in the spirit of freedom of information and fiscal transparency should publish the detailed breakdown of all monies treated as statutory transfers. This is one of the minimum demands of section 48 of the FRA.
5.2 NASS should seriously consider cutting down their allocation by a minimum of 50%. This will reduce the vote to N75bn. The austerity measures provide an opportunity for NASS to lead by example by reducing its expenditure.
- Service Wide Votes
We adopt the recommendations of the Oronsaye Committee on restructuring of federal MDAs as follows: “The committee noted the widely held view of the abuse of the utilization of the service wide vote. It was the view of the committee that budget heads currently captured under that vote could actually be captured either under specific MDAs or the contingency vote. Considering the constitutional provision for the contingency vote, it is believed that the service wide vote is not only an aberration, but also an avoidable duplication. The committee therefore recommended that the service wide vote should be abolished and items currently captured under it transferred to the contingency vote or the appropriate MDAs
- Kerosene Subsidy
This should be scrapped because the subsidy does not benefit the target beneficiaries. It is now a subsidy for corruption.
8.1 FGN should increase the education budget to the UNESCO recommended 26% of the overall budget.
8.2 There should be a specific increase in the capital vote of the sector to a minimum of N150bn.
8.3 FGN should consider a moratorium on the establishment and licensing of new public federal tertiary institutions.
8.4 To meet demands the increasing demand for tertiary education, the carrying capacity of existing tertiary institutions should be increased.
8.5 A full personnel audit to determine the staffing needs of universities and other tertiary institutions is overdue.
8.6 Tertiary institutions should also be fully enrolled in the IPPIS.
8.7 With so many states of the Federation unable to access their funds in UBEC; UBEC management and states should dialogue to find ways of energising the fund so that it can be accessed by all.
9.1 Increased funding for health to meet the 15% of overall budget benchmark. Increases should target more of capital expenditure.
9.2 NASS should consider a universal health insurance law that makes it mandatory and compulsory for all to contribute to a pool of funds that can be used to take care of the basic health needs of majority of the population.
10.1 NASS should consider increasing the agriculture vote to 10% of the overall budget to meet the Maputo Declaration target.
10.2 The idea of having a Federal Ministry of Agriculture with about 40 parastatals, agencies, colleges, research institutions etc, under the Ministry is incredible. The restructuring and rationalisation of agencies under this Ministry is long overdue and should be a priority for the executive and legislature going forward.
- Labour and Productivity
Job creation should be mainstreamed in all plans and policies of government from agriculture, education housing, transport, procurement, local content, electricity reforms, trade, tariff and non tariff measures.
The restructuring of the National Housing Fund including a review of the enabling law and the deployment of a more effective management is long overdue.
- Revenue Projections and Management
13.1 FGN should take cognisance and seek to enforce (through the Fiscal Responsibility Commission) the express provisions of sections 22 and 23 of the FRA on the payment of 80% of the operating surplus of scheduled corporations to the Consolidated Revenue Fund of FGN.
13.2 The proposal to scrap the FRC should be dropped. Rather, the FRC should be strengthened to perform its statutory duties so that more revenues may be collected and paid over to the Treasury.
13.3 Criminal sanctions should be imposed against banks, companies and their top management and government officials who collaborate with them to short-change or withhold funds due to the Treasury. Heavy penalties including large fines doubling the sums withheld; prison sentences, disqualification from professional practice etc, should be considered against the corporate organisations and individuals. If there are no laws currently stipulating these penalties, then new laws should be enacted.
13.4 The Accountant-General of the Federation is enjoined to harmonise, streamline and enforce the stipulated accounting system that should apply across all MDAs and corporations for effective calculation and retrieval of operating surpluses and other IGR.
13.5 FGN should consult widely before increasing the VAT rate to avoid labour and social unrest.
13.6 FGN should ensure the full implementation of the Treasury Single Account and the Government Integrated Financial Management Information System (GIMFIS).
13.7 NASS should insist on the full disclosure of all IGR generated by MDAs and details of their receipt of grants, local and foreign and assistance.
 The figures do not include SURE-P; with the inclusion of SURE-P funds, the decline between 2014 and 2015 is 10.1%.
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Review of 2015 Federal Budget Proposals