Reviewing the 2015 federal budget (2)
The demand for budgetary funds to service debts is increasing. It rose from N712bn in 2014, being 14.26 per cent of the budget, to N943bn in 2015, being 21.14 per cent of the budget. The major issue with the increased spending on debt servicing is that the bulk of these debts were not incurred in accordance with the due process of law. With a debt profile of $69.6bn, the Federal Government and the states cannot point to capital projects and activities or human capital developmental projects worth that much. A good part of the debts were incurred to fund recurrent instead of capital expenditure against the clear provisions of the Fiscal Responsibility Act (Sections 41- 44 of the FRA). To imagine that Nigeria is spending more on debt service than capital expenditure is a nightmare. In 2015, we are proposing to spend N310bn more on debt service than capital expenditure. The debt service provision is 148.84 per cent of capital expenditure! At the same time, debt service amounts to 26.17 per cent of our retained revenue.
Service Wide Votes rose from N301.84bn, being 6.05 per cent of the 2014 budget, to N348.69bn, being 7.82 per cent of the 2015 proposal. This increase is unacceptable in a time of lean resources. The Oronsaye committee on reforming the cost of governance stated as follows of service wide votes: The committee noted the widely held view of the abuse of the utilisation 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. It is therefore the considered opinion of this writer that this allocation be restructured and given to the respective MDAs in need of them.
The Federal Government proposes to block leakages and under remittance of internally generated revenue by the MDAs. The proposal is to ramp upon collecting 25 per cent of gross independently generated revenues by the MDAs. This is a welcome development. But the Federal Government should also take cognisance and seek to enforce the express provisions of Sections 22 and 23 of the FRA. Section 22 requires 80 per cent of the operating surplus of scheduled corporations to be paid over to the Consolidated Revenue Fund of the Federal Government. In this direction, the strengthening of the Fiscal Responsibility Commission to perform its assigned statutory role is imperative so that more revenues may be collected and paid over to the treasury. Furthermore, there is the need for collaboration between the Federal Responsibility Commission and the Accountant-General of the Federation to firm up the template for the calculation of operating surplus for the scheduled corporations so as to make the collections easier.
New sources of revenue are proposed: Surcharges on certain luxury items at N23bn; 10 per cent surcharge on new private jets, N3.7bn; 39 per cent surcharge on luxury yatch, N1.6bn; five per cent surcharge on luxury cars, N2.6bn; surcharge on business and first class tickets on airlines which has yet to be fixed; three per cent luxury surcharge on champagnes, wines and spirits, N2.3bn; one per cent FCT Mansion Tax on Residential Properties with value of N300million and above is expected to yield N360m and strengthening tax administration and policy expected to yield N460bn in three years. The budget also proposes reduced spending on overheads. Both the new sources of budget funding and the savings will come up to N243bn. Although these steps are commendable, more still needs to be done to save resources from leakage points and get new sources of funding. The implementation of the Oronsaye committee report with modifications that are reasonably necessary in the circumstances will go a long way in facilitating the adjustments.
In this period of austerity measures, let the Presidency and the National Assembly lead the way in the adjustments. They will soon discover that Nigerians are wonderful followers. Specifically, the two arms of government should slice their votes by a minimum of 50 per cent. The Presidency should empower security agencies to do the simple task of stopping oil theft and thereby increasing our crude oil production volume to not less than 2.5mbpd. It is incredible that we have continued this story of crude theft for over four years. This, obviously, cannot go on indefinitely. Stopping oil theft is not rocket science; it is achievable with the right attitude to official duty. The benchmark price of crude oil should be reduced to a realistic estimate, not more than $55pb so as to avoid generating apologies for budget failure. We should have a moratorium on borrowing unless it is tied to specific capital projects. The President and National Assembly should also endeavour to fix the debt ceilings so as to rein in frivolous borrowing and ensure that new debts build the capacity to grow the economy and our ability to repay. It is also imperative to reallocate service wide votes to the MDAs in need of them.
The 2015 budget provides an opportunity for the presidential candidates to have a debate around the different perspectives of handling fiscal policy at a time of crisis and uncertainty. One expects that the main opposition party should have come out with an alternative fiscal vision of how to get new income, spend and manage the available resources in the coming year. For instance, could the already allocated figures be reallocated for greater efficiency and results? Posers would have been raised and answered around such issues like; can we get more out of our crude oil and gas sales? Can we manage our maritime sector for new revenue? Can we reform the land policy to wake up dead capital? How can housing policy create new jobs and increase access to housing to grow the economy? What happened to the implementation of the National Housing Fund? Why is it not yielding the necessary resources to generate adequate housing? How can we fine-tune the new national auto policy for greater development and to yield more revenue to the treasury within a couple of years? This is about issue-based politics that addresses specific issues and provides alternatives. It is not about trading blames but responding to the challenges and emergency at hand.
Finally, it is a shame that 10 days after laying the budget before the National Assembly, the Ministry of Finance has not deemed it proper to make available to Nigerians the full details of the budget. There is nothing on the website of the Budget Office of the Federation to show that a budget document has been released. It is the same attitude to releasing budget implementation reports. Apparently, the ministry still thinks in the old opaque way and manner believing that Nigerians are not entitled to have access to information to enable them make a detailed intervention to the official position. This is unacceptable; it is against all known canons of fiscal transparency.
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