Instead of compiling a list of fresh projects in 2018, all the projects that were not implemented in 2017 should be in the 2018 budget as the first set and the second set will be the 40 percent which will be new projects. Whether the projects are called the 2017 extension or the 2018 budget, the important thing is that they are implemented.
Fellow Nigerians, while we are engaged in debates about restructuring, terrorism and insurgency, herdsmen/farmers clash, etc., we seem to have taken our eyes off the ball on how the economy and the budget have been managed and how this affects our daily lives and livelihoods. In federal and state budgets, the expectation is to find structured, rational and evidence-led processes and plans for raising and spending public funds in a way that is aligned to national policies, plans and priorities. This process is governed by law, common sense and good reasoning. If the process has delivered according to the above expectations, we may not have entered recession and, as such, the struggle to get out of it would not have arisen.
The Nigerian Financial Year Act defines the financial year as the period from January 1st to December 31st every year. The expectation is that the budget, being the financial plan for the year, should be ready not later than December 31 of the previous year, so as to enable the implementation of the revenue and spending plan to start on January 1 of the new year. But we have very important and intelligent men and women in the executive and the legislature who, for years, think that they are not bound by the provisions of this law. The 2016 federal budget was rolled over to May 2017, whilst the 2017 budget was not ready until June. The N1.2 trillion which the federal government claimed to have spent in capital expenditure for 2016 was inclusive of expenditure up to May 2017. The expenditure as at December 2016, which ideally was the end of the 2016 financial year, was about 50 percent of the N1.2 trillion. Thus, the first and second quarter 2017 budget implementation reports (BIR) could not, in good conscience, be reporting about the 2017 federal budget. Definitely, no one can be a magician to render reports on a budget that had not been approved, and for which implementation is yet to start. So, in essence, those reports claiming to be the first and second quarter 2017 BIRs issued by the Budget Office of the Federation were not properly named and labeled. The actual first and second quarter BIRs will start running from the date of the assent to the Appropriation Act, 2017.
Enter the 2017 federal budget which seems to be ambitious in terms of the programmed naira expenditure. The high ambition comes from the fact that the revenue profile is overly unrealistic and the crafters were not very sure of its deficit funding sources. The 2017 second quarter BIR puts it in proper perspective: “Revenue shortages therefore persisted with Gross Oil Revenue of ₦789.21 billion in the second quarter of 2017. This translates to a ₦544.40 billion or 40.82 percent shortfall in the prorate budget for the period but was above the ₦518.2 billion generated in the corresponding period in 2016. Gross non-oil revenue of ₦697.84 billion received in the second quarter of 2017 also signifies a shortfall of ₦654.82 billion (or 48.33 percent) below the quarterly estimate of ₦1,350.66 billion. A breakdown of the non-oil revenue items showed that all the non-oil revenue items fell below their quarterly expected projections. The net distributable revenue to the three tiers of government after cost deductions stood at ₦1,009.26 billion in the second quarter of 2017, representing a shortfall of ₦1,119.01 billion (or 52.58 percent)”. Thus, both oil and non-oil revenue sources underperformed.
Returns from oil and non-oil revenue sources for the period were not quarantined, while awaiting for the passage of the 2017 budget. Even the Eurobond used in funding part of the 2016 capital budget was not raised until February 2017! So, the 2016 capital budget performance was based on tweaking the facts.
Evidently, the 2016 federal budget revenue estimates were also built on quicksand. If you recall that the capital expenditure was over N1.6 trillion, whilst reported implementation was N1.2 trillion. As at September 30, 2016, the Third Quarter BIR states that only N396.29 billion out of the N1,190.55 billion projected for capital budget implementation for the three quarter part of the year was released to MDAs for major capital and social programmes. Part of the revenue used for the implementation of the 2016 budget, especially from January to May 2017, was the revenue that should have accrued to the revenue profile of the 2017 federal budget. Returns from oil and non-oil revenue sources for the period were not quarantined, while awaiting for the passage of the 2017 budget. Even the Eurobond used in funding part of the 2016 capital budget was not raised until February 2017! So, the 2016 capital budget performance was based on tweaking the facts.
Any argument or justification of this tweaking exercise based on the power of the legislature to roll over capital projects or extend the life of the Appropriation Act over and above December 31 in any particular year is like an attempt to stop the rising of the sun. If the power to extend expenditure from the old to the new year is to make sense, it must also be supplemented and accompanied by the exercise of the power to create a new supporting revenue profile and framework outside of the revenue framework of the new year. Otherwise, the futility of legislating two overreaching expenditure frameworks (e.g. N1 trillion and N500 billion) to be funded by a single revenue framework (e.g. N800 billion) is nothing but an exercise in futility.
For a budget with a capital expenditure estimate of over N2.1 trillion and with less than three months to the end of the 2017 financial year, only N340 billion had been released and when the recently raised Sukuk Bond is added, the release comes up to N440 billion, which is less than 20 percent of the appropriated sum. Of course, no one is sure that all releases have been cash backed as there is a world of difference between released and cash backed sums. Further, the cash backed sums do not necessarily translate to utilised sums, considering the bureaucratisation of the procurement process.
Fellow Nigerians, I implore the executive and the legislature that, for the 2018 budgeting cycle, let the law, common sense and good reasoning prevail.
The Ministry of Budget and National Planning, in accordance with the Presidential Executive Orders, states that the 2018 federal budget estimates will be submitted to the National Assembly in October 2017 and if approved on time, the 2017 federal budget will wind down on December 31, 2017. Close to 60 percent of the capital projects in the budget is to be rolled over to the year 2018. Indeed, the minister of Finance accused the legislature of delaying the approval of the executive request for external borrowing to fund the budget; an accusation which the Senate denies and puts the minister to the strictest proof thereof. From the televised briefing of the Senate Committees on Appropriation and Finance by the ministers of Budget and National Planning and Finance, it seems the executive proposals are not acceptable to the Senate. The Senate insists on the full implementation of the 2017 budget as they are against its selective implementation. Indeed, Senator Goje questioned the wisdom on sticking to the Financial Year Act when the capital budget had not been reasonably implemented.
The media reports the Senate president as suggesting that in the light of these circumstances, the 2018 federal budget may involve expenditure up to the tune of N10 trillion. This need not be so because the federal government has no reasonable source of funding a yearly budget up to N10 trillion. Instead of compiling a list of fresh projects in 2018, all the projects that were not implemented in 2017 should be in the 2018 budget as the first set and the second set will be the 40 percent which will be new projects. Whether the projects are called the 2017 extension or the 2018 budget, the important thing is that they are implemented. The revenue projections should be realistic and based on a little mark up on the 2017 actuals.
Fellow Nigerians, I implore the executive and the legislature that, for the 2018 budgeting cycle, let the law, common sense and good reasoning prevail.
Eze Onyekpere is lead director at Centre for Social Justice. Twitter: @censoj
