GOVERNANCE - 14 NOV 2017

Another Record Nigerian Budget

Another Record Nigerian Budget
President Buhari's economic team has consistently enlarged Nigeria's budget to invest in key infrastructure.

On November 6th, President Buhari presented the 2018 Budget to the National Assembly. Dubbed the 'Budget of Consolidation', the President made some bold statements, assuring Nigerians of his intention to finish capital projects. But beyond the numbers, the issues that most concern Nigerians pertain to how the budget process works, why it is often delayed and any material impact we can expect from government spending in 2018. 

 

The Budget Process

Procedures for presenting a budget vary across countries. In the United Kingdom, the Chancellor of the Exchequer submits the Budget to Parliament. In the United States, the President has to send the budget to Congress at least 8 months before the fiscal year begins.

In Nigeria, Section 81 of the constitution requires the President to lay out estimates of revenue and expenditure for the coming financial year, at any point in the preceding year. And addressing the situation when a budget has not been passed, Section 82 authorises the President to withdraw money for purposes necessary to carry on the services of the Government for a period not exceeding six months. 

Together, these laws have proven insufficient in ensuring that the Government prioritises speedy budget passage, an issue that may be addressed by an Organic Budget Law.  

After going "missing" and amidst allegations of budget "padding", the 2016 Budget was finally passed in May 2016, five months after President Buhari's initial submission to the National Assembly. This year, the 2017 budget was assented in June, but not before going missing again

Would President Buhari's relatively early submission ensure that we buck this trend? Possibly not: though President Goodluck Jonathan presented the 2013 budget on October 10th 2012, the budget was not signed until February 2013

 

The Budget's History

Buhari's proposed 2018 Budget pegs Federal Government (FG) expenditure at ₦8.6 trillion ($28 billion) and is the third straight record budget. 

Beyond its growing size, the major issue with Buhari's budgets has been implementation. This is best highlighted by looking at capital expenditure which was projected at ₦2.2 trillion for 2017 and yet less than ₦500 billion has been disbursed as we approach the end of the year. Meanwhile, the most recent annual budget implementation report shows that while the 2015 Budget had an implementation rate of 94%, the 2016 Budget barely achieved 75% of stipulated spending. 

Such a significant gap between projections and reality inevitably limits the impact of government spending on the Nigerian economy, and standard economic theory would suggest that a better 2017 budget performance would likely have accelerated Nigeria's economic recovery. 

However you may feel about the Finance Minister's strategy to spend our way out of the recession, this cannot be done on paper. Actual spending, the sort that touches the man on the street – through social welfare schemes, job creation policies, and industrial parks – is needed to realise the gains of our chosen strategy. 

Meanwhile, implementation of the 2018 Budget is particularly relevant on the political front as failure to deliver on constituency projects may affect the re-election campaigns of many lawmakers. 

Recognising all this, the president tried to assuage concerns over prominent projects. In his 2018 Budget speech, he stressed that the FG would carry over strategic projects from 2017, including funding for the Mambilla Power Project and 2nd Niger Bridge.

 

Walking the Talk

For all the hype that usually accompanies budget presentations, questions linger. 

Power, Transportation, Special Intervention and Defence received billions of naira in the 2017 budget, and it is important to reflect on the returns expected from such investments. This is especially telling since the same ministries received the top allocations in the proposed 2018 budget.

Others have claimed that the budget is not ambitious enough. Prominent economist Bismark Rewane argued that once we factor in the rate of inflation, the budget has mostly remained the same and isn't bold enough to carry out 'impactful spending'.

There is some truth to this statement. Nigeria's budget is about 8% of GDP, compared to roughly 27% and 36% in Ghana and South Africa respectively. Unfortunately, the FG's capacity to spend is constrained by its low revenue base, which in turn stems from its over-dependence on oil revenues and its inability to generate taxes from the population. Until those are addressed, Nigeria's budget will always look too little compared to the size of its economy and population.

History will be the fairest judge of the 2018 Budget. For now, the National Assembly, along with civil society and other interest groups, must hold the government to account. The year before presidential elections, government spending should be put under even greater scrutiny, lest recent missteps become the norm. Let's hope that there is action, and if there isn't, well 2019 won't be too from for the next budget presentation. 

 

Follow this Editor on Twitter @aadekaiyaoja. Subscribe to read more articles here.

Afolabi Adekaiyaoja

Afolabi Adekaiyaoja

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