ECONOMY - 06 MAR 2019

In Nigeria, corruption starts with the budget

In Nigeria, corruption starts with the budget
The Nigerian budget appears to be a source of national corruption

Rife with enormous misconduct, Nigeria’s public procurement sector is considered the grand source of political corruption in the country. But a new narrative is gradually gaining momentum: corruption starts with the budget.

The public procurement sector, virtually everyone believes, breeds financial leakages, funds misappropriation and all other sorts of corruption in the public system. In fact, some authorities conclude that 60% of corruption cases are procurement-related, while over 70% of government’s total budgets is consumed by the same sector.

Against this popular notion, BudgIT, one of Nigeria’s transparency watchdogs, argues that the root of corruption lies in the budget process. According to the group, “There is a school of thought that grand corruption starts from procurement but we believe it starts with the budget. The opacity in the budgetary line items raises suspicion on corruption. This gives room for vague procurement which leads to embezzlement.” 

 

How valid is this argument?

In 2016, damning reports of “budget padding” dealt the Nigerian public a terrible blow. That was when Abdulmumin Jibrin, former Chairman of House Committee on Appropriations, revealed that his colleagues - principal officers - had added false items to the year’s budget, figures amounting to N481 billion. But to the surprise of keen observers, the whistleblower himself was counter-accused of padding the budget with N250 billion worth of fake projects.

The complicity is jaw-dropping, especially when one discovers that the executive is also part of the annual mangling of the budget. During the 2017 budget defense at the Senate, N2 billion was discovered to have sneaked into the budget proposal of the Ministry of Power, Works and Housing. Confronted, this is how the minister, Babatunde Fashola, reacted: “It is not our project… It is a Ministry of Finance initiative… That is not what we submitted. We did not submit that proposal.”

Today, the expected result from the public outrage and judicial actions over the 2016 padding is far from happening even after President Buhari dismissed the Director General of the Budget Office as he purged other 22 top officials.

 

The Okonjo testament

The foregoing instances are nothing new. Perhaps the most relevant writing that illuminates the budget phenomenon in detail is Okonjo Iweala’s book “Fighting Corruption is Dangerous: The Story Behind The Headlines.” While the book offers first-hand insights into Nigeria’s repulsive corruption - particularly during the Jonathan regime - its fourth chapter “A Twisted Budget Process” lays bear everything about the notorious position of budgetary fraud in Nigeria.

In summary of Iweala’s narration, the budget is more of a cash conduit to the political elite. During Jonathan’s era in which the author served as finance minister, every increase in crude oil price, which also means an increase in budget’s benchmark rate, was simply converted to extra billions in individual pockets, thanks largely to the shrouded budget process.

“If governors were a tough political group to deal with, federal legislators were hardly easy. They are indispensable in the budget process and it was in that context that difficult battles took place on budget process and content,” Iweala writes.

Talking about the differing views on whether lawmakers can tamper with budget details “particularly the introduction into the budget of properly costed and scoped out investment projects” or not, she adds:

“These differing views on budget roles led to a great deal of tension. Under the Obasanjo administration, interactions with most legislators were often tense and unpleasant, but in the uneasy balance of power that emerged, the Finance Ministry managed to operate. The legislature demanded a generous budget to cover National Assembly salaries and other expenses, and in 2004-2005, negotiations led to a National Assembly budget of about N44 billion. But this did not deal with the issue of interference by legislators to add or eliminate some projects and increase or decrease the size of others, thereby introducing distortions in the budget.”

 

Budget and procurement: the fraud nexus

With such massive scale of budget fraud - fictitious projects, inflated contract prices, frivolous line items, wasteful expenditure and illegal virements - it would be naive to only focus on the procurement sector especially when that narrative is championed by the government.

Now, there is the need to dissect the reality: vague procurements are empowered and even made a norm by non-transparent budget processes. With Nigeria’s annual budgets laced with fake items running into billions, budget fraud would be nothing but the real foundation upon which procurement corruption is sustained. In other words, the procurement is just a conduit of transferring the proceeds (of budget fraud) into pockets of the political elite and cronies.

And even regardless of the dominant rhetoric, this reality is reiterated by a silent few. “We believe that more than 60% of corruption issues in Nigeria are built and legalized in the budget,’’ says Prof. Suleiman Aruwa, president of Nigerian Accounting Association (NAA). It’s impossible to strip these arguments of veracity when, out of 115 countries globally, Nigeria is ranked 90th on budget transparency, according to the 2017 Open Budget Index (OBI).

With its expenditure suffering the most, the government is the first victim of budget corruption. Then failing economic variables. Ultimately, corruption on the part of those who make budgetary decisions hijacks resources meant for social programmes from benefitting the people to serving the interest of a few thereby engendering economic inequality whereby the poor only get poorer.

Nigeria must tackle budget corruption just as it must see to the true reform of the procurement sector.

 

Follow this writer on Twitter @akorive001.

Shakir Akorede

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