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Whither the 2017 budget? -By Uche Uwaleke

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Uchenna Uwaleke

Uchenna Uwalek

Judging from the disclosures made by the Minister of Finance, Mrs Kemi Adeosun, when she appeared recently before the Senate Joint Committee on Finance and Appropriations alongside the Minister for Budget and National Planning, Senator Udoma Udo-Udoma, the fate of the 2017 Budget, which has witnessed low implementation, hangs in the balance. Unlike the implementation of the 2016 capital budget which was extended to May 5, 2017 due to late passage, the life of the 2017 budget, which was similarly plagued by avoidable delays, may come to an abrupt end by December 2017 with about 60 per cent of the capital component rolled into the 2018 financial year.

It will be recalled that a total of N7.441tn was budgeted to be spent in 2017 out of which N2.99tn was meant for recurrent (non-debt) expenditure while N2.174tn (or about 29 per cent) was earmarked for capital expenditure. According to the finance minister, while the sum of N1.5tn had been released for recurrent expenditure, only N340bn had been made available for capital expenditure. The disbursement of the N100bn proceeds from the Sukuk bond issuance to the Ministry of Works brings the amount to about N440bn.

This sub-optimal performance of the 2017 budget has been blamed on the shortfall in expected oil and non-oil revenue receipts. As contained in the mid-year 2017 budget implementation report published by the Budget Office, “gross oil revenue of N1,587.70bn was collected in first half of 2017 as against N2,667.22bn prorate budget estimate for the period while the gross non-oil revenue in the first half of the year amounted to N1,244.86bn depicting a shortfall of N1,456.46bn (or 53.92 per cent) below the half year estimate of N2,701.32bn”. The late passage of the 2017 Budget is also to blame. The budget proposal was laid before the National Assembly on December 14, 2016 and was not signed into law till June 2017. As a matter of fact, the budget process in Nigeria has rarely operated as intended since 1999.

A budget is meant to be a financial plan prepared prior to an approved period. By virtue of Section 318(1) of the 1999 Constitution, the financial year in Nigeria runs from January 1 to December 31. Therefore, the budget is expected is to be ready for implementation before the beginning of the fiscal year. But this has not been the case for several years not least because Section 81 of the Constitution allows the President the liberty to lay the Appropriation Bill before the National Assembly at any time before the commencement of the next financial year. This loophole in the constitution in which a timeframe is provided with no timeline is partly responsible for the broken budget process in place today.

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The plan to roll over about 60 per cent of this year’s capital budget to the 2018 budget is geared towards fixing the broken budget process and once more realigning it to the Gregorian calendar adopted by more than 70 per cent of the IMF member countries. Much as fiscal year realignment with the practice in most countries is desirable, an abrupt change will be highly disruptive involving considerable transition costs especially in view of the newly introduced Zero-Based Budgeting approach in the country’s budgeting system. The Senate President, Bukola Saraki, has already warned of the possibility of jerking up the 2018 spending proposals to over N10tn with grave implications for the widening budget deficit.

With less than three months to the end of 2017, it remains to be seen how next year’s budget proposal that has yet to be laid before the National Assembly will be debated, passed and assented to by the President before the end of this year. What is more, the Medium Term Expenditure Framework/Fiscal Strategy Paper has yet to be considered and approved by the National Assembly. As mandated by Section 11 of the FRA 2007, the MTEF/FSP, which provides the basis for annual budget planning, is expected to be submitted to the National Assembly by the President “not later than four months before commencement of the next financial year.” The 2017-2019 MTEF/FSP was presented to the National Assembly on October 4, 2016, relatively earlier, and yet not long after the resulting 2017 Appropriation Bill was signed into law by Prof. Yemi Osinbajo, then Acting President, the Senate President acknowledged receiving a request by the Executive on July 18, for “virement of N135bn from the 2017 budget for the purpose of executing certain priority projects”, a request that has been turned down for being “unconstitutional”. The fact is that a request for virement would not have been made so soon if a thorough work had been done on the budget proposals by the Executive and the Legislature.

These flaws buttress the argument in favour of a biennial budget process that would produce funding legislation for two years at a time rather than one. Under biennial budgeting, currently being practised in some countries including the United States, the Legislature would pass appropriations bills in the first year while the second year would be used to carry out serious oversight of the implementation of the approved budget. This way, lawmakers could have more data and insight to make more judicious decisions on federal spending. That said, to embrace this superior budgeting process in Nigeria will require constitutional backing.

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Perhaps, in recognition of the inherent difficulty in getting out the 2018 budget proposals early enough when the implementation of the 2017 budget had not recorded any appreciable progress, Udo-Udoma was earlier reported to have hinted that the 2018 budget proposal would be sent to the National Assembly in January 2018. This has since been refuted by the minister who has reiterated that the 2018 budget proposals would be laid before theNational Assembly in October this year.

It bears repeating that the idea of readjusting the government’s fiscal year to align with the calendar year is good but should not be undertaken in a hurry. As things stand now, any attempt to get the lawmakers pass the Appropriation Bill before proceeding on Christmas break will certainly not allow for a proper interrogation of the budget proposals. The way forward is to allow the 2017 budget run its full course with greater

attention given to the funding of capital projects and programmes. Efforts should continue to be channelled towards plugging revenue leakages and ensuring that the MDAs remit operating surpluses to the coffers of government. Like the case with the Sukuk bonds, future medium-to-long term borrowings should be project-tied in line with the provisions of the Fiscal Responsibility Act 2007. In the meantime, the Ministry of Budget and National Planning, the Ministry of Finance and the non-partisan National Assembly Budget and Research Office should be tasked to come up with a workable plan (with inputs from the MDAs) on how to ensure a seamless realignment of the broken budget cycle with the calendar year.

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