27th August, 2012
Analysts hail federal government’s early preparation of the 2013 budget framework, which is believed loaded with the imprint of the Federal Minister of Finance, Dr. Ngozi Okonjo-Iweala. They are not extending the same enthusiasm to faithful implementation of the document, though, when it is eventually passed and signed
The controversies over the extent of implementation of the 2012 budget which earned President Goodluck Jonathan impeachment threat from one of the chambers of the National Assembly are yet to abate. But if the federal government keeps to its promise that the 2013 Appropriation Act will be submitted to the National Assembly latest by October and the lawmakers also do their bit of vetting the bill before they proceed on their Christmas holidays, then such controversies may be avoided next year. Labaran Maku, Minister of Information had told journalists that the budget would be submitted early so as to stabilise the budget circle of 1 January to 31 December. It remains to be seen if the country will go back to the practice of the release of the national budget on the first day of the year, a practice which has ceased since the return of civil rule in 1999.
The National Assembly is due to resume from its recess in September. To ensure that the budget is ready for presentation to the lawmakers on resumption, the Federal Executive Council on 8 August 2012 met to consider the 2013-2015 Medium-Term Expenditure Framework, MTEF, and Fiscal Strategy Paper, FSP, which provide the broad fiscal framework and priorities of the 2013 budget. The fiscal framework will be submitted to the National Assembly before the end of September when the 2013 budget will be made available to the lawmakers. As Dr. Ngozi Okonjo-Iweala, Minister of Finance and the coordinating minister for the economy informed journalists after the meeting, under the fiscal framework for the 2013 budget, government is projecting a revenue of N3.891 trillion and expenditure of N4.929 trillion.
The budget has as its objective fiscal consolidation with growth and job creation, as it would enable the Executive arm to deploy resources into sectors that will accelerate economic growth in a transparent manner. “It will be targeted at loading the resources into key sectors like infrastructure, power, roads and rail, that is, physical infrastructure; growth areas like agriculture and water resources, but also into human capital like education and health; and, of course, encouraging other sectors like solid minerals with the potential to create jobs. So that is the basic outline that we will be managing prudently.”
Details in the fiscal framework indicate that the revenue outloook is predicated on crude oil production projection of 2.53mn barrels a day, against 2.48mn barrels a day in 2012 and a benchmark price of $75 a barrel, as against $72 a barrel in 2012. Recurrent expenditure in the proposed budget will also be reduced from 71.47 per cent of the total budget in 2012 to 68.66 per cent in line with the administration’s pledge to continue to reduce recurrent spending and increase capital expenditure. “We are continuing the trend and in the same token we are increasing the capital expenditure from 28.53 per cent in 2012 to 31.34 per cent in 2013,” said the Finance Minister. She added that for the first time in a long while, government is breaking the 30 per cent barrier for capital expenditure. Okonjo-Iweala disclosed that fiscal deficit next year will be reduced to 2.17 per cent (N727.19bn) from 2.85 per cent (N744.44bn) of the gross domestic product, which is below the 3 per cent stipulated under the Fiscal Responsibility Act.
Another significant aspect of the proposed budget is the new approach government said it is introducing for the management of domestic debts. This, according to Okonjo-Iweala, is in line with government’s efforts to bring down annual domestic borrowing from N852bn in 2011 to N744bn in 2012. The federal government is projecting N727bn in domestic borrowing in 2013. The ultimate objective is to bring down domestic borrowing to N500bn by 2015. To achieve this, government intends to establish a Sinking Fund into which it will be devoting about N25bn every year to retire its debts, and another N75bn to help retire a bond that will be due in February 2013. “The proposal for the 2013 budget is based on a rigorous review of the performance of the global economy with regard to negative economic developments around the world which have the potential to negatively impact on the country’s economy. Based on a foundation of prudence, the proposals represent a robust response to these developments anchored on a strong macro-economic framework,” Okonjo-Iweala asserted.
Critics are questioning some of the assumptions in the framework. First, there is the argument that the 2013 budget should be predicated on the 2013 to 2015 Medium Term Expenditure Framework, according to Section 18 (1) of the Fiscal Responsibility Act. The Act states that the MTEF shall be the basis for the preparation of the estimates of the revenue and expenditure required to be prepared and laid before the National Assembly under section 81 (1) of the 1999 Constitution, as amended. The MTEF is expected to be prepared and endorsed by the Federal Executive Council before the end of June every year.
The Citizens Wealth Platform, CWP, a group of non-governmental and faith-based organisations, professional associations and other citizens groups dedicated to ensuring that public resources are made to work for the benefit of all, said it is not aware that government has complied with this aspect of the law. The group, in a press release some weeks ago, said it was not aware “that the MTEF 2013 to 2015 has been prepared, endorsed by the Federal Executive Council and approved by the National Assembly as required by section 14 of the FRA.” Eze Onyekpere, a lawyer and Lead Director, Centre for Social Justice, Abuja also noted that though the Federal Executive Coucil claimed to have approved the MTEF, the document is not available, even on the website of the Budget Office of the Federation for perusal and criticism by Nigerians. “On what basis shall we proceed to accept, reject or critique these parameters when we do not belong to the ‘elect’ who are blessed to have these facts? If it is true, as reported, that the Federal Executive Council has approved the Fiscal Policy Framework for 2013, where is the framework?” he queried.
Beyond this, the proportion of recurrent versus capital budget has been another area of concern for analysts. The contention is that the increase in capital expenditure in relation to the recurrent expenditure in the budget, does not go far enough. “Reducing recurrent expenditure from 71.47 per cent in 2012 to 68.66 per cent in 2013 and increasing capital expenditure from 28.53 per cent to 31.4 per cent is not good enough,” said Onyekpere. “If the authorities do the right things, Nigerians should, as a minimum, get a budget that reflects 60 per cent recurrent and 40 per cent capital.”
There is also concern about the over N1trillion deficit in the budget which many see as a contradiction of promise by government to reduce its debts. However, one issue that analysts seem not to agree on is the assumption of 2.53mn barrels of oil production per day on which the funding of the budget is based. While some commentators believe that the estimate is too conservative, others believe that government is being too optimistic in its projections. Razia Khan, head of Africa Global Research, Standard Chartered Bank, London described the $75 per barrel benchmark oil price and output assumption of 2.5 million bpd as hugely ambitious. “It’s much more the output assumption that may prove unrealistic. Sure, Nigeria can get there when it is producing at an all-time high,” Khan told a Nigerian newspaper.
On the other hand, some other analysts of the draft document believe that the oil production estimation is not only in order, but should have been higher, given a recent assertion by Andrew Yakubu, Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, that Nigeria’s oil production has leapt from 2.4 to 2.7 bpd. “How reasonable is the fixing of daily production of crude oil at 2.53mb pd when we are currently producing 2.7mbpd. If we are to believe that government is taking steps to improve oil and gas production and that it may soon hit 3mbpd, why should we not project a minimum of 2.7mbpd?” Onyekpere wondered. He queried how the $75 per barrel was arrived at.
Generally, many Nigerians who spoke with this magazine last week were not very keen to discuss the framework for the 2013 budget as announced by the Federal Government. To them, the budget is government’s own document “prepared only by top federal government officials for top government officials” as described by Okechukwu Nwosu, a civil servant. He said government has not bothered to show enough sincerity and diligence in the implementation of the budget over the years as to warrant a mass belief in the document. “Now, they are even beginning to fight among themselves over the lies they tell one another on implementation. See how the Executive and the National Assembly have been quarelling over the 2012 budget. Only those people always see themselves as implementing the budget to all practical purposes and intent, to any percentage. To the Nigerian masses, the 2013 budget is simply Okonjo-Iweala’s budget,” Nwosu sneered.
Nwosu tore apart Okonjo-Iweala’s claim before the National Assembly last month that the 2012 national budget has been implemented up to 56 per cent. The devil, he said, is in the details. The minister claimed that while government had released N1.6trn of the recurrent votes, it had so far released N404bn of the N1.3trn capital votes. According to her, out of the N324bn cash-backed, the MDAs have utilised only N184bn, meaning that the actual performance of the capital budget stands at 41.3 per cent. This in itself raises the question of the capability of the government bureaucracy to implement the capital component of the annual budgets.
Okonjo-Iweala will be hard put to prove wrong cynics like Nwosu who are fixated that the budget announcement has become a mere annual ritual to which implementation the federal government is not faithfully committed. As it is, the 2013 budget will be the first which preparation is fully supervised by Okonjo-Iweala in her second advent as Finance Minister. The process for the 2012 budget was on before she assumed office last year. Early presentation to the National Assembly and early approval of the Appropriation Bill, as Okonjo-Iweala herself noted, is critical to the level of the performance of the budget. The promise of early presentation of the budget to the National Assembly, if actualised, will help tackle one of the main problems hindering implementation of the document.
The few Nigerians who still pay attention to the budget, even if for academic purposes, are waiting to see the details of the Appropriation Bill to know if it will not be loaded with wasteful allocations, in accordance with her promise to curb the traditional unnecessary spending by government. More importantly, they are waiting to see if government will have the will and honesty to implement it for the benefit of the people and the growth and development of the country.
—Oluokun Ayorinde/TheNEWS Africa