2017 Appropriation Bill: Another budget, another ritual?

President Muhammadu Buhari, on Wednesday, submitted the 2017 budget estimates to a joint session of the National Assembly. As it was last year, the session was dotted with back slapping and loud ovations from the president’s men and lawmakers alike. But this year’s appropriation bill be different from last year’s, which was mired in controversy and how will the budget guarantee better life for the citizens? Group Politics Editor, TAIWO ADISA, who has covered budget sessions for more than a decade, attempts some answers.

 

Background to budget drama

When President Muhammadu Buhari entered the precincts of the National Assembly to present the 2017 budget estimates, on Wednesday, December 14, he was presenting his second budget a week earlier than he did last year, but with similar mindset and related statistics. The president had dubbed the previous budget, ‘Budget of Change’ and this year, he christened it ‘Budget of Recovery and Growth’ whose foundations are rooted in the 2016 Appropriation law.

While the country had started seeing traces of economic meltdown as of the end of 2015, when the 2016 budget estimates were laid, the signals right at the end of the year, in spite of assurances, appears gloomier. The country had slipped into recession and there were fears depression might creep in if steps were not taken to drag the country out of the precipice.

In anticipation of quick steps from the executive arm of government, the National Assembly resumed from its long recess in September with an eye on the economy. The House of Representatives, on September 22, passed an extraordinary resolution inviting President Buhari to address a joint session of the National Assembly on his economic agenda. The Senate, which devoted three days to the debate on the economy eventually, set up a harmonisation committee which submitted its resolutions on October 6.

The lawmakers, thereafter, approved the resolutions and concurred with their colleagues in the lower chamber on the need for Buhari to address a joint sitting of the National Assembly. At the end of the deliberations, the Senate adopted a 22-point resolution, chief of which was that the president brief the lawmakers on the ways his government intends to pull the country out of recession.

Senate President Bukola Saraki, thereafter, wrote the president to communicate details of the resolutions and asked him to pick a date he feels comfortable with to brief the legislators.

Some of the resolutions passed by the lawmakers included the rejection of the planned sale of national assets to shore up revenue and the need to ensure meaningful dialogue between Niger Delta militants and the government.

The resolution read in part: “Government must engage in meaningful and inclusive dialogue with the aggrieved Niger Delta militants to avoid escalation of the unrest in the region and ensure protection of Nigeria’s oil and gas assets to facilitate increase in oil production and boost revenue there from.

“That the president should as a matter of urgency, appoint a Senior Special Assistant who should lead a team that coordinates thegovernment’s engagement with all stakeholders in the region,specifying that the team should include Senators from the zone.

“The president to reconstitute the Board of Central Bank of Nigeria (CBN) and all other critical agencies in order for them to operate in accordance with the enabling laws.”

The lawmakers also identified the Treasury Single Account (TSA) Policy and the Foreign Exchange Policy as some of the issues that needed to be tinkered with ahead of the 2017 budget.

As that was going on, the executive responded by submitting the Medium Term Expenditure Framework (MTEF) and the Fiscal Strategy Paper (FSP), for 2017 to 2019 on October 4. The MTEF is the prerequisite for the passage of annual budgets since the coming into effect of the Fiscal Responsibility Act, 2007.

The October 4 MTEF/FSP document pegged oil benchmark at $42.5 per barrel and proposed a production quota of 2.2 million barrels per day.The Federal Government also estimates that it will earn N7.775 trillion as revenue from oil sales in the New Year.

In the document, the president had proposed a budget of 6.866 trillion for the 2017 fiscal year, pegging the Exchange Rate at 290 to $1, and a 13.3 per cent increase on the 2016 spending plan. The government also announced plans to set up a $25 billion Infrastructural Development Fund as a means of attracting non-budgetary resources hinting that the country’s debt stock stood at 16.3 trillion ($61.45 billion) as of June 30.

It stated that in adherence to the three per cent threshold set out in the Fiscal Responsibility Act 2007, the 2017 budget deficit is projected at 2.7 trillion in nominal terms. The government equally projected oil prices at $45 barrels per day (bpd) and $50 bpd for 2018 and 2019 respectively, while it projects oil production figures of 2.3 million and 2.4 million barrels per day for the same period.

But the release of the document triggered a round of controversy which placed its passage in jeopardy.  The Senate, which raised the alarm, said that the document was empty and not practicable, asking the executive to rework appropriately. There was dead silence from the executive for more than four weeks.

The Senate in a letter signed by its Majority Leader, Senator Ali Ndume and dated October 19, 2016 said that MTEF/FSP was “empty and unrealistic.”

The lawmakers, in summoning the Minister of Budget and National Planning, Udoma Udo Udoma, for a meeting on November 1, said that the document submitted by the executive failed to provide holistic fiscal perspectives on the ways and manner in which the government wants to ease the dislocation caused by recession.

The letter indicated that after a preliminary review of the MTEF/FSP by the Senate it came to a conclusion that the main thrust of the 2017 to 2019 MTEF was to reflate the economy out of recession but added that the document failed to provide holistic data on how to achieve that.

The letter asked the minister to provide a Medium Term Development plan to show the funding pattern of the 2017-2019 MTEF; a comprehensive report of the implementation of the 2016 budget; a detailed account of fiscal rates, including taxes and charges upon which the 2017-2019 budget is based and a report on the structural composition of the nation’s debts and funding sources, as well as account of funds borrowed and the spending pattern.

Ndume’s letter reads: “Following the letter from his Excellency, President Muhammadu Buhari, dated 30th September, 2016, forwarding the 2017-2019 MTEF and FSP, the Senate has begun work on the consideration of the document.

“Preliminary review suggests that the thrust of 2017-2019 MTEF and FSP, which is to reflate the economy out of recession to a sustainable and inclusive growth path, is based on the aspirations of this present administration as being articulated in the 2016-2019 Medium Term Development Plan.

“In addition, it is envisaged that the reflation of the economy will be achieved through increased capital spending in target sectors which will be financed through a stronger non-oil revenue drive, as well as increased borrowings.

“To enable the Senate objectively review the MTEF from a holistic fiscal perspective, we deem it necessary to invite you to a meeting to brief the leadership of the Senate on Tuesday, IST November, 2016 at the National Assembly by 2pm. You are requested to please, send the following documents ahead of the meeting: (a) The Medium-Term Development Plan (even a draft copy) upon which the 2017-2019 MTEF is founded, (b) A comprehensive report on the implementation of the 2016 Budget (as at third quarter, September 30), (c)  All fiscal rates, charges, etc., used to derive the projected revenue in the 2017-2019 MTEF, (d) A report on the structure/composition of the debt, funding sources, how the borrowed funds are to be spent as well as repayment plan and schedule.”

The executive, which spoke through the Federal Executive Council (FEC), however, replied the Senate weeks after the letter and insisted that the MTEF/FSP was not empty and that it was workable. Since then, there was a cat and mouse relationship had developed between the two arms of government until two weeks ago when the National Assembly resolved to consider the document. The drama was further spiced with the confusion that greeted the date for budget presentation.

Senate Minority Leader, Senator Godswill Akpabio, initially announced December 1, 2016 as the date the president would present the budget. It was from an unlikely source, especially as the information did not emanate from the Senate President, but the media lashed on to it because the Senator made the revelation on the floor of the chamber. The grapevine again announced December 7 before the President eventually wrote the National Assembly confirming December 14 as the date for the joint session and budget presentation.

 

NASS vindicated?

Twenty-four hours to the December 14 fixed for the presentation of the 2017 budget by President Buhari, through the Minister of Budget and National Planning, Senator Udoma Udo Udoma appeared to answer the concerned earlier raised in the October 19 letter by the Senate when he presented a revised MTEF/FSP to the JointCommittee of the Assembly on Budget and Finance.

The new document jacked up the budget figure to N7.2 trillion and projected a 70/30 per cent recurrent/capital expenditure in the 2017 budget.

In the new MTEF, the Federal Government not only raised the budget figure from N6.866 trillion to N7.298 trillion, it also raised the exchange rate from initial N290.00 to N305.00 to the US Dollar.  It, however, retained the oil production projection at 2.2 million barrels per day and $42.50 per barrel as oil benchmark.

The new document reduced the earlier projected foreign borrowing from N1.336 trillion to N1.067 trillion, while raising the projected aggregate capital expenditure from N1.939 trillion to N2.243 trillion. Recurrent non-capital expenditure was also raised from N2.5trillion to N2.629 trillion, just as the government projected that its revenue target stands at over N10 trillion in the fiscal year. Budget deficit in the new document is put at N2.3 trillion as against N2.4 trillion in the 2016 budget.

Udoma told the Joint Senate Committee on Finance and Appropriation that the government had opted to increase the budget projection from N6.8 trillion to N7.2 trillion because more money needed to be pumped into the economy to pull Nigeria out of recession. According to him, the 2017 budget would be financed through oil licences renewal, royalties, promissory notes in the oil sector as well as recoveries of loot locally and from the Swiss government.

He stated that the Federal Government would early in the year issue new oil licences, review the current joint venture arrangements with oil companies, marginal oil fields and mount pressure on revenue generating agencies to exceed expected targets.

The government expects to raise N10.6 trillion revenue during the year out of which N5 trillion will be generated from the sale of crude oil and the balance of N5.06 trillion generated from non-oil revenues, including corporate and company taxes, Nigeria Liquefied Natural Gas (NLNG), stamp duties, capital gains tax, Value Added Tax (VAT), customs, excise, fees, surcharges on luxury items, special levies and Federal Government independent revenue.

Udoma said: “I know N7 trillion seems larger than N6 trillion. In actual dollar term, the 2017 budget is smaller. We have had challenges in revenue generation in funding the 2016 budget. We are trying to get to the bottom of revenue generating agencies in order to raise more money.”

He highlighted some of the measures to be taken to tighten the belt around revenue generating agencies as follows: “We want to issue a presidential order to ensure that revenue generating agencies are unable to spend money unless payment of salaries until their budgets are passed.

“We want to be more engaging in the Niger Delta to ensure that there is peace in order for us to produce. We will be increasing the amount for the Amnesty Programme to the old figure. It is important to engage he people in the Niger Delta region,” he said.

 

 

The 2017 budget projections

While presenting the 2017 budget on Wednesday, President Buhari gave the fundamentals as of the N7.2 trillion aggregate expenditure to comprise the following: i. Statutory transfers of N419.02 billion; ii. Debt service of N1.66 trillion;iii.Sinking fund of N177.46 billion to retire certain maturing bonds;iiii. Non-debt recurrent expenditure of N2.98 trillion; and v. Capital expenditure of N2.24 trillion (including capital in Statutory Transfers).

He said that the based on the assumptions, the aggregate revenue available to fund the federal budget is N4.94 trillion, an increment of 28 percent on the 2016 projections.

He also submitted that oil is projected to contribute N1.985 trillion of the amount, while non-oil revenues are estimated to contribute N1.373 trillion. He said that the government had set a realistic projection of N807.57 billion for Independent Revenues; receipts from fines and other loot recoveries at N565.1 billion and other revenue sources, including mining, projected to earn N210.9 billion.

 

2016 budget performance

When the government of President Buhari jerked up the budget which had hovered around N4.7 trillion all through the President Goodluck Jonathan’s years to over N6 trillion in 2016, not a few expected huge and massive spending from the government of the day.

With over N1.5 trillion meant to be spent as capital votes, a lot many also expected the bulldozers to turn the country into a construction site of sorts. But the hiccups that greeted the budget passage till April ensured that the benefits of a big budget are lost eventually.

The president himself submitted that the capital projections in the2016 budget was possibly met by half in terms of releases, while actual work done is far below such projections.

He said while crude oil  benchmark US$38 per barrel was adopted for 2016; a projected production of 2.2 million barrels and an exchange rate of N197 to the US dollar, the projections were hampered by several factors.

Other basic projections of the 2016 budget include an aggregate revenue was projection of N3.86 trillion and an expenditure outlay of N6.06 trillion.

The first hurdle against the budget was its passage schedule. First the budget was presented to the National Assembly on December 22, leaving the Senators with no option than to consider the document from January 2016.

Again, the process was dogged by series of controversies, including claims that the document was stolen and equally padded at different stages.

In admitting the failure of 2016 budget, the president said: “The implementation of the 2016 budget was hampered by the combination of relatively low oil prices in the first quarter of 2016, and disruptions in crude oil production which led to significant shortfalls in projected revenue. This contributed to the economic slow-down that negatively affected revenue collections by the Federal Inland Revenue Service and the Nigerian Customs Service.

“As of 30 September 2016, aggregate revenue inflow was N2.17 trillion or 25 per cent less than pro-rated projections. Similarly, N3.58 trillion had been spent by the same date on both recurrent and capital expenditure. This is equivalent to 79 per cent of the pro-rated full year expenditure estimate of N4.54 trillion as at the end of September 2016.’’