Implications as NASS passes N9.1trn 2018 budget in May

SIX months after President Muhammadu Buhari submitted the 2018 budget estimate to a joint session of National Assembly, both chambers on Wednesday, May 16, 2018 each passed the Appropriation Bill. Both Houses increased the N8.6 trillion to N9.1 trillion, an increase of N500 billion. Buhari had presented the budget to the assemblymen on November 7, 2017.

Chairman, Senate Committee on Appropriation, Danjuma Goje while laying the report said the increase of N500 billion was done in consultation with the executive and that it followed a decision to increase oil benchmark from the proposed $45 to $51. Crude was selling at $78 per barrel on the day the budget was passed. Other variables include pegging budget exchange rate at N305/US$ and production of 2.3 million barrels of oil per day.

Goje added that the additional N500 billion was spread over some critical sectors in consultation with the executive. He gave a breakdown of how much more will be spent on different sectors.

Of this, N42.72 billion will be spent on security; N57. 15 billion on the 1 per cent vote for health as mandated by the National Health Act; N106.50 billion for the Ministry of Power, Works and Housing; education- N15.7 billion; Judiciary- N10 billion; and Niger Delta Development Commission (NDDC)- N44.20 billion. Earlier proposed 2018 budget deficit was reduced by N50.88 billion deficit reduction. The budget now has a fiscal deficit of N1, 954, 464, 993, 775 and a deficit to GDP of -1.73 per cent.

Further breakdown of how the N9, 120, 334, 988, 225 would be spent includes N530, 421, 368, 624 for statutory transfers as against N456, 458, 654, 074 proposed by the executive; N2, 203, 835, 365, 699 was budgeted for debt service as proposed while N190, 000, 000, 000 was budgeted for sinking fund for maturing loans; N3, 512, 677, 902, 077 was earmarked for recurrent (non-debt) expenditure which is an increase from N3, 494, 277, 820, 219 proposed and N2, 873, 400, 351, 825 was budgeted for capital expenditure as against N2, 427, 665, 113, 222.

Other details as gleaned from the House of Representatives’ report showed that of the total, N530 billion is for statutory transfers; N2 trillion for debt service; N2 trillion for sinking fund for maturing bonds and N2 trillion for recurrent (non-debt) expenditure. Capital expenditure is N2.8 trillion.

Also, the following eight establishments are to get their allocations on first line charge: N110 billion for statutory transfer to the National Judicial Council; N81 billion to the Niger Delta Development Commission; N34 billion as part payment to NDDC Outstanding Liabilities on Federal Government of Nigeria; N109 billion for Universal Basic Education; N139 billion for National Assembly; N7 billion for Public Compliant Commission; N45 billion for Independent National Electoral Commission; and N3 billion for National Human Rights Commission.

Plenty blame to go round

The 1999 Constitution (as amended) prescribes timelines for processes leading to the submission and passage of annual budgets beginning with the submission of Medium Term Expenditure Framework in August. This is to be followed by the submission of the Appropriation Bill in the first week of September. The National Assembly is then expected to work on the Bill and pass it early enough for the commencement of a new fiscal year on January 1 of the following year. However, since 1999, the executive arm of government has never been able to adhere to the timetable.

Again, both executive and legislative arms have not agreed on the limits of each other’s role in budget with the former perennially quarrelling that legislators tinker with figures submitted to them. The back and forth movement that usually accompanies such quarrels is also responsible for delayed implementation of budgets.

Whereas the National Assembly passed the 2017 Appropriation Bill around March, the document did not become law until June 12 when then acting President Yemi Osinbajo eventually signed it into law.

Head of Research at BudgIT Nigeria, Mr Atiku Samuel, said lack of a budget calendar, lack of coordination and lack of planning were the major reasons for such delays noting that during the budget formation phase, the executive and legislators and other stakeholders should have been consulted and actions point agreed on to avoid such delay. However, not much is done by the executive to carry the legislators along. As such, issues on the budget framework, lack of details, frictions between the legislators and executive and how the legislators process information differs from how the executive process information. “In all, the lack of coordination cumulates into a bigger issue that has delayed the passage of the budget among other issues,” he said.

In September 2015, the Monetary Policy Committee (MPC) warned that “having seen two consecutive quarters of slow growth, the Committee recognized that the economy could slip into recession in 2016 if proactive steps were not taken to revive growth in key sectors of the economy. In the face of prevailing circumstances, the Committee acknowledged that synergy between monetary and fiscal policies remained the most potent option to sustainable growth. The Committee further observed that the impact of the persistent decline in global crude oil prices on the fiscal position of Government continues to reflect in rising credit to government.” Government failed to heed the warning and the economy finally slipped into recession as predicted.

Implications

At its meeting of November 2017, MPC expressed “hopes that, while the economic recovery appears to remain fragile, a tenacious implementation of the 2017 budget and quick passage of the 2018 budget would boost aggregate demand and confidence in the economy.” Also, at its delayed first meeting of 2018 which held in the first week of April, the committee equally expressed belief that effective implementation of the Economic Recovery and Growth Plan (ERGP) by the Federal Government and quick passage of the 2018 budget will continue to enhance aggregate demand and confidence in the Nigerian economy.

Senator Rufai Hanga, who spoke on the phenomenon of delayed budgets recently insisted that late passage of the budget would affect the implementation of capital projects, which is not good for an economy. “It has a serious implication on the economy. In fact, whoever is delaying the passage of the budget should be sanctioned. It is disrespect to the National Assembly. Everybody has got his own responsibility in running this government. The ministers and the government are supposed to work harmoniously. But unfortunately, some people are out to sabotage this government. The impunity of some government functionaries is becoming something else and is not helping the government. It is sabotage. They are sabotaging the government,” he said.

Also, civil society activist, Mr Eze Onyekpere, Lead Director, Centre for Social Justice (CSJ) said delay in the passage of the 2018 budget was impacting negatively on the economy. According to him, “the delay compounds the already parlous economic situation and shows a country that is afloat and without a focused leadership at both the executive and legislative levels.”

As witnessed in past years and especially in 2017, the delay in the passage of 2018 budget has been predicted to have a postponed the multiplier effect of government spending. Recurrent expenditure boosts injections, while capital spending reduces the country’s infrastructure deficit. The latter will also support activity in the construction sector, which grew by 1 per cent  in 2017.

With unemployment at 40 per cent, the delay in the passage of the budget is likely to escalate the situation as government will not have enough time to use these funds. The 2017 budget for instance has a capital outlay of N2.6 trillion but because it was passed late, government was only able to spend N1.5 trillion according to Finance Minister, Mrs Kemi Adeosun. The limited time has affected the absorptive capacity of the economy. Should President Buhari eventually sign the bill this month, it means that there will only be seven months left before the end of the year for the budget.

It may be difficult to extend the lifespan of this budget as done in previous years because of the general elections scheduled for 2019. Experience has shown that actually implementation of capital budget kicks off fully at least three months after it is signed.

It will then follow that the normal inflationary and exchange rate pressures that usually come with increased government spending will also be delayed till close to end of the third quarter of the year when political party primaries would have kicked in. It could be a situation of double jeopardy for ordinary citizens and the economy.