Procedural lapses threaten 2018 budget
• As 2017 Budget Remains In Limbo
• Delayed Passage Of 2017 Budget Responsible For Sloppy Implementation
• N450B Spent On Capital In Four Months, Records Zero Implementation In Q2
• Udoma Assures Of January-December 2018 Budget Life Cycle
• Illegality, Shoddy Budget Implementation Worry Owoh, Ezeh
The implementation of the capital votes of the 2017 fiscal plan, which came into force following the late passage of the Appropriation Act by the National Assembly in May, and the eventual assent by then Acting President, Prof. Yemi Osinbajo on June 12, 2017, is bogged by liquidity challenges arising from shortfall in expected revenue as projected in the plan.
Indeed, only about N450b, according to the Minister of Finance, Mrs. Kemi Adeosun, has been released in the last four months (July to October) for capital projects, even as details of the specific projects for which the funds have been deployed are not yet known.
Minister of Budget and National Planning, Senator Udoma Udo Udoma, last weekend, told The Guardian that details of the expenditure, which would be made known in the third quarter of 2017, were still being put together.
Even though the report is not yet ready, some of the listed projects as captured in this year’s spending plan include the allocation of N10bn for the rehabilitation/reconstruction and expansion of Lagos-Shagamu-Ibadan Dual Carriageway, Sections I & II in Lagos and Oyo states.
Others are N13.19b for the dualisation of Kano-Maiduguri Road- Sections I-V; N10.63b for the rehabilitation of Enugu-Port Harcourt Dual Carriageway, Sections I-IV; N7b for the construction of the Second Niger Bridge, including access roads phases 2A & 2B; N7.12b for the dualisation of Abuja-Abaji-Lokoja Road; N9.25b for the dualisation of Obajana Junction to Benin Road Phase 2 Sections I-IV; N7.5b for the rehabilitation of Onitsha-Enugu Dual Carriageway; N7b for the construction of Bodo-Bonny Road with a bridge across the Opobo channel; N3.3b for the rehabilitation of Ilorin-Jebba-Mokwa-Bokani Road; N3.5b for the dualisation of Odukpani-Itu- (Ididep – Itam) – Ikot Ekpene Federal Highway Lot 1; Odukpani-Itu bridgehead; N1.5b for the dualisation of Kano-Katsina Road Phase 1; N2.24b for the dualisation of Suleja-Minna Road, Sections I & II; N2.3bn for Gombe-Numan-Yola Phase II (Gombe – Kaltungo); N2.7b for the construction of Kano Western bypass; and N2.03b for the construction of the terminal building at the Enugu International Airport.
Earlier on in the second quarter (April to June 2017), capital votes implementation stood at zero due to revenue shortfall. This, perhaps explains the rationale behind government’s search for a $5.5 billion concessionary loan facility, where the sum of $3b is being planned to liquidate a part of the country’s rising N19.6 trillion public debt and the balance of $2.5 billion to implement the 2017 projects, which could not be catered for just two months to the end of 2018 fiscal year, where government hopes to restart the budgeting year from the current disjointed calendar to the traditional January to December, 12 months budget cycle.
Though experts favour the return of the country’s fiscal plans to January and December cycle in order to raise the percentage of implementation of, particularly, the capital votes components from the current level, the strategies they put forward towards this end varies.
For instance, while Udoma is advocating the rolling over of the financing of 2017 projects into the 2018 plan, a professor of Economics and Executive Chairman, Society of Analytical Economics, Prof Godwin Owoh, countered arguing that it goes against the spirit and letter of Section 382 of the constitution, which clearly spells out the way and manner in which appropriations are to be undertaken.
According to Owoh: “The issue of rolling over of budgets was never contemplated by the Nigerian constitution because it clearly states that every budget year must run for 12 months, and should there be any cause for delay, the president shall order the withdrawal from the Consolidated Revenue Fund of the Federal Government, the sum for the purposes of running of government, an amount not exceeding the same approved in the preceding year, until such a time that a new fiscal plan is approved. And the president is authorised under that section of the constitution to do this without resort to any organ of government, including the National Assembly.
“The idea of rolling over a plan to another year is a misnomer, and an illegality because appropriation matter is a constitutional matter. The Nigerian economy has been run on a wrong interpretation. This is the time to correct this,” he pointed out.
Owoh, however, doubted the preparedness of the executive to reset the budget this year, despite the optimism displayed by the Ministry of Budget and National Planning.
His words: “The best solution to our budget crisis is to reset the budget year to January to December. But it is not likely that this is going happen given the way and manner that the executive is carrying on.
“Firstly, most of the nominations for confirmation forwarded to the National Assembly have not received the clearance expected from the legislature. Secondly, and most importantly, the executive has a very poor accounting and record keeping culture, as most of these government agencies have not undertaken proper audit of their respective establishments to show how the funds received in the past were spent so that lawmakers can approve new funds for them. This is one area where delays arise from. I don’t see them changing overnight, that is why I don’t see the likelihood of a January 1, 2018 appropriation. The president should just prepare to take the bull by the horn, by terminating the 2017 plan in December and starting a fresh plan in January, using the power vested in him to appropriate, in line with the provisions of Section 382 to begin implementation based on the 2017 appropriation.”
Special Adviser on Media to the Minister of Budget and National Planning, Senator Udoma Udo Udoma, James Akpandem, had earlier expressed optimism that the 2018 spending plan, slasted for submission on Tuesday October 31, would be quickly passed by the legislature because they have been part of every step of the budget preparation, hence there may be less or no friction to warrant any delays.
Akpandem said: “We are very optimistic that this time around, we are going to reset the budget life cycle to run from January to December. We don’t expect the proposal to be with the legislature beyond two to three weeks because their leadership and relevant committees have been working with us, and we are on the same page. In fact, they are always in the picture, and there is nothing that we did that we didn’t involve them. At every stage, we would inform them that this is what we want to do. For instance, when we took the document to Mr. President, we informed them. I can assure you that the January target is realisable this time around,” he restated.
Commenting on the implementation of the 2017-spending plan, which is in its fifth month now, a public finance expert and lead director of the Centre for Social Justice (CENSOJ), Eze Onyekpere, said the N450b capital votes releases (out of the year’s N2 trillion votes) represented only about 20 per cent of the capital budget, which was a poor performance.
Attributing the poor performance to poor revenue generation and the disjointed budgetary calendar, he said: “How can you be looking for funding in October to implement a 2017 budget? Where did you keep the revenue generated during the year, did you sterilise it somewhere? How can you be using 2017 revenue to implement 2016 plan?” Onyekpere rhetorically asked.
To correct the anomalies, he said the best thing to do is to end all 2017 budget by December 31 because there was no need to extend the plan to
“All the unaccomplished plans in 2017 should find accommodation in the 2018 and whatever is the 2018 and whatever is the balance for the new
plan can now take care of the new projects. Therefore, they must end every project of 2017 on, December 31 this year,” Onyekpere further
He advised the legislature to cooperate with the executive and pass the 2018 budget before the end of November, in order to allow the president time to assent to it and get the plan executed from January 1 next year.
Equally disturbed by execution of the 2017 budget in the second quarter of the year is the Director General of the Budget Office of the Federation, Ben Akabueze, who lamented that the situation is very challenging on several fronts.
He stated that the extension of the 2016 capital budget to May 5, 2017, effectively halted the execution of the 2017 capital budget in the first half of the fiscal year.
He added that the execution of the 2017 budget was also adversely impacted by the late passage of the budget, as well as, the shortfall in expected oil and non-oil revenue receipts.
However, government, he said has continued to meet its non-discretional expenditures.
This submission is contained in the 2017 Second Quarter Budget Implementation Report recently released, a copy of which was obtained by The Guardian in Abuja.
The report read in part: “Implementation of the budget in the second quarter of 2017 continued to be adversely affected by the poor revenue outturn as oil production and exports remained low, while the poor performance of the economy continued to impact non-oil revenue. Funds were not released for capital projects/programmes in the second quarter of 2017. This was due to the extension of 2016 capital budget implementation to May 5, 2017, the late passage of the 2017 budget as well as, the need for MDAs to finalise their procurement processes.
“The 2017 Fiscal Framework projected a quarterly fiscal deficit of ₦589.19b to be financed through earnings from privatisation proceeds of ₦2.50b, foreign borrowing of ₦266.88b, domestic borrowing (FGN Bond) of ₦313.57b, and sale of government properties of ₦6.25b. The revenue and expenditure outturn of the Federal Government resulted in a fiscal surplus of ₦181.88b in the second quarter of 2017. However, none of the financing items materialised in the second quarter of 2017,” the report added.
The Budget Office of the Federation boss also reported that in the second quarter of this year, the actual net oil revenue that accrued to the Federation Account was ₦456.89b, depicting a decrease of ₦637.02b (or 58.23 per cent) below the estimated quarterly budget projection of ₦1, 093.90b. This notwithstanding, the net oil revenue inflow in the second quarter of 2017 was higher than the ₦396.95b net oil revenue recorded in the first quarter of 2017, by ₦59.94 billion (or 15.1 percent).
He ascribed the poor oil revenue performance in the second quarter of 2017, when compared with the quarterly projection to the relapse in oil price at the international market, as well as, other supply challenges like crude oil theft, illegal bunkering and the destruction of pipelines that occurred 25 times during the period.
It would be recalled that the sum of ₦5, 084.40b was projected to fund the budget. This translates to a quarterly share of ₦1, 271.10b. A total of ₦506.39b (excluding other funding sources, was received in the second quarter of 2017). This amount was ₦764.71b (or 60.16 percent) lower than the quarterly projection and ₦126.38b (or 33.26 per cent) higher than the ₦380.01b reported in the first quarter of 2017.
The aggregate revenue in the second quarter of 2017 was also put at ₦123.60b (or 32.29 percent) above the ₦382.79b recorded in the second quarter of 2016. The sum of ₦221.59b received in the second quarter of 2017 from oil sources was lower than the quarterly estimate of ₦530.54b by ₦308.95 b (or 58.23 per cent) for the period. Likewise, all the non-oil revenue items fell below their quarterly budget projections. The Federal Government share of VAT of ₦32.70b, Customs & Excise duties of ₦62.96b, special levies of ₦5.0b, independent revenue of ₦97.49b and company income tax of ₦86.64b were below their corresponding quarterly budget estimates of ₦60.48.
Meanwhile, as the Federal Government readies its presentation to the joint session of the National Assembly, the 2018 budget proposal is already being threatened by what some lawmakers refer to as apparent breaches of the Fiscal Responsibility Act during its preparations.
The major issue, The Guardian understands, is the absence of the Medium Term Expenditure Framework (MTEF), which ought to serve as the basis for preparing the budget.
In clear breach of Section 11 of the Fiscal Responsibility Act, which dictates that the president must submit a draft copy of the MTEF to the National Assembly, not later than four months to the end of the year, the document was only submitted to the two Houses of the National Assembly on Tuesday, October 10.
Matters were made worse by the fact that while the 2018-2020 MTEF is still pending before the National Assembly, the Federal Executive Council (FEC) announced on Thursday that it had approved a draft copy of the budget for onward presentation, even when the draft MTEF is yet to be considered by the Assembly, let alone being approved.
To many critical minds within the National Assembly, the approval given by FEC, which suggested that the executive had concluded the preparation of 2018 budget proposal and ready to send same to the National Assembly amounted to turning the law upside down, and could kick-start serious problems for the 2018 budget.
Faulting the procedure, a member of the Senate Committee on Appropriation, who pleaded anonymity, drew attention to Section 18 of the Fiscal Responsibility Act, which clearly provides that the president ought to await the consideration and approval of the draft MTEF by the National Assembly before using same as basis for preparing the budget proposal.
According to him: “These are the issues we have always raised. Why do we always behave as if we are ignorant of the law guiding budget preparation? It is sad that despite the presence of competent lawyers in the cabinet, the executive is acting as if the law does not matter. Apart from the Vice President, Yemi Osinbajo, the Attorney General of the Federation, Abubakar Malami is also there. Better still, the Minister of Budget and National Planning, Senator Udoma, is not only a lawyer, he was with us here as a member of the Senate. Is it impossible to get the document on MTEF submitted by the end of August as required by law? They ignored that aspect of the Fiscal Responsibility Act and submitted MTEF in October.”
The lawmaker further said: “Now, you know that to do a thorough job before getting the MTEF approved, it takes a minimum of six weeks. That is why the law asked that the draft of the MTEF be submitted to the National Assembly at least four months to the end of the year so that before the end of October of every year, the MTEF would have been considered, approved and sent back to the Mr. President.
“In the eyes of the law, it is the approved MTEF sent to the president that he will use to cause the national budget to be prepared and later sent
back to us as budget proposal. At the moment, the National Assembly has not even started considering the MTEF draft because of its late submission, and FEC has announced that it has approved the budget proposal . What a mess! Is the National Assembly supposed to play the rubber stamp role and close its eyes to these irregularities? We will wait and watch how the whole
thing will play out.”
In the recent past, late submission of MTEF to the National Assembly led to serious problems that eventually encumbered early passage and implementation of the budget.
Other lawmakers, who bared their minds on the issue, expressed regrets that no lessons have been learnt from previous budget crises that led to quarrels between the executive and the legislative arms of government, particularly since the inception of the Muhammadu Buhari-led administration.
In specific terms, the Fiscal Responsibility Act stated in its Section 18 that, “Notwithstanding anything to the contrary contained in this Act or any other law, the Medium-Term Expenditure Framework shall be the basis for the preparation of the estimates of revenue and expenditure required to be prepared and laid before the National Assembly under section 81(1) of the constitution.
“The sectoral and compositional distribution of the estimates of expenditure referred to in Subsection (1) of this section shall be consistent with the medium term developmental priorities set out in the Medium Term Expenditure Framework,” it further stated.
A principal officer in the Senate, who also elected to speak off camera, admitted that the ground was already being prepared for another round of budget crisis between the National Assembly and the executive.
According to him, the late submission of MTEF to the National Assembly, as well as, refusal to comply with relevant laws guiding budget preparations has always been the major cause of challenge that plagues the country’s budgeting process.
He recalled that in 2016, the Senate returned the MTEF to the executive due to lack of supporting documentation and details.
While Udoma, through his aide assured that the January target for the take-off of the 2018 budget “was realisable this time around,” Chairman of the House of Representatives Committee on Legislative Budget and Research, Timothy Golu, thinks otherwise, insisting that there is no possibility of doing so before the end of the year due to the poor implementation of the 2017
The lawmaker who represents Pankshin/Kanke/Kanan Federal Constituency of Plateau State on the platform of the Peoples Democratic Party (PDP), blamed the executive for the problems associated with the budget implementation.
He disagreed with the claim by the executive that paucity of funds was responsible for the poor implementation of the 2017 budget, saying, “Lack of money is not the main problem, but the government is slow in taking decisions; it is slow in coordinating the agencies and it is slow in coordinating it’s policies. The government is just slow in doing most of these things. I believe that if the government can accelerate action, if there can be proper coordination between the Ministry of Finance, the Budget Office and the MDA’S, these things could be sorted out, but everybody is saying a different thing. They are not on the same page as far as budget data is concerned. So that is part of the problem. I don’t see us passing this budget in December because we need to do a good job, and because they are yet to submit the documents that they are busy talking about.
He continued: “We are yet to start work on MTEF-FSP. The relevant committees are about to work on the MTEF-FSP now, which should precede the submission of the main budget. So, it means that we would be handling the budget together with the MTEF-FSP, which to us is not the problem because we can do it. But to have enough time for the various committees to do their work is going to be difficult. So, to pass this budget before December 31, 20I7 is not going to be possible because if we rush now and do an untidy job, Nigerians would not be happy. We need enough time to handle the items one-by-one because the National Assembly more than ever before, will maintain an eagle view on every item.
“We are doing what is referred in the ports as destination inspection. We will do this because it is a law and if we don’t do it, the implementation would be bad and it would affect all of us. So, the leadership of the National Assembly has placed it upon itself to sit down and analyse in details, every item so that by the time it becomes law, you know that it is a law that would be implementable.
There should be a clear implementation of the 2017 budget to give way to the coming budget because if the previous budget is not implemented, then there would be no clearance for the new budget to take-off. So, if they want to harmonise or roll over some things, I just don’t know how they are going to do it.”
Shedding light on the level of implementation of the 2017 budget, he said: “We have not heard anything about the 2017 budget implementation up until now, as even 10 per cent implementation has not been done and they are planning to bring 2018 budget. There is nothing happening. I don’t know how they intend to do it because we are worried because they have not started the implementation and they are bringing another budget and they are talking about rolling part of this budget to 2018. So I don’t know how they intend to solve a budget crises that is imminent. I really don’t know.
“I understand they have released about N450b for the zonal intervention projects, but I don’t think the MDA’s have been cash-backed because most of the capital projects are yet to commence, even though some, especially roads have started in other areas, but the implementation is slow. So I expect massive implementation since funds are available because I believe there are funds, but if most MDA’s have not seen cash, there is no way they would start implementation of any budget without money.”
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