Starting on the wrong premise that the country faces “critical resource constraints”, the budget, as usual, devotes too much – N3.3 trillion of the total proposed expenditure of N4.92 trillion – to recurrent expenditure, leaving only N1.54 trillion or 31.3 per cent, for capital projects. Though the capital outlay is an improvement on the N1.28 trillion or 28 per cent of the N4.7 trillion 2012 budget, it still falls short of the minimum capital-to-recurrent ratio of 60-40 recommended by the World Bank to drive Nigeria out of the woods. The bank says Nigeria needs to invest $20 billion each year to erase its critical infrastructure.
There is little to cheer therefore in the marginal reduction in recurrent spending from 73 per cent in 2011 to 71.4 per cent in 2012 and 68.7 per cent in 2013. Even worse, our irresponsible fiscal behaviour manifests in the perennial failure of the government to fully implement the capital budget and the itemisation of things such as furniture, replacing gates of guest houses, purchase (every year) of kitchen equipment and equipping the State House veterinary clinic under the capital vote.
Furthermore, the government continues to violate the debt and expenditure anchors spelt out in the Fiscal Responsibility Act 2007 and optimised through the Medium Term Expenditure Framework, a multi-year rolling plan to which the annual budgets should align. The International Monetary Fund warns that a prolonged negative oil price shock or permanent real GDP growth shock could undermine recent progress in achieving macroeconomic and debt sustainability. This lapse resulted in an overall budget deficit of N1.15 trillion in 2011 while borrowing was N852 billion in 2011, N744 billion in 2012 and is projected at N727 billion next year. The President’s proposal to set up a sinking fund of N100 billion to repay maturing debts instead of carrying such forward, is not comforting given the total outstanding (foreign and domestic) debt of $44 billion, while the government is borrowing furiously irrespective of statutory caps.
The budget re-emphasises our over-dependence on crude oil revenues for over 90 per cent of government’s earnings that places the country at the mercy of a volatile international oil market and the disruptive activities of criminal gangs operating in the oil-rich Niger Delta region. The bickering between the executive and the National Assembly over the budget’s $75 per barrel oil price benchmark is a clear demonstration of the unpardonable failure of successive governments to diversify the economy and reduce the precarious dependence on oil and gas sales.
Shoddy preparation and the failure to consult widely, as is the practice in mature democracies, inevitably lead to the additions, distortions and delays that have characterised our budgets for the last 13 years. A budget in a democracy requires the input of key stakeholders before it is laid before the parliament for approval. The assumption of 2.53 million barrels per day is also dicey if sporadic disruptions like the force majeure declared by oil majors, Shell and AGIP, after recent attacks on their facilities are not curtailed.
The allocations to Education, N426.53 billion; Health, N279.23 billion; Works, N183.5 billion, and Agriculture and Rural Development, N81.41 billion, will typically be spent on overheads, not on critical infrastructure. When, at a time of higher costs and leaner resources, the Jonathan government established 12 new universities in two years, it is not surprising that only N60 billion, a mere 14 per cent of the N426.53 billion voted for education, is earmarked for capital projects. The budget also seeks to entrench the state’s direct involvement in the downstream oil and gas sub-sector through a proposed Eurobond for gas pipelines that ought to be left to the private sector, while government funds the comatose health, education and road infrastructure sectors.
The Nigerian economy is facing serious headwinds. In February, the IMF declared that though Nigeria had shown robust Gross Domestic Product growth during the past decade, with rates among the highest in sub-Saharan Africa, unemployment had kept rising and the public finances and balance of payments remained vulnerable to a fall in oil prices. Yet, the abysmal low level of the 2012 capital budget implementation does not inspire hope for a better performance in 2013.
The budget Nigeria needs should focus mainly on how to exponentially expand revenue base; drastically reduce poverty; rapidly promote private sector job growth and clinically cut waste in public finance. There is also the need to improve the business climate. Regrettably, the 2013 budget offers just a token in all of these. It does not provide a stimulus that can help to reduce our 23.9 per cent overall unemployment and graduate employment of over 50 per cent. The plan promoted by the Finance Minister, Ngozi Okonjo-Iweala, to spend N10 billion on 52,000 households when such an amount, creatively channelled into small and medium enterprises, could create hundreds of thousands of jobs, is laughable. The outlay of N15 billion for “job creation” is also vague.
The major problem with public finance in Nigeria is cost of governance. The plan to deposit N1.12 billion towards purchasing two new helicopters for the extra-large presidential air fleet, N1.5 billion for “welfare” at the Presidency and N5.5 billion on former heads of state and their deputies, are insensitive in a nation where 112 million out of 167 million people live below the United Nation’s poverty threshold of $1 per day.
The parliament should apply itself more rigorously to scrutinising this budget. We cannot afford to carry on in mediocrity while the rest of the world is moving ahead.
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Source : punchng[dot]com
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