Restore rigor to budgeting and growth plans
FOR the regime of Major General Muhammadu Buhari (retired), the promise of a qualitative change in budgeting remains illusory. A 2022 National Budget Snapshot contains no drastic and positive changes from years of shoddy budgeting, with excessive recurrent spending above capital, reliance on a tight income stream, deficits, and debt. Instead, it offers more of the same poor planning that has characterized Nigeria’s budget management since 1999. There should be completely innovative ideas and new approaches to the budgeting process and budget implementation.
With four months to spare before the new fiscal year, the president and his team still have time to rework the plan into a plan that will cut borrowing, reduce the deficit, and devote more resources to infrastructure and social services.
Details of the 2022 budget proposals taken from a circular from Minister of Finance, Budget and National Planning, Zainab Ahmed, to federal ministries, departments and agencies reveal a projected budget size of 13.98 trillion naira. As a component of the Medium-Term Expenditure Framework and Budget Strategy Document 2022-24, and the National Medium-Term Development Plan 2021-25, its objectives include poverty reduction, “ensuring economic stability, and good governance ”.
But already, the achievement of these noble goals, as well as the achievement of food security, the reduction of unemployment and the control of inflation, have been compromised by the revenue deficits anticipated even before the take-off of the budget plan. As Ahmed admitted, “the provision for development spending has been constrained by low income, increased staff and pensions, as well as debt servicing costs.”
While national budgets everywhere else are designed to meet national development goals, budgeting in Nigeria has become repeatedly ridiculous. First, budgets tend to be late in the preparation and final adoption of the law. This is a trend that, of course, the Buhari regime, unlike its predecessors, has succeeded in moderating through early preparation.
Second, national budgets have been characterized by the double evil of deficits and debt. The total projected income of 8.76 trillion naira in 2022, for example, implies a deficit of 5.22 trillion naira. Debt service will drain 3.6 trillion naira, with an additional 292.7 billion naira in a sinking fund to repay maturing loans. The 2021 budget deficit of 13.08 trillion naira was 5.20 trillion naira and the debt service was 4.28 trillion naira. Under the MTEF / FSP 2020-24, the government has committed to borrow more than N15 trillion from domestic and external sources. Ahmed confirmed that nearly 91 percent of undistributed income in January-June this year was spent on debt service; 97% was spent in 2020, according to BudgIT, a tech-based advocacy group. It is not sustainable.
Budgets are also failing to meet the country’s chronic infrastructure deficit. Typically, less than 30 percent goes to capital spending while the bulk goes to current spending. The 3.61 billion naira allocated to capital in 2022 is only 26% of the total, while the recurring estimate of 6.21 billion naira represents 70.87% of the total expected income of 8.76 trillion naira. . At 4.79 trillion naira, personnel and pension costs will account for 57% of income, and are 534.4 billion naira higher than the 2021 figure.
Yet Nigeria has an infrastructure deficit of $ 3 trillion, six times the size of its GDP, according to Moody’s, a rating agency. Between 2009 and 2013, added Proshare, a Lagos-based consulting firm, the country invested just $ 664 per capita per year in infrastructure, compared to $ 3,060 in advanced economies. Asian economies average over 40 percent, the Asian Development Bank said. However, it is capital spending that drives economic growth in emerging economies, the World Economic Forum reported, adding: “Every dollar spent on an investment project generates an economic return of between 5.0% and 25%. . Nigeria continues to push millions of people into poverty by spending most of its resources on a few, serving an unnecessary and unproductive bureaucracy and politicians, and fueling a thriving machinery of corruption and tax evasion.
That’s not all. Budgeting here is not anchored to need; it is based on a primitive “envelope” system in which the estimates are simply added, kept or reduced compared to the headings and sub-headings of the previous year. It ignores needs, neglects critical areas, and facilitates massive looting by complicit bureaucrats, politicians and lawmakers. The repetitive budgeting of vehicles, office equipment and computers that fraudulently resurfaces in the budget every year should be done away with. Buhari is expected to recall the 2022 budget and rework it to be based on the ‘zero budget’ model which channels spending towards critical and current needs as the regime has promised since 2015 through the vice president Yemi Osinbajo.
In addition, budgets must correspond to national priorities. Infrastructure, social services and stimulation of productive economic sectors – agriculture, mining, manufacturing and services – are badly needed. More than 70 percent of the population is affected by poverty, 33.3 percent of the workforce is unemployed, oil and gas revenues dominate exports, tax revenues are meager and insecurity reigns. Health, education and water supply are grossly underfunded, and facilities dilapidated and inadequate.
Money should be spent on these issues. Bloated bureaucracy and huge resources spent on political office holders, inefficient state-owned enterprises and religious activities are not sustainable. Budgeting must be precise, an accounting document must not have room for such vague headings as “department-wide” votes that set aside up to 500 billion naira in some years, allowing the executive to spend taxpayers’ money in a capricious way and with little oversight.
The completion of heinous budgeting was the frivolous falsification of estimates by federal lawmakers who add, subtract, and distort spending plans to accommodate private interests and their controversial “constituency plans.”
There should be a radical change in attitude towards budgeting to break the cycle of underdevelopment and poverty. Ideally, budgets are designed to respond to national economic, social and political policies. These include achieving inclusive growth, economic stability and growth, and reallocation of resources. A joint study by PwC and Oxford Economics attributed the rapid economic growth in China, India and other emerging Asian economies to effective budgeting and implementation. Buhari is expected to follow suit, recall and restructure the 2022 budget plan to mark a radical break with the messy past.
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