The inconsistencies in the 2018 budget of consolidation

By LakinbofaGoodluck

Although the government could not meet the October deadline that was set by the Minister of Budget and National Planning, Senator Udoma Udo Udoma, the government has been able to set a new record for itself. President Muhammadu Buhari on Tuesday November 7^th presented the budget estimates to the joint session of the national assembly. In spite of the reports of archetypal drama such as the expulsion of journalists from covering the event, and the planned protest by lawmakers from the opposition Peoples Democratic Party (PDP), and headlines alluding to disenchantment in the national assembly, the president had a largely successful outing. In fact, some praise singershave beencelebrating the ability of the president to stand for 75 minutesto deliver a speech. Clearly that outing significantly demystified any doubts over the president’s state of health.

The N8.612 trillion “Budget of Consolidation” as tagged by the president is aimed at consolidating the achievements that have been recorded in the past year. The achievement being that the country came out of an avoidable recession. The budget has a total deficit of N2.005 trillion, down from N2.36 trillion in the 2017 budget, which is a 15 per cent reduction from the last budget. As usual, the recurrent expenditure of N3.5 trillion is still higher than capital expenditure of N2.4 trillion, while debt servicing will gulp as high as N2 trillion. The major concern in a budget is usually the question of where funds will be sourced to finance the budget. In this regard, the government plans to initiate new borrowings estimated at N1.699 trillion.Fifty per cent of the borrowing would be sourced externally, and the balance would be sourced from domestic financial market.

Predicated on a benchmark of $45 per barrel, with production estimate of 2.3 million barrels per day, with exchange rate of N305/US$, the president believes 2018 will be a year of “positive and better outcomes”for Nigeria. The highest allocation in capital spending goes to the Ministry of Power, Works and Housing, with N555.88 billion; Transportation with an allocation of N263.10 billion; while Special Intervention Programmes will gulp N150 billion.

Without assessing sectoral allocation in the budget estimate, it is contingent on perceptive minds to pay attention to the performance capability of the budget because a budget is only beneficial to the populace when it can be implemented. A popular saying in local parlance goes: “what Sunday will look like is always determined by how Saturday is.” In other words, our guess of what the future holds is often determined by current events. How the 2018 budget will be executed is essentially revealed in how the government has managed the 2017 budget. The 2017 budget will go in history as arguably one the worst implemented budgets in recent times, especially with regards to capital expenditure. The president in his budget speech stated that the government has released the sum of N1.2trillion for capital expenditure despite challenges faced in the year. This assertion by the president manifestly contradicts the earlier revelation by the Ministers of Finance and that of Budget and National Planning at a meeting with the Senate Committee on Finance in October.

Earlier in June, the Minister of Finance had indicated that the ministry would release N350 billion being the first tranche of capital releases for the 2017 budget but she however did not provide a date for the release. Then on Tuesday September 25th 2017, the spokesperson of the Ministry of Finance Patricia Deworitshe released a statement that the government had released N336 billion in the first quarter of 2017 for capital projects with N90 billion being the highest going to the Ministry of Power, Works and Housing. The statement was released the same week the Senate Committee invited both Ministers of Finance and Budget and National Planning for explanation on the poor performance of the 2017 budget.

At the meeting with the committee, the ministers expressed the difficulty the executive was facing in meeting its capital obligations, primarily due to the N2.3 trillion deficits in the 2017 capital budget.In addition to the revelation that only 20% of the capital allocation had been released so far, the Minister of Budget Planning, Senator Udoma stated that the government had so far released N300billion for the execution of capital projects. The Minister of Finance on her Twitter handle revealed that another N100billion would be released for capital projects in that week. They eventually hinted that about 60percent of the 2017 budget would be rolled into 2018 budget in the same manner 2016’s was rolled into 2017 budget. All these happened between October 2^nd and 5^th 2017. That means based on the assertions from the Ministers of Finance and Budget and National Planning, only about N400 billion had been released as at October 2017, which is a far cry from the N1.2trillion the president claimed in his speech. Could it be that N800billion was released between October 6^th and November 7^th that the president delivered the budget speech or there is a wide gap for reconciliation between the drafters of the president’s speech and the financial and budget planners of the government?Juxtaposing all these facts, one can only wonder where the President got his N1.2trillion figure from and what exactly changed between October 5^th and November 7^th.

In the same way, the President stated that the funds released for capital expenditure in the 2017 budget has been the highest ever. In spite of the reality that the believability of the figure quoted by the President is in doubt, historical analysis also shows that the amount released is actually not the highest in real terms taking into account the current exchange rate. The capital budget for 2011 was N1.1trillion while actual spent was N810billion representing 73% performance; at an exchange rate of N150 the total capital releasewould amount to $5.4billion. N1.3trillion was devoted to capital projects in the 2012 budget but the actual spent was N744billion at an exchange rate of N155, which comes to about $4.8billion and represents about 55.5% performance. The former administration budgeted N1.5trillion to capital projects in 2013 but the actual spent was N913billion at an exchange rate of 160, which represents about 61% of the budget and $5.6billion. The capital budget for 2014 was N1.1trillion at an exchange rate of N160. The actual capital expenditure as at October of 2014 was N610billion representing 55.5% of the estimate. Now, agreeing to the figures quoted by the president, N1.2trillion at the current official exchange rate of N305 will amount to $3.9billion. This shows that in dollar terms the country has spent the least on capital project since 2011.

The 2018 budget has been tagged the budget of consolidation, which implies that the government is aiming to improve on achievements in the current year. However, it is a bit difficult to identify the achievements that have been recorded in the year under review except for the recovery from recession which was essentially propelled by the stability in the oil industry. Generally, the 2017 budget so far has fallen short in expectation by many parameters. Its implementation has been largely marred by a collage of phantasmagorias that lacked any tangible hope of materiality. The budget had a deficit of over 30% and predicated on a questionable borrowing plan. Nevertheless, kudos must be given to the federal government for ensuring peace in the Niger Delta, fragile though. That peace has been largely responsible for the tiny success recorded in the budget implementation. Besides, the government needs to pay attention to the brewing tension in that region because resurgenceof crisis will greatly hamper the economic survival of the country. The answer to maintaining peace is not only determined by the presence of military formations; the answer lies in dialogue and unwavering commitment to the spirit of agreements reached.

Disappointingly, the same unrealistic projections that marred the performance of the 2017 budget have now been replicated in the 2018 proposal. The current budget has a deficit of N2trillion amounting to 23% of the entire budget. In the same vein the capital vote is put at N2.60 trillion (inclusive of capital in transfers) representing 30.0% of the budget. Going by the assertion of the Minister of Finance before the Senate Committee that the government could not release capital vote for 2017 because of the hitches in borrowing; it is plausible to conclude that if the borrowing plans of the government fails in the coming year, there will be no capital vote. This is further compounded by the electioneering process that will begin fully in the year. The implication of this is that Nigerians might be in for a full term of President Buhari’s administration with minimal attention to capital projects in the country. Ultimately, if there is no departure from the past and the present approach to budget preparation and implementation, the 2018 budget of consolidation will consolidate nothing but the stagnancy in the economy.

 

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