National Budget: Capital projects and borrowing hurdles

By Lakinbofa Goodluck

When President Muhammadu Buhari presented the budget to National Assembly in December, 2016, many people hailed the budget proposal as if the president just manufactured a vehicle that would take Nigeria to the Promised Land. The budget which was tagged “Budget of Recovery and Growth” had lofty projections and inclusions that elicited commendations from many. But a few watchers thoroughly questioned the assumptions in the budget. With over 20% increase from the previous year, the N7.44tn final budget was predicated on $42 per barrel oil price and a daily production of 2.2 million barrels. The budget also had a capital expenditure of N2.24tn, which constitutes 30.69% of the total budget and a deficit of N2.36tn which was to be funded by borrowings. In essence, if the budget deficit was put at 2.36 trillion and capital expenditure was put at 2.24tn, it presupposes that the government would only fund capital project with borrowed funds, the absence of which naturally connotes dearth of capital projects in the year under review. And the development focused aspect of a budget is usually the capital expenditure.

At the recent meeting with members of Appropriation and Finance Committees of the Senate, the Ministers of Finance and Budget Planning revealed that not much has been released so far for capital projects; less than 20% actually. Their reasons are rested on the National Assembly’s inability to approve the loan request before it, meaning without the loan from China, we cannot embark on capital projects in the country. The Minister of Budget Planning stated that the government has so far released N300billion for the execution of capital projects. Perhaps, as a form of damage control following public reaction that trailed the revelation at the meeting with the members of the Senate committees, the Minister of Finance on her Twitter handle revealed that another N100billion would be released for capital projects to suggest that more funds are being released for capital projects. The same Minister had earlier told the Senators that she could not provide timeline for the next release for capital projects.

Parts of the reasons put forward by the Minister of Budget Planning is also that the country was still running the 2016 budget cycle till June 2017. To that extent, the 2017 budget only took effect from July 2017 after the Vice President signed it into law. However, the country will be returned to a budget cycle of January to December starting from 2018, which means the next budget has to be approved and signed by December 31^st 2017. Realistically, it is nearly impossible for the 2018 budget to be ready by December 2017 considering the pace the current administration is moving. This is the second week of October; the budget proposal has not been presented. In fact no notification has been sent to the National Assembly to that effect, which means there might not be any budget presentation till November. If the National Assembly receives the budget in November, it only has till the third week in December to finalise and passed the budget for the President’s assent. If we continue in this current pace we should be hoping to have our 2018 budget ready by February 2018. What that means is that the country will still have to retain the current budget cycle that has been detrimental to the economy.

What is worrying is the way we keep making declarations that eventually turn out impossible. Firstly, was this government not aware that the 2016 budget was rolled over into 2017? Did they not do some scenario planning in anticipation of lateness in the passage of the budget and how that could affect implementation? Were they not aware of the need to properly phase out the current budget cycle in preparation for the new proposed budget cycle? Our nation has become one that cannot execute a financial plan just because the planners seem to have opted for political correctness as against the stimulation of the economy. The planners of the budget need to be aware that many individuals and companies predicate their plans and assumptions on the national budget. This is why it is considered an important Act of the Parliament in other climes.

If we must truly restore this country to the path of greatness then we must learn to plan realistically and discountenance all these fantasy laden projections. Such things should not be identified with the government; only individuals are permitted to revel in fantasies, governments are known for fact based planning. That is the only way to lead a nation to the path of growth. As we plan for the 2018 budget, it is incumbent on the government to make realistic projections and assumptions that will truly restore this country to the path of greatness. A country like Nigeria should not plan its capital expenditures completely on borrowing. It is a set up for national budget failure, which is not healthy for our economy.