2020 budget signing: Credibility, performance of greater concern, says ACUF

… Nigeria’s budget consistently suffering from low credibility, corruption, contracts’ inflation, others

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Divergent reactions from financial experts, investors and other stakeholders have trailed the signing of the revised 2020 FGN budget of N10.8 trillion ($28 billion) into law by President Muhammadu Buhari last Friday.

Reacting on the budget, a non-governmental organisation (NGO), the Amaka Chiwuike-Uba Foundation (ACUF) said that greater emphasis should be laid on credibility and performance of the budget as “Nigeria’s budget has consistently suffered from low credibility as a result of poor budget performance occasioned by corruption, inflation of contracts, stealing, poor planning and supervision, weak institutions and most especially, unrealistic and ambitious revenue and expenditure projections”.

In a statement to the media Saturday, Board Chairman, ACUF, Dr Chiwuike Uba, while commending President Buhari, said that the signed 2020 budget has a budget deficit of about N4.5trillion, debt service of N2.9 trillion, a capital expenditure of N2.4 trillion and N4.9 trillion for recurrent expenditures, revealing that the proposed 2020 FGN revenue may be difficult to achieve “as a result of the COVID-19 ravaging the globe”.

Dr Uba, who is a development economist said that about 42% of the 2020 FGN will be funded through additional public debt as Nigeria’s debt service to revenue ratio is about 66%, which is above the World Bank prescribed debt service to revenue ratio of not more than 22.5%, even as he lamented that “greater part of the budget will be siphoned for selfish uses and at the detriment of poor, unemployed and dying Nigerians”.

Uba recommended that Nigeria’s budgets should be made transparent and accountable as Nigerians need to know the budget for waivers and subsidies, even as he advised for the 2020 Budget to be re-allocated “as the present allocations will not guarantee economic stabilisation and growth intended by the government” and more attention paid to the health and education sectors.

He said: “We commend President Muhammadu Buhari for signing the revised 2020 FGN budget of N10.8 trillion ($28 billion) into law. Nevertheless, we are worried about the performance and credibility of the 2020 FGN budget.

“In recent years, Nigeria’s budget has consistently suffered from low credibility as a result of poor budget performance occasioned by corruption, inflation of contracts, stealing, poor planning and supervision, weak institutions, and most especially, unrealistic and ambitious revenue and expenditure projections.

“In most cases, the actuals are usually at variance with the budgets. According to the information accessed from the Budget Office of the Federation website, as of the 3rd quarter in 2019, the total debts and fiscal deficits increased by 13.7% and 94.92% above the amounts provided in the budget, respectively. Given the current global crisis occasioned by the COVID-19, the proposed 2020 FGN revenue (loans, oil, and non-oil revenue) may be difficult to be achieved. And, this, on the other hand, may also affect the proposed expenditures.

“The signed 2020 FGN budget has a budget deficit of about N4.5trillion, debt service of N2.9 trillion, a capital expenditure of 2.4 trillion, and N4.9 trillion for recurrent expenditures. This means that about 42% of the 2020 FGN will be funded through additional public debt. “Currently, Nigeria’s debt service to revenue ratio is about 66%, which is above the World Bank prescribed debt service to revenue ratio of not more than 22.5%. Nigeria is borrowing to fund consumption and this is not only sustainable but unacceptable for a country struggling with high poverty rate, high misery rate, high unemployment, insecurity, and an economy facing recession among other challenges.”

He added: “Painfully, monies that end up into personal bank accounts are included as part of the metrics for determining budget performance. A typical example is the alleged N1.6 billion shared by the management of NDDC, as part of their COVID-19 palliatives. Budget performance should not be measured based only on the amount expended, but, more importantly, it should be based on the value-added.

“The value-added should be determined by evaluating the social costs of the foregone projects and activities as well as the social and economic benefits derived by the citizens for the monies spent. Clearly, Nigeria needs to rethink its project and infrastructure strategy. A cost-benefit analysis should be employed in project determination and implementation.

“The FGN 2020 budget of $28 billion is a far cry to South Africa’s budget of $122 billion and Kenya’s budget of $32 billion. Unfortunately, Nigeria has a population of over 200 million people. Nigeria’s population is 3.5 times the South African population of 57 million people and over 4 times Kenya’s population of 48 million. Yet, only about 22% of the 2020 FGN budget is for capital expenditure.

“The current administration promised to increase the capital budget, but that has not really happened as promised. Most of the government budget underspending is related to capital expenditure, especially, the economic sector –infrastructure projects. In most cases, more than a third of these projects are never started. Even when they are started, it is never completed.

“It is even worse when you factor in over-inflated and poorly executed projects. South Africa’s budget for infrastructure is above $28 billion, which is more than Nigeria’s entire 2020 budget. In addition to poor funding for education, health, and other social sectors, the less than $2 billion budget for infrastructure is not enough to jumpstart Nigeria’s economy. I wonder how the government wants to stabilize the economy with the current policy and budget.”|

Continuing, he said: “Many have argued that Nigeria is a rich country, but it is evident from our annual budget, when compared with South Africa, Kenya, and some other African countries (including some universities in Europe and America), the touted Nigeria’s wealth is an illusion and imaginary. It has no basis in reality. While we blame corruption for the state of our economy, it is important to recognize that the abysmally low productivity in Nigeria is contributing immensely to Nigeria’s state of affairs.

“It is, therefore, important that we increase our investment in the social sectors, manufacturing, and basic infrastructures to increase the productivity output in Nigeria. Nigeria has the potentials to become the real biggest economy in Africa; not in terms of GDP but in real production and inclusive growth. The business of the government must be more transparent, accountable, and capable.

“Clearly, to address the infrastructure challenges confronting Nigeria, there is a need to have a separate infrastructure bill like the United States. The proposed infrastructure law shall transcend a particular administration and should be anchored on a 10 to 20-year infrastructure and spending plan. This should be supported with robust and complete laws that promote and protect Public-Private Partnership (PPP) initiatives, with an effective oversight mechanism that includes the communities and citizens.

“The law shall provide for the review of the spending plan every 5 years to adapt it to the emerging realities. It is also important to make budgetary provisions for the maintenance of the infrastructures for rolling periods of 5 years.

“Finally, it is important to make our budgets more transparent and accountable. Nigerians need to know the budget for waivers and subsidies the government has approved and proposed in the 2020 budget. It should be part of the budget figures- both the revenue and expenditure, with clear details on the expected social and economic benefits of the proposed waivers and subsidies to the economy.

“Nigeria’s 2020 FGN Budget should also be re-allocated.  The allocations as currently are will not guarantee economy stabilization and growth intended by the government. Instead of reducing the allocations for health and education capital expenditure budget by 25% and 20% respectively, it should be increased and some of the recurrent expenditures reduced.

“This reduction is even made worse by the hedging of the proposed allocations to health and education on the budget performance; whereas the allocations to the Presidency, National Assembly, and the National Judicial Commission are arbitrarily assigned irrespective of how the revenue performs.”