PRESENTATION AT THE LAUNCH OF DUBAWA AND UDEME BY PREMIUM TIMES CENTRE FOR INVESTIGATIVE JOURNALISM (PTCIJ) AT YAR’ADUA CENTRE ON 20TH FEBRUARY 2018
- BACKGROUND
The budget is perhaps the most important instrument in any modern state apart from the constitution. The focus on budget has assumed greater prominence in recent years with increasing democratization, civil society participation and the desire to respond to the development challenge of poverty. In Nigeria, the return to civilian rule in May 1999 after many years of military rule not only put issues of budget in the public domain but brought out the role of parliamentarians, the media and citizens in the budgetary process.
A budget has been defined simply as a statement of government’s estimated revenue and proposed expenditure for the year. It is a plan that deals with the future allocation and utilization of various resources to different enterprise activities over a given time period usually one year. Government budgets have crucial roles in the planning and control of the economic activities of a nation. Budgeting is simply the process of preparing a budget. It refers to the procedures and mechanisms by which the budget is prepared, implemented and monitored. Budgeting is very crucial for the economic development of any nation. Good budgeting can lead to economic growth and development. But to prepare a good budget requires a responsible leadership, special staff assistance, broad, accurate and reliable information, complete plan, a financial calendar and effective monitoring and control over the execution of the budget plan. The budgeting process traces the budget in one year from conception through to preparation, approval, execution, control, monitoring and evaluation. Scholars have divided the budgeting process into four main stages namely budget review, budget formulation, budget implementation and budget monitoring and control. In practice, the cycle as it operates is as follows: call circular; defense with ministry of finance and planning commission; collation by the ministry of finance; submission to executive council; presentation to parliament; consideration by parliament; enactment; implementation and monitoring and oversight.
It is well known that Nigeria is endowed with enormous human and natural resources, yet the country and its people are poor. Nigeria, which was one of the richest 50 countries in the early 1970s, has retrogressed to become one of the 25 poorest countries at the threshold of the twenty first century. It is ironic that Nigeria is the sixth largest exporter of oil and at the same time host the third largest number of poor people after China and India. Statistics show that the incidence of poverty using the rate of US $1 per day increased from 28.1 percent in 1980 to 46.3 percent in 1985 and declined to 42.7 percent in 1992 but increased again to 65.6 percent in 1996. The incidence increased to 69.2 percent in 1997. The 2004 report by the National Planning Commission indicates that poverty has decreased to 54.4 percent. But by 2010, the poverty rate has increased again to 69.1 percent. Nigeria fares very poorly in all development indices. From the above, it is clear that the resources in the country has not translated into development. As a matter of fact, the development indices in Nigeria is comparable only with countries in war.
Several scholars have argued that one of the greatest problems confronting Nigeria is corruption. It well known and documented that corruption is widespread, deep and endemic in Nigeria. Nigeria has been consistently rated among the most corrupt countries in the world by Transparency International in its Corruption Perception Index. In 2011, Nigeria was ranked 143rd out of 183 countries. In 2012, Nigeria was rated 139th out of 176 countries and in 2013, Nigeria was placed at the 144th position out of 177 countries.
Meanwhile, the budget has been described as the most important document for the development of any country. It is the most powerful way that a government can meet the needs and priorities of the citizens. The budget process is crucial to good development outcomes. Corruption in any country starts from the budgetary process. In very corrupt countries, the budget is done in secret. Releases are done without the knowledge of citizens. Procurement information is not made available to citizens and corruption is guarded and protected. This is why civil society organisations are advocating for an open budget system. A budget is regarded as open if citizens have access to the key budget documents; have high level of involvement in the budgetary process and have access to procurement information.
Democracy will be meaningless if the citizens do not participate in how government raise and spend money. This is why the tool (Open Budget Survey Tracker) developed by the International Budget Partnership (IBP) is a very useful instrument. It surveys the availability of eight key budget documents to members of the public: pre-budget statement, executive budget proposal, enacted budget, citizens’ budget, in-year report, mid-year review, year-end report and audit report. The Pre-budget statement is meant to disclose the parameters of the budget proposal including macro-economic assumptions. The enacted budget is the budget that has been passed into law by the legislature. The Citizens’ budget is a simplified version of the budget proposal that the average citizen can understand and relate with. The in-year report is a monthly or quarterly report of budget implementation. The mid-year review is a comprehensive update of implementation in the first half of the year. The year-end report is the annual report of implementation. The audit report is the audited annual account of the government.
- CHALLENGES OF BUDGETING IN NIGERIA
In Nigeria, there are a lot of blockages to effective budgeting. First and foremost, the budgetary process is not participatory. Citizens and communities do not participate in formulating policies and agreeing on projects that go into the budget. Meanwhile, it has been documented that wherever participatory budget is implemented, it has expanded citizenship, empowered excluded groups, redefined rights, deepened democracy and stimulated civil society.[i] But in the recent past, efforts have been made by the government to improve the participation of citizens through the Citizens Budget Portal.
Secondly, the budgetary process is not open. Corruption in any country starts from the budgetary process. In very corrupt countries, the budget is done in secret. Releases are done without the knowledge of citizens. Procurement information is not made available to citizens and corruption is guarded and protected. However, with the government joining the Open Government Partnership and with the efforts of the Bureau of Public Procurement the process is opening up.
Thirdly, the priorities of the budget are not in accord with the development challenges of the country and there is no synergy between plans, policy and budget. We have always argued that there is the need for better public finance management across the world because of increasing inequality and non-inclusive growth. The past five decades have witnessed monumental changes in the world. Global economic wealth has increased sevenfold and average incomes have tripled.[ii] Yet, poverty has increased to record high levels. The major problem is that wealth is concentrated in the hands of a few people while majority of the people live in abject poverty. The UNDP in its 1998 report documented that the three richest people in the world have assets that exceed the combined Gross Domestic Product of the 48 least developed countries. A report by Oxfam in 2014 indicated that the 85 richest people in the world have wealth more than half of the world’s population (3.5 billion people).
Fourthly, there are several frivolous expenditures in the budget that will not stand any reasoning and logic. For instance, the Centre for Social Justice documented N668.8 billion frivolous expenditure in the 2016 budget. They include N3.91 billion allocated annual reporting maintenance of villa facilities; N322.4 million for linking of cable to drivers rest room at the villa; ; N213.8 million for linking of cable from guest house to generator house etc.
Finally, the institutions and mechanisms for oversight of the budgetary process are weak. In any modern democracy, the legislature, civil society and media are expected to play oversight functions in addition to the internal control system put in place by the executive.
- ADVOCACY ISSUES IN NIGERIAN BUDGET
Advocacy is a strategy to influence policy makers to make a policy change. Advocacy is directed at policy makers including politicians, government officials, legislators and others whose opinions and actions influence policy makers.
From the definitions of advocacy:
- It involves communication
- It engages the policy maker (advocacy) or the public/the whole society (campaigns)
- It requires a lot of planning
- It needs a lot of targeting
- Messaging is key
- It requires mobilisation
- It requires organised action
- It is meant to bring about change
Since return to civil rule in 1999, citizens groups have engaged in advocacy to address some of these challenges. The advocacy issues have centred around the need for increased allocation to infrastructure, agriculture, health and education; the need to remove frivolous expenditure that defies logic and reasoning; improvement of citizens participation in the budgetary process, the need to monitor the implementation of the budget and effective legislative oversight. Specific advocacy issues have included advocacy for reduction of recurrent expenditure, budget realism, more citizen participation, effective legislative oversight, effective auditing from the office of Auditor General, more allocation to the social sectors, effective implementation of the budget, reduction of frivolous expenditure and reduction of service wide votes to international acceptable standards of between 3 and 10 percent.
Over the years, the recurrent expenditure has been increasing disproportionately. For instance, Federal Government expenditure increased from 701.1 billion naira to 4.2 trillion naira between 2000 and 2012. But there was a higher level of increase in the recurrent expenditure (seven-fold increase) than the capital expenditure (four-fold increase). The increase is so much that for the past few years, recurrent expenditure has been over 70 percent of the total budget. In the past, scholars have consistently criticized the budget for not being realistic. The macroeconomic assumptions are always too optimistic and seem unrealistic. The crude oil projections are always more than the OPEC target including the target of 2018. Although there is a slight improvement in citizens participation in the budget process, citizens make little or no input on projects that go into the budget. In addition, citizens lack the skills and resources to effectively monitor the entire budget cycle. The oversight from citizens groups, media and legislators is still weak and lacks systematic approach. The Office of the Auditor General needs strengthening to improve its independence and performance. Allocation to the social sectors is still very low even when compared to other counties. There are still frivolous expenditure in the budget. The percentage of service wide votes continue to increase beyond the international benchmark.
It must be recognized that despite the challenges mentioned above, previous efforts have yielded some gains in the budgetary process. There is clearly an improved engagement by citizens in the budgetary process. Discussions about the budget take place almost on a daily basis in the social media, newspapers, radio and television. Several citizens groups such as BudgIT, Centre for Social Justice, Follow the Money, CODE, African Centre for Leadership, Strategy & Development, NDEBUMOG, etc are tracking the budget. The Budget Office of the Federation has produced a simplified budget that citizens can engage with. The government has also set up the Citizens Budget Portal containing relevant budget information. On the citizens portal is an application that citizens can use to monitor projects and report. Citizens groups working with relevant committees of the National Assembly have developed tracking template that citizens groups can use to track the budget and the report used by the National Assembly for oversight. Citizens groups and the media are now more systematic in engaging the budget process. Several media platforms now have programmes dedicated to budget issues. In addition, there are marginal increases in allocation to the social sectors. For instance, allocation to education increased from 6.12 percent in 2017 budget to 7.03 percent in the 2018 proposed budget. However, despite the gains from previous advocacy, there are still issues with the 2018 budget especially with the process of making the budget and the content of the budget.
- ADVOCACY ISSUES FOR THE 2018 BUDGET
The 2018 budget is based on an Oil benchmark crude oil price of US$45 per barrel; an oil production estimate of 2.3 million barrels per day; and an average exchange rate of N305 to the US dollar; and target Gross Domestic Product (GDP) growth rate of 3.5 per cent.
First and foremost, there are still issues with the process of making the 2018 budget. Citizens and communities do not participate in the selection of projects that go into the budget. Legislators are not consulted on the selection of projects into the budget. The oversight of the budget process by the legislature, civil society and the media is still weak. The Public Accounts Committee which was very popular in the second republic has become very ineffective. There is still confusion on the limits of legislative power in appropriation.
Secondly, there is no much improvement in the content of the budget. There is still low budgetary allocation to sectors that will have impact on the lives of citizens such as Agriculture, health, education and infrastructure. For instance, while the budgetary allocation to education by Republic of Benin and Ethiopia is more that 20 percent of the total budget since 2012, that of Nigeria is less than 10 percent. In the 2018 budget, the allocation to education is 7.03 percent. It is very clear that allocation to education is very low in Nigeria especially when compared to other African countries: Burundi -16.59 % in 2010; 14.98 % in 2011; 16.43 % in 2012 and 17.24 % in 2013; Benin-25.02 % in 2012; 22.34 % in 2013; and 22.23 in 2014; Ethiopia 26.30 % in 2010; 29.67 % in 2011; 30.54 % in 2012 and 27.02 in 2013; and Madagascar- 19.78 % in 2011; 20.33 % in 2012 and 13.99% in 2013.
Frivolous, inappropriate, unclear and wasteful estimates have continued in the 2018 budget. The Centre for Social Justice has documented that this amounted to two hundred and nineteen billion, three hundred and seventy million, two hundred and seventy-two thousand seven hundred and thirty-three naira, forty kobo (N219, 370,272,739.40) in the 2018 proposed budget. These include items such as over one billion (N1,144,066,298) for fumigation of the office of the National Security Adviser; N2.2 billion for Social Media Mining Suite for Directorate of State Security; over N907 million for replacement of vehicles spares and tyres in the Presidential CVU; over N4 billion for annual routine maintenance of mechanical/electrical installations of the Villa and over N254 million for procurement of anti-terrorism, chemical, bioradiation and nuclear weapon equipment by National Security and Civil Defence Commission.
Thirdly, there has always been issue with budget realism. In the past three years, the exchange rate has been fixed around N305 to the US dollar. This is very far from reality. Even the oil revenue is projected at 2.3 million barrels per day. There is a large variance between projected parameters and actual results. For instance, the OPEC quota to Nigeria is 1.9 million barrels per day but 2018 proposed budget is 2.3 million barrels per day.
Fourthly, geographical analysis of the budget indicates that there is no systematic way to ensure fairness and equity e.g. 84 % of specialised and focused projects in the Ministry of Agriculture goes to Yobe State; for road projects-SW (21.4%); SS (19.17%); NC (17.76%);SE (15.96%);NW (14.69%) NE (11.27%); Power generation NW(16%); NE (47%); NC (35%); SS (2%); SW (0%); SE (0%). Power Transmission: SW (26%); SS (15%); SE (19%); NC (5%); NE (9%) and NW(26%). Aviation Capital budget: SW (12%); SS (8%); SE (9%); NW(26%); NE(1%); NC(44%); Railway counterpart fund (SE (16%); SS (5%); NC (13%); NE (14%); NW (47%); Inland Waterways and Maritime Capital Budget: SW (21%); NC (17%); NE (0%); NW (3%); SE (9%); SS (50%).
In addition, recurrent expenditure continues to increase when efforts should be made to decrease it. In the 2018 proposed budget, there is an increase by 11.38 percent over the 2017 approved allocation. Furthermore, although there is a slight improvement in the terms of early submission of the budget by the Executive to the National Assembly, it is still not in tandem with the Fiscal Responsibility Act and the Budget may not be passed even in the First quarter of 2018.
Another huge issue with the 2018 budget is service wide votes. Service Wide Votes became part of the budgetary process in Nigeria from 2003 to 2007. It was actually introduced to improve budget credibility and enhance fiscal discipline. Service Wide Votes is made up of unallocated funds set aside to meet genuine budget details of which cannot be ascertained at the time of making the budget because of sudden escalation of prices, contract variation, natural disasters, etc The international good practice in budgeting is to set aside unallocated amounts for unforeseeable or indeterminate expenditure at the time of budgeting. But to promote transparency and accountability, it is recommended that “Contingency Budget” or service wide votes should be between 3 and 10 percent of the original budget. But service wide votes have increased steadily in Nigeria. In the 2018 proposed budget, it increased from 31.7 percent in 2017 to 36 percent of the 2018 proposed budget.
- BUDGET TRACKING
Over the years, citizens’ groups and the media have been monitoring the budget process in Nigeria and the National Assembly has been doing oversight. Meanwhile, the volume of frivolous expenditure as captured by civil society is not decreasing and the work of civil society is not feeding the oversight work of the legislature. This is why the DfID programme Partnership to Engage, Reform and Learn (PERL) developed a budget tracking and reporting mechanism agreed by relevant committees of the National Assembly and Citizen groups.
Across the world, there are several examples of Public Expenditure Tracking systems to track and report on public budgets. Public expenditure tracking involves tracing the flow of public funds for the provision of goods and services from origin to destination. It can help to detect bottlenecks, inefficiencies and /or corruption in the budget process. It is key for government, the media and civil society to work towards ensuring transparency, accountability and effectiveness of the budget process.
A budget tracking and reporting system essentially involves tracking and monitoring.[iii] Tracking entails all activities meant to follow the money to the service provider. Monitoring looks at the issues of timeliness of disbursement, quality and adequacy.
Public Expenditure Tracking tries to examine the manner, quantity, timing and quality of expenditures. It tries to answer the following questions[iv]:
- To what extent are the actual expenditure different from the original budget and why?
- Are the implementers of the budget operating in compliance with set policies and procedures?
- Are there leakages or diversion of funds? If yes, how is it happening?
- Are there institutional, policy or administrative factors that may be affecting the quality of public spending?
- Are the products and services delivered in a transparent, efficient and cost-effective manner?
It is against this background that we must commend the Premium Times Centre for Investigative Journalism (PTCIJ) for the launch of Dubawa, Nigeria’s first online fact checking platform and Udeme, Nigeria’s budget implementation tracking platform.
- CONCLUSION
The budget is crucial in allocating resources and delivering services to citizens. But there are a lot of blockages to the budgetary process in Nigeria. Previous advocacy efforts have led to some improvement, but a lot still needs to be done especially in terms of process, content and implementation issues. There is the need to promote citizens engagement in the entire budget cycle from selection of projects through implementation to monitoring and evaluation. There is the need to promote budget literacy and enhance social, economic and political resilience. Citizens groups and the media need to work more closely with the legislature to ensure effective tracking, monitoring and oversight. Advocacy will play a big role in improving the budgetary process in Nigeria.
Otive Igbuzor, PhD, Executive Director, African Centre for Leadership, Strategy Development (Centre LSD)
E-mail: Otive.Igbuzor@centrelsd.org; otiveigbuzor@yahoo.co.uk
Website: www.centrelsd.org; www.otiveigbuzor.com
ENDNOTES
[i] Schneider, A (nd), Participatory Budgeting
[ii] Watkins, Kevin (2000), The Oxfam Poverty Report. An Oxfam Publication
[iii] Budget Analysis Guide, IBIS Education for Development.
[iv] Budget Analysis and Tracking by Save the Children
