As the 2014 federal budget was being finalized in November 2013, a team of IMF staff spent a few days in consultations with the Finance Minister (a World Bank alumnus) and the Director-General of the Budget (an IMF alumnus). On the 26th day of November, the IMF staff issued the “Concluding statement of the IMF mission for the Nigeria 2013 Article IV consultation discussions.”
Therein, the IMF observed that the key challenge facing Nigeria is how to promote sustained inclusive growth, reduce poverty, inequity and unemployment. The IMF also observed among other things, that compared with 2012 oil production fell by between 6 and 18 percent owing to production losses and theft. They opined that the exchange rate is somewhat overvalued – a coded message to the federal government to devalue the Naira.
It was therefore not surprising that on 20th January 2014, the 2014 federal budget was instructively called ‘a budget for jobs and inclusive growth’ in the presentation ceremony hosted by the Minister of Finance. It was derived directly from the sound-bites identified for the Ministry and Budget Office by the IMF.
The budget philosophy is clear with the plethora of slogans and acronyms that are consistent with the stance of the typical right-wing, liberal market fundamentalism that the current administration believes in. This review of the 2014 budget proposals is being undertaken by the APC to draw attention to the core issues that should concern not only our legislators in the National Assembly but the Nigerian public.
Budgeting Practices of the Administration Jonathan
The Jonathan administration’s first budget for the year 2011 witnessed an alarmingly significant increase in personnel costs from about N600bn in 2007 (5% of federal budget) to current levels of some N1.7 trillion (35% of total budget!). The budget contained a consumption (recurrent) portion equal to 74.4% of federal budget, with a paltry 25.6% for the capital projects which create the jobs and other positive multiplier effects in the national economy.
In that year’s budget speech, the administration promised to reduce recurrent spending by at least a percentage point annually thereafter. This proposal was thought to be insignificant and lacking in ambition even then.
In 2012, the recurrent portion was reduced to 71.5% which was commendably higher than expected. In 2013, the Finance Ministry disingenuously changed the method of calculating the recurrent portion to claim that it was 67.5%. Actually, the recurrent portion that year was still a little above 70%! It is a matter of concern that this has risen back to higher than the 2011 level of 74%. This means that government is growing larger in size while the quantity and quality of public services continue to deteriorate.
The Fiscal Responsibility Act 2007 intended that the foundational basis for the 2014 budget is contained in the Medium Term Expenditure Framework (MTEF) for 2014-2016. The MTEF was submitted to the National Assembly and debated with the slight adjustment of the benchmark crude oil price to $77.5 per barrel. The draft 2014 budget differs significantly in several areas from the approved MTEF in its revenue and expenditure assumptions, and therefore disconnected therefrom.
Objectives of the APC Budget Review
This review will cover a critique of the overview of the 2014 budget presented by the Minister of Finance on January 20th 2014. It will then show the limited connection between the MTEF and the budget as presented, by looking at the revenue and expenditure assumptions in both, focusing on departures, inconsistencies and omissions.
We will then take the budget and examine to what extent it attempts to generate the inclusive growth and jobs that the Jonathan administration claims. We will go into sectorial as well as MDA-level distributions of expenditure, pointing areas of waste, questionable prioritization and potential for savings, which can then be applied towards sensible capital expenditure that will uplift the quality of life of Nigerians.
We will conclude the review with suggestions for the restructuring of the budget to serve the greatest number of Nigerians prioritizing their needs for economic progress, social justice and equality of concern for the welfare of our citizens.
These are guiding principles around which the APC was born. With our significant strength in the national assembly, the APC legislators in cooperation with like-minded colleagues in the National Assembly can restructure and improve the content of the 2014 budget to serve the people of Nigeria, and not the select few that will capture it as currently proposed.
Key Assumptions in MTEF and the Draft 2014 Budget
The MTEF is expected to provide a basis for annual budget planning not only for the federal government, but also for all the 36 states of the federation and local governments. That is why federation-wide expenditures (referred to as ‘first-line charges’ in the days of military rule) are tucked away in the document, outside public scrutiny and framework for appropriating such expenditures. Examples include amounts set aside for Joint Venture Cash Calls, gas infrastructure investment costs, Pre-Shipment Inspection Agents’ fees and expenses and seed monies for exploration of oil in ‘frontier’ locations outside the Niger Delta.
Neither state governments nor their legislatures are in the decision-making loop to debate and finalize the MTEF, and it is unclear if its approval by the National Assembly amounts to the expenditure authority lawfully recognized by sections 80, 81 and 162 of the Constitution.
The MTEF assumes an annual oil production of 2.3883 million bpd in 2014 which is projected to rise to 2.5 million bpd in 2015. These assumptions are unrealistic! The highest oil output Nigeria has ever recorded was the peak 2.44 million bpd in 2005 which fell to as low as 1.8 million in 2009. Between January and November 2013, the US Energy Information Administration (EIA) reported that our crude oil production averaged below 2.0 million bpd, similar to the 2008-2009 levels. Oil production of nearly 2.4 million bpd has been irrationally adopted in the 2014 budget.
In 2013, the budget was based on a crude oil price of $79 per barrel while prices averaged more than $110 during the year. The MTEF for 2014 proposed a benchmark price of $74, which was revised upwards by the National Assembly on the insistence of APC legislators to $77.50 per barrel. It is still too low, and perhaps need to be adjusted back to $79 during the appropriation process.
On the basis of this benchmark price adjustment, an additional N173 billion goes into federation account as crude oil sales and federally – collectible revenues rise to N10.692 trillion. Gross federation account inflows increase to N10.276 trillion. The ‘hidden’ deductions referred to above are:
1. Joint Venture Cash Calls N858.588bn $5.367bn
2. Gas Infrastructure and Development N304.541bn $1.90bn
3. Oil Pre-Shipment Agency Expenses N3.200bn $0.02bn
4. Frontier Exploration Services N16.000bn $0.10bn
5. Fuel Subsidy Payments (NNPC/Marketers) N971.138bn $6.07bn
These deductions amount to over N2 trillion from revenues accruing to states and local governments. The deductions are decided unilaterally by the federal government without any consultation, transparency or rigorous debate. It is also noteworthy that these sums deducted do not get transferred into the federation account as required by the Constitution.
This effectively brings down net oil revenue to N4.206trn. After adding non-oil revenues and taxes, we estimate that the federal government net share of federation account would amount to some N3.662 trillion. The following special funds to be held in trust by the federal government in 2014 for the entire nation need to be transparently budgeted, accounted for and audited regularly:
• Ecology and Derivation – 1% N60.000bn
• Statutory Stabilization – 0.5% N30.000bn
• Natural Resources Development – 1.68% N100.800bn
TOTAL – 3.18% N190.800bn
Implementation of the 2012 and 2013 Federal Budgets
The poor implementation of capital budgets while disbursing 100% of all recurrent budget items has been the dominant characteristic of the Jonathan administration. Implementation in 2012 budget was shrouded in controversy; by the third quarter of the year, the finance ministry pegged implementation at 56% but when new facts emerged, the ministry revised the figures to about 12.6%. The House of Representatives came up with a different figure entirely and issued a threat to have the President impeached if by September of that year the budget was not implemented 100%. The budget was not implemented 100% and neither was the president impeached. Interestingly, the implementation for the four quarters of 2012 fell below the projected estimates.
The 2013 Appropriation Act envisaged spending N4.987trn, an increase of about 6% from the N4.69trn for 2012. This consisted of statutory transfers of N388bn (8%); N592bn (12%) were earmarked for debt servicing; while personnel and overhead costs amounted to N2.419trn (48.5%) and capital expenditure was some N1.589trn (less than 32%). Less than one out of every three naira budgeted in 2013 was to be invested to improve education, healthcare, transportation or electricity supply.
A summarized analysis of two key ministries’ budgets in 2013 revealed the following structure: N278.8bn was budgeted for Health; about 79% (N223bn) of the entire sum was voted to recurrent expenditure and N55.7bn (19.9%) for capital expenditure. The trio of HIV/AIDS, Tuberculosis and Malaria remain major public health issues in Nigeria with our nation having the highest number of malaria cases in the world accounting about 30% to the global burden, according to WHO. In light of this, how does a federal government justify allocating under one-fifth of its inadequate health budget to capital expenditure?
Education was generously allocated some N427.5bn in 2013. Like health, the major chunk of its allocation was misdirected; N60.1bn (14%) was allocated to capital expenditure. At N367bn (85.8%), recurrent expenditure was about six times the size of capital provisions. The largest slice of the federal education budget and administrative energy in 2013 went to secondary schools that ought to be the purview of state governments, while university and polytechnic education – the proper concern of the federal government, suffers.
In the 2013 budget, total allocation to the power sector was N74.26bn, a measly 1.4% of the total budget. Capital expenditure for the power sector was pegged at N70bn (about 1% of the total budget, or 3% of the total capital budget) while recurrent expenditure was N4.26bn. For a sector in dire need of rehabilitation and resuscitation, these figures were not indicative of any sense of prioritization that would amount to any improvements of power supply anytime soon.
While the entire recurrent portion of the budget was implemented in full in 2013, only N646.88bn out of the N1.62 trillion capital budget was released, cash-backed and spent by the relevant MDAs as at the end of December 2013. This meant that while the overall budget implementation for the year deceptively stood at about 80%, the more impactful portion – the capital budget – recorded only about 40% implementation. The experiences of 2012 and 2013 budgets should be studied as the 2014 proposals are being considered. The SURE-P capital budget did better, recording some 60% implementation, which remains at an unsatisfactory level.
Noisy Celebration of Non-Existent Achievements
It is in the light of the foregoing that the celebratory tone of the Finance ministry’s characterization of the 2013 budget must be interrogated. The highlights of the minister’s briefing included the now over-hyped GDP growth rate of 6.5% and the questionable claim of 1.6 million jobs none of which can be convincingly substantiated. No one can see these jobs, and none of them amount to NEW employment opportunities – there are some mythical 250,000 jobs in agriculture in 10 northern states that are not identified; 30,000 in Onne Free Port and some dodgy claims about resultant jobs from SURE-P spending which mostly targeted funding equipment-intensive civil works contract awarded between 2006 and 2008!
The claims about improvement in the power sector contradicts the facts of actual power generation which has never really moved beyond the 3,500MW mark, and current realities in households, factories and offices all across Nigeria that spend more on diesel and inverters as ever. Apparent electricity supply improvements have therefore been sporadic, inconsistent and unstable; with apparent improvements in Abuja, state capitals, and large urban areas while the less visible and voiceless smaller towns and rural areas are starved of electricity.
For those that know the performing capacity of the Jonathan administration, its claim of constructing 125 Almajiri Schools in one fiscal year is a near-impossibility. Perhaps, the finance ministry was referring to the number of classrooms, not full-pledged ‘schools’, and even that needs further investigation. The claimed successes of the 2013 budget are simply in contradiction with the logic of 40% capital budget implementation and realities on ground in locations all over Nigeria.
In essence, the actual performance of the 2013 budget was 84% recurrent and 16% capital expenditure! This is woeful and represents the path to underdevelopment, not the growth promised. The Finance ministry continues to talk about the budgeted levels of recurrent spending without disclosing the actual utilization for past years because they will show how really bad the situation is.
The 2014 Budget Proposal
The budget proposal claims to be a continuation of the broad economic direction embedded in the 2012 and 2013 budgets, which aimed to diversify the Nigerian economy and build a shared future for all. Whether the past budgets of 2012 and 2013, or the budget currently proposed are consistent with these claims will be clearer and evident from the review in the ensuing paragraphs.
First, the APC believes Nigeria must cure itself of its petroleum-dependency through government-directed investments in agriculture, non-oil minerals, manufacturing, housing and construction, information technology, entertainment and sports. These are sectors with high growth potential coupled with the capacity to create millions of well-paying jobs for our youths.
Secondly, the APC believes that government policy and public investment should be focused on making life easier for going concerns, start-ups and other entrepreneurs to establish and grow their businesses. Arising from these, public investment in improving security, law enforcement and contract compliance, infrastructure particularly electricity and transportation, and access to low-interest loans should command the attention of the federal budget.
The budget statements of 2012, 2013 and 2014 all made stupendous claims along these lines but have not done much of that when it comes to effective funding. This is partly responsible for Nigeria’s deteriorating rankings on indices of global competitiveness of the World Economic Forum and World Bank’s Ease of Doing Business (EDB) rankings since 2010. Poor infrastructure has generally been the greatest impediment to competitiveness of the Nigerian economy according to successive EDB annual reports.
The 2014 budget envisages a total expenditure of N4.62 trillion, a 7% drop from the 2013 figure of N4.987 trillion. This is made up of N400bn (2013: N388bn) for statutory transfers, N737bn (2013: N592bn) for debt service, N2.385 trillion (2013: N2.419 trillion) for recurrent non-debt expenditure, and N1.245 trillion (2013: N1.589 trillion) for capital projects. We have adjusted the debt service figure to include N25bn in the recurrent budget for the redemption of maturing domestic bonds.
The statutory transfers are single line items allocated to agencies without a detailed breakdown of projects and programs of expenditure. They are intended to give the agencies some degree of fiscal prioritization and financial autonomy at the high price of transparency and accountability.
The current beneficiaries of the statutory transfers are the Judiciary (N68bn), Niger Delta Development Commission (N62bn), Universal Basic Education Commission (N70bn), the Legislature (N160bn), Public Complaints Commission (N2.9bn), INEC (N45bn) and National Human Rights Commission (N1.35bn). The INEC allocation excludes another N21bn in the service-wide vote for general election logistic support” so the 2014 elections are likely to cost us some N66bn!
The cost of the elections can be significantly reduced by holding all the elections in one day. During the 2011 elections, the Nigerian electorate demonstrated sufficient sophistication to be able to conduct all the elections in one day. If INEC leaders were genuinely concerned about the possibility of something going wrong on the first day of the elections, they would not propose a time-table that has the most sensitive and complex of the elections (the Presidential contest) holding on day 1.
The proposed three-month National Dialogue has been budgeted N7bn, more than what the average federal university gets in one year and about the same as the N8bn budgeted for the “National Job Creation Scheme” for 2014! At a daily cost of about N80 million for less than 500 delegates, each delegate costs more N150,000 daily while according to the National Bureau of Statistics, more than 100 million Nigerians live on less than N200 per day!
The main sector allocations are for education – the sum of N655bn for the ministry, its 208 parastatals and agencies including the Universal Basic Education and the Tertiary Education Funds. Health got N263bn while the Defense ministry and its various arms and agencies got an increased allocation of N376bn (N340.3bn, N12bn for Army Quick Response Group and another N24.1bn for internal operations of the Armed Forces tucked away in the service-wide vote).
The Police got N301bn, Works N129bn (plus another N100bn from SURE-P portion of the budget), Power got a paltry N102bn (Ministry – N62bn, NELMCO, Bulk Trader and MYTO – N40bn) while the allocation for the Agriculture ministry fell by nearly 20% from N83bn in 2013 to N67bn this fiscal year. Foreign Affairs ministry was allocated N63bn for the headquarters, five agencies and our 120 foreign missions.
The Niger Delta ministry, associated agencies and programs were allocated a total of N204bn (Niger Delta ministry, associated agencies like the NDDC (N62bn), the Amnesty Program (N63bn), and SURE-P portion (N30bn). This amount is twice the allocation for electric power, and more than the budgets of the ministries of works, transport (N81bn including SURE-P), Water Resources (N38bn), Federal Capital Territory (N30bn plus N23bn SURE-P portion) and the Millennium Development Goals (N120bn).
In direct contrast to this, the entire North-East zone got allocated a pathetic N2bn to address the devastation the six states have suffered from years of insurgency! This meagre budgetary proposal may have to do more with the dominance of the opposition in the zone than an assessment of real need. Indeed, Nigeria’s multilateral and bilateral donors have designed and submitted a Special Initiative for the North-East comprising N33.6bn program to address the needs of the region, but this has not been reflected in the 2014 budget in any way.
Even if the allocation to the Niger Delta focused-agencies is justifiable, the outputs and outcomes of similar allocations in past years leave much to be desired on account of pervasive corruption and lack of implementation capacity in the benefitting MDAs. The Federal Government acknowledged that much recently regarding the NDDC.
The total budget for the National Assembly is effectively N255bn made up of N150bn statutory transfer for the legislature’s recurrent needs, N5bn for the National Institute of Legislative Studies, and another N100bn for ‘constituency projects’. The entire judiciary got a modest N68bn for recurrent and capital programs for 2014.
Pensions and gratuities which have historically remained a major area of fraud and waste got N187.5bn in 2014. The Ministry of Finance has also made a significant change to the accountability for the service-wide vote by moving it from the office of the SGF. This budget head is where most discretionary and absurd allocations are hidden, and need to be interrogated more closely, particularly in light of revelations about the role of finance ministry in the abuse of its discretionary power over import duty waivers and disbursement of the ecological fund in 2013!
In summary, an overview of the budget proposals clearly shows an attempt at spreading expenditure items in various parts of the budget to mask the administration’s real priorities as against, and in contradiction to, the stated objectives of the appropriation bill. Furthermore, the critical areas earlier identified that need enhanced public funding to generate inclusive growth with jobs have received much lower allocations than expected. The budget contains many classification errors, typos and duplication of items or line items that are clearly not needed. These need to be corrected by the National Assembly.
Many line items in the recurrent and capital budgets were simply cut and paste from the budget of 2013, complete with descriptions, amounts and even typographical errors. MDAs simply felt the need to allocate amounts large enough to exhaust their respective fiscal envelope for the year without any regard for public purpose or real needs. Perhaps a movement from the envelope system to a zero-based budgeting system is what is needed to impose some fiscal and hard budget constraints on federal MDAs.
The Jonathan administration has predictably made no statements about fighting corruption in the 2014 budget. The levels of allocation to MDAs with publicly-acknowledged corruption challenges (e.g. the Ministry of Aviation and agencies), while the anti-corruption agencies are hardly getting by in this budget says it all. We will now look at specific areas that the legislature will need to focus on to ensure the 2014 Budget works for all Nigerians.
Wasteful Spending and Wrong Priorities
The seeds of wasteful budgeting that prefers consumption to investment and has resulted in the instant gratification of a few to the detriment of the long term interest of the many were sown in 2010 when President Jonathan, purely for political expediency, increased the salaries of civil servants without due regard to affordability and productivity. This single decision led to demands for commensurate wage increases by federal parastatals, states and local government employees, professionals and private sector entities.
The personnel cost component of the budget has tripled from about N600bn to nearly N1.8 trillion today, despite retrenchments and non-replacement of all retiring employees. It is doubtful whether the phenomenon of ghost workers has been totally exorcised from the federal public service. The Legislature should consider making a one-off budgetary provision for engagement of reputable firms to conduct a comprehensive personnel audit service-wide to supplement the achievements of IPPIS which was rolled out since 2006 but now to be another bottomless fiscal pit.
Statutory transfers jumped from about N100bn in 2007 to N400bn in 2014. Since several fringe benefits and allowances and pensions are linked to salaries, all these escalated as well. The Oronsaye Committee report made sound recommendations on the rationalization of the size of the federal government, but none have been adopted due to limited legitimacy of the Jonathan administration and absence of political will. This must be addressed sooner rather than later.
The following aspects of the overhead component, and some capital items constitute centers of wasteful spending and account for between 3% and 59% of the budgets of individual MDAs as summarized in the attached Excel spreadsheet:
1. Local travel for Training N6.5bn 15. Financial Consulting N3bn
2. Local Travel for Others N9.8bn 16. IT Consulting N0.5bn
3. Intl Travel: Training N4.4bn 17. Legal Services N2.4bn
4. Intl Travel: Others N9.9bn 18. Engineering Services N0.3bn
5. Utilities N7.7bn 19. Budget Preparation N0.4bn
6. Stationery, printing, etc. N13.9bn 20. Fuel for Vehicles N4.7bn
7. Drugs/Medical Supplies N1bn 21. Fuel for Generators N4bn
8. Field/Camping Materials N0.6bn 22. Insurance Premiums N3.5bn
9. Teaching/Instructional N0.7bn 23. Refreshment/Meals N2bn
10. Maintenance: vehicles, etc. N40bn 24. Honorarium/Allowances N2.4bn
11. Training: Local N8bn 25. Medical Expenses N1.9bn
12. Training: Abroad N2.9bn 26. Welfare Packages N4.6bn
13. Services: security, rent, etc. N11bn 27. Sporting Activities N4.9bn
14. Security Votes N36bn 28. Recruitment N0.5bn
Within the low capital budget, there were many items of apparent duplication, waste and clear evidence of misplaced priorities throughout MDAs. For instance, in many ministries, clearly ongoing projects were listed as NEW, indicating careless budget drafting or a proliferation of projects beyond the execution capacities of most agencies. Some of the large ticket items that can be interrogated and substantial amounts transferred to other areas of need to improve the quality of spending include:
• MDG interventions nationwide – N120bn including N9bn for monitoring and evaluation. Since the exit of Mrs. Amina Az-Zubair, the Office of Senior Special Assistant to the President- Millennium Development Goals (OSSAP-MDGs) has become a cesspit of corruption and incompetence. As at January 2014, the 2013 allocations for the Conditional Grants Scheme (CGS) states-track have not been disbursed to the state governments one year after the states were required to provide their counter-part funds.
We hear the money has been spent for other purposes and they are waiting for the 2014 allocations to pay the 2013 grants. The OSSAP-MDGs superintends an annual budget that is bigger than the budget of many states in the country and therefore deserves more stringent oversight.
• Research and development – N39bn which simply do not make sense in many MDAs that have little or no R&D focus. In the budget, R&D is the heading where some of the most wasteful ‘feasibility studies’, all manner of studies, master plans and consulting assignments are tucked away to exhaust MDA envelopes.
• Acquisition of computer software – N14bn is another area of waste and fraud. The FGN had a global agreement with Microsoft for licenses to use software, but every MDA budgets to acquire customized software that is often not needed, and not in compliance with any system-wide standard. Most of the budget provisions are simply wasted.
• Acquisition of Motor Vehicles – N14bn is too large an amount in a federal government that had monetized the acquisition of vehicles since 2004. What are, and who are the beneficiaries of these vehicles?
The RMAFC ought to be in the forefront in asking these questions as all political office holders and public servants other than the President and Vice President are not entitled to any government-provided vehicles since 2005!
The 2014 budget’s many slogans and acronyms are consistent with the style of the Finance Ministry since it first gave us the structural adjustment program (SAP) in the late 1980s with the SURE-P, PACT, ATA, G-WIN and such like. If the slogans translated to less corruption, jobs for our youths and reduction of poverty, they would have been acceptable. Unfortunately, the slogans have not led to a capital budget with enough of the job-creating public works programs necessary to serve the needs of our people. We will therefore propose areas that the APC will recommend to the legislature to redraft the 2014 budget and thereby enact an inclusive budget to serve the needs of our people.
Redesigning the budget to serve the people:
It is therefore recommended that the APC legislators in the National Assembly working with fair-minded honorable and distinguished persons from other parties work in a multi-partisan manner to create a more inclusive budget. The House of Representatives in particular which has a greater voice over money bills should bear the following points in mind as the budget debate proceeds to conclusion:
(1) Amend the FRA 2007: The Fiscal Responsibility Act 2007 should be amended to require the presentation of the draft MTEF/MTSS to the National Economic Council after consideration by the Federal Executive Council. This would ensure that State Governments whose revenue share equals nearly half of the national total have a substantive say in joint venture cash calls, oil output, exchange rate and other assumptions.
(2) Revise the Oil Output Assumption Downwards: Consideration should be given to revising the oil output assumption downwards to a more realistic level of about 2.1 million barrels per day, while insisting that ALL revenues first get paid into Federation Account and duly appropriated before any expenditure of any kind or type. The revelations by the CBN governor that led to the admission of unconstitutional action by the NNPC must be addressed henceforth, and be embedded in the 2014 Appropriation Act.
Even if we accept that the $10.8bn admitted by the NNPC and Finance ministry as ‘reconciled’ from revenues unlawfully diverted as due to the federation, this represents a whopping N1.7trn! This amount of money can add 10,000MW to the nation’s power generation capacity or 170,000 new classrooms in our primary and secondary schools or new specialist mother and child hospital with 5,000 bed spaces to begin to deal a decisive blow to Nigeria’s unacceptable maternal and infant mortality ratios.
For less than half of this ($10.8bn) N1.7trn we can build a nationwide gas pipeline to deliver much needed gas to power generation plants across the country. If no immediate action is taken to rein in the NNPC, we will probably suffer leakage of revenues in excess of $10.8bn this year, given the desperation of the ruling PDP to dispense patronage. If it is $20bn that gets confirmed as unremitted, imagine how much more benefit the federation has lost from NNPC’s unconstitutional expenditure for which the President must be held ultimately accountable.
(3) Remove Discretion in Expenditure of Special Funds: The spending programs for the special funds of about N191bn should be demanded for and submitted to the National Assembly before the current appropriation bill is passed.
(1) Effect Beneficial Corrections and Amendments to the Draft Budget: In addition to the areas identified above, the National Assembly should delete the following budget provisions and transfer them to essentially capital items, examples of which will be provided below:
a. Reduce the travel budget by 75% and training budget by 50% and save N30bn.
b. Reduce the security votes in MDAs by 50% and eliminate them in all but needy ones and save at least N20bn.
c. Reduce some of the non-essential recurrent spending listed above and save at least N5bn.
d. Reduce the ‘constituency projects’ provision to the 2013 level of N50bn, thus saving N50bn.
e. Delete all provision for outsourced services, all administrative charges, and running and ‘verification costs’ for all pensions as they were all provided for in the 2013 budget. This will save about N11bn.
f. Delete all provisions in MDA budgets for contributions to local, state and international organizations, which have been partly duplicated in the service-wide vote. This will save about N3bn.
g. Reduce the provision for the National Dialogue to N3bn and save N4bn for the capital budget. The provision is excessive. The National Political Reform Conference of 2005 cost N945 million and likely to lead to the same conclusions!
h. Reduce overall provision for monitoring and evaluation in the entire budget by 75% and save N9bn for utilization on other capital expenditure.
i. Apply an across-the-board reduction of 75% on all ‘research and development’ budget items and transfer the estimated savings of N35bn to other capital projects.
i. Roll up the following wasteful or ambiguous line items from the service-wide vote; national job creation scheme – N8bn, special intervention – N62.8bn, and sinking fund for infrastructural development – N30bn, and transfer the total of N100.8bn to other capital projects.
j. Reduce the provision of N14bn for acquisition of computer software and N14bn for motor vehicles in the 2014 by 75% and transfer N20bn to other job-creating capital projects.
k. Eliminate the duplications and “cut-and-paste” items in the budget; for instance provisions for kitting of youth corps members in virtually every MDA budget, indefensible grants and the like, and transfer these to the capital budget. Estimated savings of N2bn.
j. The Finance Minister appears intent on creating new agencies instead of restructuring and making existing ones work better. An example is the recent establishment of the Mortgage Refinance Company that will enjoy N50bn federally-guaranteed bond flotation and N2bn FGN contribution in the 2014 budget. This new company merely duplicates the statutory functions of the Federal Mortgage Bank of Nigeria and should not enjoy federal budgetary support.
k. Another example of this duplication is the plan to set up a brand new ‘wholesale’ development finance institution with a budgetary provision of N16bn instead of restructuring the Banks of Industry and Agriculture to make them more effective. This is in direct contradiction to the recommendations of the Oronsaye Committee on rightsizing the federal government and should not enjoy budgetary support. The amounts proposed – N18bn should be taken off the service-wide vote and transferred to the capital development fund.
l. Delete the provision for the Presidency’s 11th aircraft (N1.5bn), the VIP wing of state house clinic (N0.75bn), and upgrade of Villa facilities (N1.5bn). Estimated savings of N3bn.
(1) From the foregoing items alone, over N350bn can be freed to be spent on more job-creating capital projects like:
o The construction of 2,000 housing units in each state of the federation plus the FCT (either by the FHA or grants-in-aid to the various State Housing Corporations to do so) at the cost of N90bn.
o Enhanced funding of key roads and bridge projects like the East-West Road, Lagos-Ibadan Expressway, New Niger bridge, Onitsha-Enugu Expressway and Abuja-Lokoja Road that have consistently suffered from inadequate funding – N100bn,
o More funding for the construction of Police and Military Barracks all over the country, and the rehabilitation of existing ones at the cost of N30bn,
o Better funding of the agricultural and SME sectors with the sum of N50bn.
o Increase the North-East Intervention Fund to N11bn with an expected contribution of N33bn from multilateral and bilateral donor agencies.
o Increase funding for power supply by earmarking N30bn for gas infrastructure and N30bn for the transmission company to complete ongoing projects.
The above-proposed adjustments will raise the budgetary allocation to capital expenditure by 4.7% to 31.6%, which however remains too low, relative to what is required to meet the stated objectives of this budget. We must therefore work towards more ambitious targets for the capital expenditure component of the national budget from 2015 onwards.
This review was prepared to guide discussions and debate within the various APC committees, the leadership of the party, progressive governors’ forum and stakeholders in the National Assembly. It is aimed at exploring possibilities and encouraging thinking outside of the box to give Nigeria a better budget for fiscal 2014 and beyond.
Abuja, February 2014No tags for this post.