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On the 2016 Budget

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NIGERIA’S 2016 Budget which has been submitted by President Muhammadu Buhari to the National Assembly, like any budget, should not be a mere expression of figures and facts. A national budget is an embodiment of a country’s strategic and policy priorities, and the politics and processes that throw them up. In these key areas, the 2016 spending plan before the National Assembly certainly can be substantially improved upon.

Budgeting is indeed intensely a political matter as both expenditures and revenues are about allocation of resources among competing constituencies within a political environment. What is of importance to the citizenry, constituencies and society at large is expressed through the political and democratic process.

Because budgets aim to finance programmes and projects that reflect the country’s strategic priorities and are of greatest current and future importance to the citizenry, in more developed climes, the opposition parties have well groomed shadow ministers on key issues and priorities of importance. There are well-established institutes on all sides of the political spectrum that systematically conduct policy research and scenarios that reflect the core priorities and vision of the parties for the country. New governments are then able to hit the ground running.

These ingredients of course, have been missing in Nigeria’s budgeting process. For the most part, the 2015 election campaigns especially at the presidential level were centered on mudslinging and less on issues with the result that the then ruling Peoples Democratic Party, (PDP) was not prepared for ouster from office just as the All Progressive Congress, (APC) was not prepared for governance.

It appears the new government had only a plan to plan after winning that election and the new opposition party has neither a credible plan for critiquing government proposals nor alternative policies and programs to address current economic storms.
So, the responses to the current state of the economy via the budget are the outcomes of this lack of credible plans on both sides of the political divide.

On the surface, the 2016 budget suggests an attempt to balance equity, efficiency, and effectiveness. On equity, the budget tries to provide some bailouts with special intervention programs, conditional cash transfers, and school feeding programs. The budget tries to balance the short-term equity programmes with infrastructure spending that should boost long-term productive capacity, while delivering on effective security and institutional governance.

The devil is, however, in the details and the process leading to those details. Several embarrassing stories on the budget have since emerged. Nigerians have been told that the budget was missing from the National Assembly. Then, the Executive now claims that the budget has been doctored by some budget cabal in ministries, departments and agencies.

Frivolous and scandalous spending, sprinkling and padding of unjustified item lines in the proposed national budget have also been identified. Notable examples often cited are budgeting to spend more on capital projects for Aso rock clinic as against the budget for all of the country’s teaching hospitals combined; and scandalous amount for international conferences and purchase of cars.

Ministers are also claiming that there are discrepancies between their ministries’ figures and the budget figures before the National Assembly. All of these suggest absence of effective inter-ministerial co-ordination and the levity with which budget preparation has been treated. It does not speak well of the cohesiveness of the administration.

The budget process should ensure aggregate fiscal discipline, facilitate allocative efficiency with government resources devoted to areas of greatest current and future public priorities, and encourage operational efficiency among agencies. Some features of the process that help facilitate those desirable public policy priorities and processes are well documented.

First, the budgetary process should develop a cycle of not less than one year. Using this time framework, the President should be submitting the 2017 budget to the National Assembly by now. Nigeria’s 2016 budget has been prepared under three months from the time ministers were confirmed and the budget submitted by the President to the National Assembly.

President Barack Obama of the United States of America submitted the 2017 fiscal year budget, which begins in October 2016 to the U.S. Congress on February 10, 2016. So, the preparation of the final budget would have taken at least another six months.

Second, the budget must be based on realistic projections of expenditures and revenue and other data useful for developing it. The 2016-2018 Medium-Term Expenditure Framework (MTEF) has been prepared in a hurry and its projection of oil revenue has been dead on arrival. While a $38 oil price was assumed in the budget, the current price is around $31, a level that some operators suggest is the production break-even point implying that no oil revenue would accrue to government coffers at this level. The other budget parameters including for non-oil revenue appear to be very ambitious given historical budget execution deficits. In this context, the absence of a credible Economic Management Team is clearly visible; it was only two days ago that the team was named.

Third, while the principle of zero-based budgeting is desirable to weed out frivolous spending proposal, its complete application in future budget planning should be comprehensive and ensure the value chain link of the budget from inputs, activities, outputs, and outcomes and impacts and vice versa. In this manner, there would be clarity in terms of what the budget expects to achieve, the process of how, when and where it will be achieved, and whether the budget targets are met or not.

On the fourth point, monitoring and evaluation of outcomes provide the basis for transparency and accountability as the budget is prepared by the executive, considered and approved by the legislature, and executed by the MDAs. At the minimum, Nigerians expect the budgets to be prepared as a means for establishing the policy intentions and plans of the executive arm based on the priorities agreed at the ballot between the governed and those governing them; provide for diligent review and approval by the elected representatives in the National Assembly; and ensure a transparent and accountable performance review structure for implementation of approved plans.

The ultimate goal is every naira to be spent not only equitably, efficiently and effectively, but leads to improvement in people’s lives. The objective of this approach to budgeting is to determine the outcomes that will ultimately impact the lives of the citizens in terms of their welfare and security as enshrined in the Constitution. In the instant case, the wants and all in the 2016 Appropriation Bill should be cleared speedily.