By Boniface Chizea
These are giddy and momentous times in the realm of the preparation of the national budget and the omens must be rightly captured and celebrated. It is not a mean feat for the nation to be poised for the return to a budget year that is synchronised with the calendar year; January to December. This development at once aligns our practices in this regard to global best practice as well as makes it easier for economic agents to plan their activities. This realignment should ultimately boost investment flows particularly to the non oil sectors of the economy.
First let me arrogate to myself some personal credit for this development while your indulgence is sought to forgive the “humility”. I wrote an open Memo to the President following his victory at the elections in which amongst other recommendations I drew attention to the need for this realignment highlighting the possible benefits and while it was published on a Thursday while the President was on a short vacation at Daura, on the following Sunday morning the President released a statement pledging to target this recommendation whilst speaking to some other recommendations in the Memo. This my particular claim might not be as farfetched as on two different occasions I was pencilled down for ministerial appointment under this President, the latest was in August 2017 when a mid term reshuffling was contemplated. I was recruited then for a specific ministerial position but alas the rejigging later was jettisoned.
To contextualise this development, the records have it that this is the fourth time in 20 years that the budget will be signed within the year before the commencement of the budget year and the current experience holds the record as being the earliest to be signed. There is no doubt that this is a fallout of the current existing harmonious relationship between the Executive and the Legislature. We must here give due credit to the National Assembly (NA) for working remarkably hard for this goal to be achieved. The records are that the President laid the budget before the National Assembly on October 8, 2019 a bit behind schedule as the Fiscal Responsibility Act recommends that the budget details should be laid by the end of the third quarter. And for the budget to be signed into law on Tuesday December 17, 2019 is a remarkable achievement.
Sure riding on the prevalent goodwill the President decided to sign the 2020 budget into law knowing that any outstanding issues will be amicably resolved as the President dutifully gave notice that he would revert for virement reasons or further adjustments to budget heads as might be considered necessary.
The issue of the National Assembly regularly hiking up the budget estimates whenever it is sent for their approval must be revisited with an open mind particularly now that the relationship is at its best as there is reduced acrimony, suspicion and distrust. It is necessary to reach a consensus as to what responsibilities parties have in preparing the Annual Budget. It is for now even not too clear who has residual responsibility for the preparation of the national budget. For instance this time around the National Assembly increased the budget estimates by 263.95 billion Naira. To do so it increased the benchmark price of oil from 55 dollars a barrel as proposed by the Executive to 57 dollars. It is difficult to see what gave confidence for this upward review as the current price of oil at the international market is about 63 dollars with projected average price at 55 dollars during the year 2020. Therefore what this step portends is that we might end up with exaggerated estimation which is non realisable with clear potential of worsening the revenue shortfall thereby increasing the deficit.
We have assurances that the Finance Bill will be shortly approved targeted at boosting revenue which is the albatross that had perennially undermined budget implementation. We also have assurance of Mr. President that the Finance Bill will from now be a regular complement of the submission of the Annual budgets.
We have captioned this contribution as the *Rolling Plan* as for me that should be the next focus of attention. We must commence preparation of the budget in the context of a three year rolling plan. The necessity for this was brought forcefully to mind following all the talk about what would happen to on-going capital expenditure under Budget 2019 still under implementation with some arguing that implementation should continue until June, 2020 when it is one year since the signing of the budget into law. With a Rolling Plan approach usually of a three year duration, we at once accommodate capital budget items that would ordinarily take more than one budget year to be implemented which existing gap had accounted to a considerable extent for the incidences of delayed and often abandoned capital projects. This means more work and greater discipline but this country has attempted this before and we do have some experience to fall back on. Therefore we challenge the relevant authorities to take this on board to explored the possibility so that we quickly adopt it.
There are subsisting issues with our budget preparation such as the balance between the capital and the recurrent budget which is now heavily skewed in favour of recurrent expenditure. With such a situation, it will be foolhardy to expect the catalysation of rapid economic growth badly needed if the unemployment situation in the country is to be positively impacted. But this is an area where we must exercise some patience even as we go about it deliberately. It will not happen over night as it is unrealistic to expect a sudden retrenchment of the prevalent levels of recurrent expenditure.
The Senate as represented by the Senate President Ahmed Lawan has served notice of its readiness to approve the pending request for debt acquisition which was earlier submitted to the 8th National Assembly. Approval was declined then as explained due to the need for additional information to aid the approval process. If the information is now available, we should then expect approval to be a routine matter. But the President also gave notice that a request to approve borrowing for the 2020 to 2022 period is pending to be soon submitted. This request should logically be expected as there is no budget without a deficit to be funded partly by borrowing. What is an important consideration in this regard is debt sustainability. Do we have adequate revenue flow to meet debt repayments obligations as and when due? This challenge has accounted for the recent recourse to the Finance Bill to assist with the addressing the problem of short fall in revenue.
There have been loud outcries regarding the rate at which the country has accumulated debt in the recent past with the fear of looming debt over hang. What for me is somewhat worrisome is that there is nothing on ground by way of improved infrastructure to justify such levels of borrowing. The reality of the situation is that some of the borrowings have gone into consumption which naturally will create future debt servicing problems. We don’t have any choice but to borrow. But for such borrowings to be viable, they must be used for capital projects that are to greater extent self liquidating.
The bane of budgeting in the country is lack of determined and focused implementation particularly of capital budgets. But we remain optimistic that with prevailing realignment of the budget year to calendar year that the stage is veritably set for improvement in this connection. There have also been problems arising from delays in cash backing releases which we hope that the Finance Bill will considerably positively impact.
With all stakeholders rising to this collective challenge, there is no reason why we should not make definitive impact that would result to enhanced growth which would reduce the misery index in the land as it enhances employment opportunities.
Dr. Boniface Chizea is an economist and Managing Consultant, BIC Consultancy Services