Nigeria’s first ever national Budget Dialogue was organised by the Budget Office of the Federation and held on 31 January 2018 in Abuja, with approximately 250 Civil Society Organisations, media and government representatives in attendance. The event, “Enhancing Media and CSOs’ Understanding of Current Budget Issues and Reform Efforts,” provided an opportunity for clarification of issues raised around the 2018 Federal Budget and informed the public on important governance reforms.
Mr Mark Walker, National Programme Manager, PERL-ARC, in a goodwill message noted that the dialogue was the first ever of its kind in Nigeria and was something that Nigerians ought to be proud of, as it is likely to improve Nigeria’s transparency rankings in the years to come.
Mr. Ben Akabueze, Director General, Budget Office of the Federation provided details around the formulation of the 2018 Budget presented by President Muhammad Buhari to the National Assembly on November 7, 2017. The proposed budget encapsulates the fiscal plan to restore the economy through diversified, sustainable and inclusive growth. The Budget proposed will build on the recovery from recession, spur growth, and advance delivery of the 2017-2020 Economic Recovery and Growth Plan (ERGP). The proposal reflects many of the reforms and initiatives in the ERGP, the roadmap to economic prosperity. The DG also discussed the Federal Government’s intention to prepare and pass an organic budget law.
The recorded version of the live-streamed video can be watched here
The Director General addressed key issues and concerns raised by CSOs and the media. He reiterated the Federal Government’s commitment to transparency and openness, and enjoined CSOs and the media to always ask questions. He also enumerated the various reforms being undertaken by the Federal Government towards fine-tuning the budget process, enhancing the revenue-base of the country as well as ensuring effective monitoring of budget implementation. He noted that reforms target improving fiscal transparency, anti-corruption, access to information and citizens’ engagement.
2018 FGN spending estimated at N8.61 trillion, exceeding FY2017 projection by 16%.
Crude Oil Price Benchmark increased to USD$47 for 2018, while Crude Oil Production Benchmark stays at 2.3 MBPD.
Real GDP Growth reduced to 3.5% for 2018.
At N2.01 trillion, debt service is 23% of planned spending (about same as in FY2017).
Provision to retire maturing bonds to local contractors increased by 24% from N177 billion in FY2017 to N220 billion in view of the ambitious plan to liquidate all contractor arrears of the FGN going back several years.
Recurrent (non-debt) spending expected to rise by 17%, from N2.99 trillion in FY2017 to N3.49 trillion.
Capital expenditure (including transfers) to rise by 12% from N2.36 trillion in FY2017 to N2.65 trillion.
Capital spending is 30.8% of total FGN expenditure in 2018.
Some Issues Raised on the 2018 Budget 2018-2020 Medium Term Fiscal Framework and 2018 Budget
The proposed 2018 Budget was prepared based on the 2018-2020 MTFF, as required by the Fiscal Responsibility Act, 2007.
The law does not require enactment of the MTEF/FSP upon consideration by the National Assembly.
The 2018 Appropriation Act will be based on the 2018-2020 MTFF parameters approved by the National Assembly.
Zero Based Budget
The 2018 Budget proposal was prepared using Zero Based Budget (ZBB) Principles. Hence, MDAs justified their budgets in detail.
Zero Based Budgeting does not obviate the need for annually recurring expenditure items and amounts.
Public evaluation is welcome, as it ensures that the budget speaks to what the people collectively deem as national priorities.
Budget padding, defined as insertion of unauthorized items in the budget, cannot arise because MDAs now take direct responsibility for uploading their budgets on the Government Integrated Financial Management Information System (GIFMIS).
MDAs’ Accounting Officers and Chief Executives also signed to confirm the budget proposals before submission to the National Assembly.
BOF ensures inclusion of only those projects that speak to national developmental goals are included.
If there are issues, the MDAs concerned are informed and made aware of any amendment.
Unclear Provisions in the 2018 Budget
Before the interactive session, the DG addresses some issues that were covered in the national media around the 2018 Budget allocations. These included:
Provisions to offset part of contractor liabilities – e.g. N10bn by the Federal Ministry of Power, Works and Housing for settlement of liabilities. The Government must make provisions to offset some of these contractor liabilities going back several years.
N19.3bn for the Federal Ministry of Industry, Trade & Investment for the Export Expansion Grant (EEG) to incentivize non-oil exports. This grant was reintroduced in 2017 and will occur annually. The amount may probably increase in future years.
N308 million for procurement of riot control equipment for 37 State Police Commands (FCT inclusive) and the Force Headquarters. This amount is less than N10 million per State police headquarter.
N22.6 billion for Research and Development (R&D) in the Federal Ministry of Industry, Trade and Investment. R&D is the applicable programme description which encompasses various projects involving trade facilitation, investment promotion and industrial development, including the N19.3bn EEG already noted.
Cleaning & Fumigation Services for the Office of the National Security Advisor (ONSA). It was acknowledged that matters of National Security are treated with some degree of confidentiality in Nigeria and globally. ONSA provided specifics during the budget bilateral discussions.
N2.21 billion for Social Media Mining Suite - The DSS plans to implement some security protocol to curtail spread of information capable of threatening National Security. This will by no means hinder freedom of speech or information as it would be implemented within the ambit of the law.
N338m Computer and Software Acquisition in the Federal Ministry of Finance - This is to fund ICT solutions and Initiatives for improving Public Financial Management within the Federal Ministry of Finance.
N4.9 billion for Annual Maintenance of Mechanical/Electrical Equipment in the Villa. It was noted that the Villa is quite an expansive complex comprising several offices, residences and other relevant support facilities.
Ministries, Departments and Agencies (MDAs) were required to clearly describe their budget items.
There is significant improvement in the clarity of budget items.
Schedule Officers in the Budget Office will work with Budget Officers in MDAs to ensure greater clarity of items proposed by MDAs in subsequent budgets for easier tracking and monitoring.
Inadequate Provisions for Some Sectors
Many have advocated for higher allocations to sectors such as Health, Education, Agriculture, etc. The reality is that funds are inadequate overall; proponents do not identify areas to be cut to provide higher allocations to such sectors.
It is important to note that MDAs deemed to require additional funds do return unutilized capital allocation due to poor absorptive and execution capacity or procurement issues.
The 2018 revenue projections reflect:
New funding mechanism for Joint Venture operations, allowing for Cost Recovery in lieu of the previous cash call arrangement.
Additional oil-related revenue including: Royalty Recovery, New/Marginal Field Licences, Early licensing renewals.
Forward sale arrangements of government’s share of future oil production, as well as Nigeria Liquified Natural Gas (NLNG) dividends to improve liquidity and external position.
Review of the fiscal regime for Oil Production Sharing Contracts (PSCs).
Restructuring government’s equity in Joint Ventures oil assets, (reduction in equity holding) with proceeds to be reinvested in other assets. This will improve efficiencies in the operations of the JVs and position them for better revenue performance in the future.
Increase in Excise duty rates on alcohol and tobacco.
Tax Administration improvement initiatives to positively affect collection efficiencies across various tax categories, e.g. Tax amnesty programme.
The Partnership to Engage, Reform and Learn (PERL) is a five-year governance programme, funded by the UK’s Department for International Development (DFID). The programme focuses support on governments, citizens, and evidence-based advocacy. PERL provides assistance to governments in the core areas of policy development and implementation. Visit: www.perlnigeria.net
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