Budget 2015 And Underperformed Capital Vote
• Posers Over ‘ Missing’ N701.415bn
• CBN Says FG Records 0.8% Capital Vote Implementation in Q2
• CENSOJ Proposes ‘Green’ Budget For 2016
• Ewegbara Charts New Revenue Generation, Budget Implementation WHERE has the sum of N701.415bn capital votes for the 2015 fiscal year been deployed? This is one question begging for answer in the country’s economic circle, as those who should know, from the Federal Ministry of Finance to the Budget Office and the Accountant General’s Office seem to be at a loss.
In the first instance, the Budget Office of the Federation, which is primarily mandated to furnish Nigerians with the implementation status of the yearly budget, has no record of such in the 2015 spending plan; however, the Central Bank of Nigeria (CBN) says in its account that less than one percentage point of the capital component of the budget was executed as at the end of second quarter.
The ‘missing’ N701.415bn capital votes is part of the N4.493 trillion 2015 spending plan proposed in the ‘Transition Budget’ of the immediate past President Goodluck Jonathan’s administration.
Just between the first five months of the year and now, this capital votes in question, consisting of N556.995bn provision for Capital Expenditure and another sum of N144.420bn statutory transfers for the contribution of Development Fund for Capital Expenditure in the plan may just have ‘disappeared’, without much to show where the sum, if at all, has been invested or shared.
The Guardian’s checks in the Ministries, Departments and Agencies (MDAs) did not provide any clue, as officials were unwilling to talk on the matter. They kept referring this paper to the Finance and the Budget offices.
An official in the Accountant General of the Federation’s office told The Guardian: “Any information that you want, write us officially and we would treat it. We don’t give out information like that.”
The official, who asked not to be named, was reminded how about eight months ago, a similar request was made in writing, which did not yield any result. He laughed over it, saying, “don’t be tired, try again.”
Meanwhile, the closest to disclosing how much had been expended in terms of capital votes and overheads was the recent statement by the Minister of Finance, Mrs. Kemi Adeosun, who said that the sum of N194 billion has been released as capital votes.
However, she too did not give details of the releases and the MDAs that benefited, as well as the draw downs. Adeosun, while announcing the introduction of an Efficiency Unit in the Ministry to cut down on waste, said available records confirmed that the country’s recurrent expenditure completely dwarfs capital expenditure by a ratio of 84/16. This includes, non-wage related overhead expenditure such as travel costs, entertainment, events, printing, IT consumables, stationeries etc.
She revealed, “as at September 2015, the entire capital expenditure was just N194bn, while overhead expenditure was N272bn. This scenario is unsustainable and at variance with the current administration’s resolve to reform the economy and reduce the cost of governance.”
According to Adeosun, the unit will undertake programmed reviews of all government overhead expenditure with a view to reducing wastage, promoting efficiency and ensuring quantifiable savings for the country. Specifically, it will work across all MDAs to identify and eliminate wasteful spending, duplication and other inefficiencies; identify best practices in procurement and financial management and share such knowledge to ensure its adoption.
The Central Bank of Nigeria (CBN), in its second Economic Report, as it affects the Federal Government’s fiscal expenditure, provided a brief only to June this year. The report captures income and expenditure for the period under review: “Total Federal Government estimated expenditure for the second quarter of 2015 stood at N663.59 billion, indicating a decline of 44.2 and 42.6 per cent below the provisional quarterly budget estimate and the level in the preceding quarter, respectively. The development relative to the proportionate quarterly budget estimate was attributed, mainly, to the fall in both the capital and recurrent components during the period. A breakdown of the total expenditure showed that the recurrent component accounted for 91.1 per cent, while capital and statutory transfers components accounted for 0.8 and 8.1 per cent, respectively. A further breakdown of the recurrent expenditure showed that the non-debt component accounted for 74.9 per cent, while debt service payments accounted for the balance of 25.1 per cent.”
It further said, “the fiscal operations of the Federal Government resulted in a deficit of N34.88 billion, compared with the 2015 provisional quarterly budget deficit of N260.25 or 1.2 per cent of GDP.”
On revenue generation within the period, the apex bank declared as follows: “At N628.72 billion, the estimated Federal Government retained revenue for the second quarter of 2015 was lower than both the provisional budget estimate and the receipts in the preceding quarter by 32.4 and 38.8 per cent, respectively.
“Of this amount, the Federal Government’s share from the Federation Account, VAT, NNPC Refund, NNPC additional revenue and ‘Others’ accounted for 68.5, 15.7, 4.7, 3.0, 0.6 and 7.5 per cent, respectively.”
Reacting to the confusing development, the Lead Director, Centre for Social Justice (CENSOJ), Mr. Eze Onyekpere, who is proposing a new paradigm shift to budgeting known as ‘Green Budget ‘ to correct the anomalies inherent in the present system said it was unfortunate that everybody seems to be in the dark about how their rosaries are being managed on their behalf, pointing out that it was pure injustice.
Onyekpere said: “The last budget implementation report that we have on the website of the budget office is for the Q2 of 2014, so, the 2014 Q3 and final quarter is not there, not for Q1, Q2, Q3 of 2015, and so, I do not know much about the 2015 Budget. However, the last thing we have heard is that about 200bn has been released for capital projects, which is lower than what we are going to spend on fuel subsidies that are not sustainable.”
He then spoke on the Green Budget initiative, a partnership with the Heinrich Boll Stiftung Foundation, Nigeria, which proposal has already been sent to all the relevant agencies concerned with budget formulation and approval: “This is something new in Nigeria, but not new in other climes. The idea is that Nigeria is committed to sustainability, to reduction of climate change, to mainstreaming environmental sustainability in all its policies and programmes. And we discovered that government plan, policies and programmes cannot be implemented without the backing of a resource envelope and that is where the medium term expenditure framework and the annual budget come in.”
He said, “the intersection between planned programme and budgeting is why we are looking at the commitments we have in terms of re-mediating climate change, to look at the commitment we have in terms of sustainability and see how we can use fiscal policies and the budget to begin to move them in the right direction to place resources so that we can fulfill our commitment. So, it is a prelude and an agenda setting for the MTEF 2016-2019 and the 2016 budget and with this policy brief in place we are going to approach policy makers in the executive and in the legislature to place the documentation and recommendation before them so that they can consider it in the process of approving the MTEF and enacting the budget and signing it into law.”
To avert the poor implementation outlay of the capital components of the Budget, he advised The Budget Office of the federation to wake up to its duties, put up budget implementation report and place them in the public domain and also the ministry of finance and the planning and budget ministries to start the preparation of the budget and the MTEF on time next year.
Onyekpere said, “they should start preparing the MTEF by the Q1 of 2017 for the coming year because the Fiscal Responsibility Act (FRA) says it should be ready for the endorsement of the Federal Executive Council by the end of the Q2. If it has to be endorsed by the FEC by the end of the Q2 it means you must start preparation by the Q1 and thereafter you send to the National Assembly for approval and when approved it is then you start preparing the annual budget. So, if they can start on time they will be able to remedy the situation in future.”
Part of his recommendation for the implementation of the proposed ‘Green Budget’, which is aimed at ensuring adequate clean energy for the boosting of the real sector and economic diversification drive, include:
.As a matter of legislation, there is need to implement a feed-in tariffs as a support measure to incentivize investment in renewable energy from clean sources such as, solar, geothermal and wind by guaranteeing a tariff for a particular period of time, say up to 20 years. These support measures need to be reviewed periodically, though, and phased out in time as the share of renewable energy increases and renewable energy becomes competitive with conventional fuels;
• the FGN can also use targeted financial programs to support the purchase of energy efficient appliances. For instance, a percentage of the consolidated fund should be used to promote the use of solar panels and other clean energy equipments i.e. a National Clean/Renewable Energy Fund, providing and distribution of clean stoves for rural women;
• while the above measure can generate revenues, induce clean technology innovation and increase demand for clean energy, FGN should also consider the removal of fuel subsidy. Savings from fuel subsidy removal can be used to finance cleaner energy sources and more clean locomotive technology. Besides these petroleum subsidies encourage excessive consumption of fossil energy, tend to benefit high-income households and create a significant fiscal burden in many countries;
• about eight million people are estimated to be at risk of losing their lives by the year 2030 as a result of tobacco use. Manufactures and suppliers of abusive substances such as tobacco, alcohol, nicotine, etc, for non-medicinal purposes should also be taxed; human and environmental endangerment tax. A fraction of such tax should be channelled to National Clean/Renewable Energy Fund;
• renewable energy sources create jobs. With the teeming unemployment rate in the country; rising due to unbearable business overheads induced by the epileptic power supply, the adoption of clean renewable energy source will not only ensure steady power supply and a health environment, but also creates jobs for the Nigerian youths. So far, the Nigerian oil industry has created less than 50,000 jobs in Nigeria. In Germany, 400,000 jobs in the renewable energy sector compare with less than 200,000 jobs in the conventional energy sector. Nigeria can create many more jobs than Germany, where solar radiation lesser;
• instead of spending over N8.28 billion ayearly on fuelling and maintenance of plants and generators in government MDAs, the FGN should employ as a matter of action and policy employ the use solar energy in running these MDAs. This will in the nearest time save the country lots of billions to fund capital infrastructural across the country;
• fiscal measures in the form of import waivers should be extended to cover the importation of all renewable energy machineries and parts i.e solar panels, inverters, small hydro machines, wind propellers, etc. Reports from the 2012, 2013 and 2014 on waivers and exemptions granted, shows that no waivers were granted for renewable machineries and parts; instead waivers in the power sectors seem to be restricted to generator spare parts, plant and machineries, etc. Fiscal legislation should be passed to grant full waivers for the importation of renewable technology for a long period of time, until technical institutions can manufacture the technologies locally; and
• the Nigerian transport sector relies heavily on fossil fuel; petrol and diesel to fuel vehicles, resulting in serious externalities such as air pollution from exhaust fumes, traffic congestion and accidents. Fiscal reforms in the form of phasing out support to diesel and petroleum products can help reduce air pollution from the transport sector while reducing health burdens from respiratory diseases and preventing premature mortality. Moreover, fiscal incentives can induce investment in low-carbon transport infrastructure such as light rail and encourage the uptake of electric vehicles. Taxes on motor vehicles fuels, public investment in public transport and non-motorised transport, and tax breaks for efficient vehicles can also have a positive effect.
In a related development, a development Economist, Mr. Odilim Enwegbara, equally proffered low hanging measures to be adopted by both the Finance Minister (Adeosun) and the Budget and National Planning Minister, Udo Udoma, to succeed in their task of generating more money and upscale service to the people through budget implementation.
Enwegbara told The Guardian in a chat at the weekend: “The first issue is for her (Adeosun) to understand that not only would she share fiscal policy making with the head of new ministry of Budget and Planning, but in some cases Udoma heads the economic desk. That’s why rather than interfering in expenditure issues when such matters arise from time to time it’d be better she does everything possible to work as a team member with the minister of budget and planning where necessary, especially, on issues increasing deficit spending and borrowing policy of the government.”
He also said, as minister of finance, Adeosun should aggressively focus her energy on likely policy measures to overhaul current government’s tax policy, which is so outmodelled, “not only in order to drastically increase the current tax-to-budget ratio gradually from less than 12 per cent to 70 per cent by 2019, but also to help the ministry of budget and planning have less difficulty in increasing budget-to-GDP ratio from its current less than 4 per cent to 25 per cent during this government’s first term in office.”