Challenges and Strictures of 2016 Budget

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An out-and-out constancy in Nigeria’s politics and governance is elite shifts and policy changes; which is well- documented in Joe Garba’s 1995 book, Fractured History.  Another utter constancy is Nigeria’s budgetary process; the ambiguities, reoccurring sub-heads, unimplemented projects, padding, underperformance of budgets and lost opportunities. Hardly discussed, is the linkage between Nigeria’s underdevelopment and its failure to use the budget as a national development tool. Public budgeting, which ought to be a service-delivery and good governance tool is no longer a means of promoting public interest.  The global budgetary ground norm is that government does not spend what is not appropriated. This is hardly so in Nigeria, as the capacity to undertake sound economic and fiscal planning, expenditure management, accountability and evaluation of public sector activities, remain elusive.

There’s one explanation for this dysfunction. Nigerian budgets have never been framed to be results-based.   Budgets have over time, been structured and based on certain common assumptions with recurrent and capital programmes framed as envelopes, and adopted in lieu of programmes that should guide development, economic growth and wealth creation. Such practices along with budgetary indiscipline, opacity, and lack of accountability are responsible for past misguided intervention and fiscal abuses.  They have impacted negatively on Nigeria’s development and called into question the rationale of governmental budgeting.

Hitherto, all kinds of ploys were used to circumvent budgetary controls. Though 2016 budget making offered an opportunity to redress past errors, the process had a false start.  This time it was “padding”; a terminology President Muhammadu Buhari claimed to be unaware of. His words: “There is something called “padding”. I’ve been in government since 1975. …I never heard the word “padding” until this year.” Besides padding, other challenges persist.  While past budgets were presumably needs-driven, project-specific and based on reform assumptions, our budgets not being results-based, explains why MDAs pad their budgets, and lobby the legislature to pass their sections of the budgets, as presented. Such practices offer the legislature the axiomatic “pound of flesh” and  “pork barrel”, from which to extract constituency project funding.  Can Buhari change these practices?

A key challenge arising from the 2016 budget presented to the National Assembly on 22 December 2015, and signed into law on 6 May, 2016, is its inextricable link to President Buhari’s campaign and reform promises.   Delivery and reform goals will definitely clash.  Moreover, past efforts at budgetary reform failed due to lack of political will, ownership and bureaucratic resistance. Also with less than six months to implement the 2016 budget, there exist inherent risks of trying to do much in less time. As always, haste will make waste. Contextually, the suggestion that the 2016 budget should be operated until May 2017 is absurd. Such an overlap will only prolong the simmering discord, create turf fights and grounds for fiscal abuses.

The 2016 budget, which outsizes the 2015 N5 trillion budget by N1.6 trillion, is remarkable for its deficit of N2.23 trillion – the highest ever in Nigeria’s history.  After the alleged “padding” and debulking, a slightly leaner budget was passed. The variations include a minor reduction from N6.8 to N6.6 trillion. The operational parameters: an oil price benchmark of USD38 per barrel at 2.2 million barrels per day and determining exchange rate of N197 to US$1 were retained.  The 2016 budget is essentially Buhari’s first budget as president, which in content and size, sets presidential priorities, and will shape and define his governance trajectory, change agenda goals, fundamental political reform, historical and personal mandate, and also distinguish his administration from preceding governments. Entrenching, consolidation and fulfillment of Buhari’s campaign promises will still hinge largely on the 2016 budget and its outcomes.  Nonetheless, the budget deficit –some 2.14 per cent of GDP — will require Buhari to expend some of his political capital to ensure that the budget delivers.  Yet, Buhari cannot expect to reform and downsize government’s expenses, end fuel subsidy and enforce spending cuts without hitting severely on the purchasing power and confidence of Nigerian consumers, which is at an all-time low. These realities prompt poignant questions.

One intractable challenge hardly ever discussed, is how best to tackle the subterranean but severe drain on Nigeria’s budgeted resources, by way of Nigeria’s informal support of the economies of neighbouring states. Besides, ongoing labour protestations and face-off with government, for which one side must blink; has government properly benchmarked the budget to preempt abuse,  guarantee  delivery of services and projects and stop MDAs that engage in budget busting through unforeseen expenses?  Can  the budget sustain imminent demands for palliatives and wages and kick start Nigeria’s economy?

President’s Buhari’s the biggest challenge, is how to fund the 2016 budget fully and expeditiously, considering the deficit. Low oil prices remain adversarial and the snail-paced recovery of looted funds, an impediment. That leaves borrowing and taxes.  Oil subsidy removal will result in savings that will count as revenue. Yet the impact won’t amount to much until the foreign exchange policies are tweaked and government reviews “its policy of maintaining an artificially fixed exchange rate, in the face of depressed income from crude oil.” As a political and governance tool, past budgets have been near undemocratic, by not guaranteeing trickle down dividends. Same might be true of tis budget. So any desired change coming to our budget processes, will require radical altering of orthodoxies in budget making. A change that does not reform the national budget, and a “budget of change” that does not deliver the goods and services, will make the promise and clamour for change ironic.

Attempts to revamp the Nigeria economy using the 2016 budget are fraught with challenges and imponderables. The shock therapy approach is double-edged, since policies meant for common good must be compassionate as they are rational. Demands to rescind the fuel hike is hardly a support for the cabal that gut Nigeria via oil subsidies; but as things stand it’s Nigerians that suffer regardless. Priorities contained in the president’s campaign manifesto along with the 34 priority programmes within six-cluster budget thematic priorities must be attended to in just six months. Ironically, some of these proposals are without delineated matching funds, which guarantees funding turf fights. Regrettably, there has been a very poor articulation of social safety nets and welfare packages that will result from subsidy savings, and how the masses will benefit therefrom. Change and challenge continue to intertwine.

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Obaze, MD/CEO of Selonnes Consult Ltd.

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