The 2016 Appropriation Bill entitled “The Budget of Change”, was laid before the legislature on Tuesday, December 22, 2015 by President Muhammadu Buhari in a memorable ceremony that stimulated citizen’s sense of optimism.
Nigerians’ hope for standard social and economic wellbeing was rekindled as the President declared that though “the confidence of many might be shaken. However, I stand before you promising that we will secure our country, rebuild our economy, and make the Federal Republic of Nigeria stronger than it has ever been.” He said that the budget was designed to revive the economy through inclusive growth and jobs creation. For this, capital expenditure was increased from N557 billion in the 2015 budget to N1.8 trillion in this fiscal year, representing 30 percent of the total budget of N6.08tn with a revenue projection of N3.86 trillion resulting in a deficit of N2.22 trillion.
He explained that the deficit, which is equivalent to 2.16% of Nigeria’s GDP, will take the overall debt profile to 14% of the GDP but remains well within acceptable fiscal limits. Government plans to finance the deficit by a combination of domestic borrowing of N984 billion, and foreign borrowing of N900 billion. Over the medium term, Buhari’s expect to increase revenues and reduce overheads to bring the fiscal deficit down to 1.3% of GDP by 2018.
Though economy observers are of the opinion that loans are necessary for expansionary fiscal policy required when an economy is in depression, as it were presently with Nigeria, Buhari has said that 2016 borrowings will be principally directed to fund capital projects. A sum of N113 billion will be set aside for a Sinking Fund towards the retirement of maturing loans; while N1.36 trillion has been provided for foreign and domestic debt service.
There were also insinuations that the recent visit by Managing Director of International Monetary Fund (IMF), Ms Christine Lagarde, was to help eliminate fundamental flaws in the 2016 Appropriation Bill. She hinted that the multilateral finance institution would be discussing the 2016 Budget with Nigerian officials. Lagarde, who was unsatisfied with the Budget, informed newsmen in Abuja that “A team of economists is going to come here (Nigeria) to review and audit (the bill) and have a good discussion with the government authorities to really assess whether the financing is in place, whether the debt is sustainable, whether the borrowing costs are sensible and what strategy must be put in place in order to address challenges going forward.”
President Buhari, who pledged to continue implementing strategies that will maintain macroeconomic stability and manage the oil price shocks, informed the lawmakers that his administration had set a benchmark price of $38 per barrel and a production estimate of 2.2 million barrels per day for 2016. The budget focused mainly on non-oil revenues by broadening tax base and improving the effectiveness of revenue collecting agencies.
However, Nigerians have expressed doubt about the reliability of the oil benchmark set by the government, saying that $30 per barrel as benchmark looks more realistic than $38 per barrel. Even before commencement of debate on the Bill by the National Assembly, crude prices had already hit a seven-year low of between $34.7 and $36.7 per barrel.
On how the budget would be funded, the President said, “in 2016, oil related revenues are expected to contribute N820 billion. Non-oil revenues, comprising Company Income Tax (CIT), Value Added Tax (VAT), Customs and Excise duties, and Federation Account levies, will contribute N1.45 trillion. Finally, by enforcing strict compliance with the Fiscal Responsibility Act, 2007 and public expenditure reforms in all MDAs, we have projected up to N1.51 trillion from independent revenues.
The increased capital expenditure commits significant resources to critical sectors such as Works, Power and Housing – N433.4 billion; Transport – N202.0 billion; Special Intervention Programs – N200.0 billion; Defence – N134.6 billion; and Interior– N53.1 billion. These investments in infrastructure and security are meant to support our reforms in the Agriculture, Solid Minerals and other core job creating sectors of our economy.
Education will gulp N369.6 billion; Defence- N294.5 billion; Health- N221.7 billion and Ministry of Interior- N145.3 billion. The President said, “In fulfilment of our promise to run a lean government, we have proposed a 9% reduction in non-debt recurrent expenditure, from N2.59 trillion in the 2015 Budget to N2.35 trillion in 2016. Furthermore, we have budgeted N300 billion for Special Intervention Programs, which takes the total amount for non-debt recurrent expenditure to N2.65 trillion. Earlier, the government had secured approval of the legislature to earmarked N500 billion in the 2016 budget for social welfare intervention programs. The proposed intervention is part of Medium Term Expenditure Framework for 2016, 2017 and 2018 and Fiscal Strategy Paper.
Though Nigerians continue to appreciate President Buhari-led administration for trying to fulfil its campaign promises of paying monthly stipend to the unemployed, more questions have been raised than answers with analysts suggesting that government should present a detailed plan on how these welfare programs will be operated: Where the funding will come from in view of dwindling government revenues, as well as the agencies and persons that will manage these programs.
Some analysts argued that, for example, while the school feeding program could increase school enrolment and retention, more urgent problems in the education sector that include inadequate quality teachers, low morale of teachers occasioned by poor and epileptic pay, dearth of furniture and teaching aids in schools should be areas of concentration first. They reasoned that even if school feeding leads to high retention of pupils, ill motivated teachers will still not allow for better quality?
Nigerians are also urging the government to spell out all the conditions and qualifications required for the conditional cash transfer to vulnerable persons and post NYSC grant. Some vital questions raised include; is it the aged, disabled, retired, internally displaced or the young? How much will be transferred to each recipient, for how long and how would they be identified? An open-ended cash transfer could turn out to be socially injurious if it creates a dependency syndrome. Previous regimes have tried programs such as National Poverty Alleviation Program [NAPEP] and SURE P, which failed to achieve their purposes and were greatly abused by both operators and beneficiaries.
Public affairs analysts have also expressed fears that if not properly coordinated and managed with transparency, the desired impacts of the programme will not be felt by the citizens because social welfare programs in Nigeria are highly susceptible to corruption and the Buhari administration, whose key governance program is fight against corruption, must take every necessary step to ensure that civil servants and contractors do not hijack these programs and bog them down in corruption.
Buhari narrated his maiden budget seeks to stimulate the economy by focusing on infrastructural development; delivering inclusive growth; and prioritizing the welfare of Nigerians. He hoped that the budget, while helping industry, commerce and investment to pick up, will as a matter of urgency, address the immediate problems of youth unemployment and the terrible living conditions of the extremely poor and vulnerable Nigerians.
He was convinced that the new managers of revenue generating agencies would help to checkmate fiscal rascality and ensure deviation from the frustrating past when diversion of revenues into the federation account was rampant among other factors militating against the implementation of fiscal budgets.
Analysts have begun to appreciate Buhari’s determination to block the loopholes, which give stimulus to reckless squandering and siphoning of the public funds. According to them, the Treasury Single Account introduced by the President, which harmonised accounts of all government ministries, departments and agencies is cheering.
The President announced that not less than N1.5 trillion had been deposited in the TSA. “With the full implementation of the Treasury Single Account, we expect significant improvements in the collection and remittance of independent revenues and to further support the drive for increased remittances, we will ensure that all MDAs present their budgets in advance, and remit their operating surpluses as required by section 22 of the Fiscal Responsibility Act.”
He expressed determination to “ensure that resources are managed prudently and utilized solely for the public good. To set the proper tone, one of our early decisions was the adoption of a ‘zero based budgeting approach’, which ensures that resources are aligned with Government’s priorities and allocated efficiently. This budgeting method, a clear departure from previous budgeting activities, will optimize the impact of public expenditure.”
He added that “In addition to the proper linkage of budgeting to strategic planning, we are enhancing the utilization of the Government Integrated Financial Management Information Systems (GIFMIS) to improve financial management. The recently established Efficiency Unit is working across MDAs to identify and eliminate wasteful spending, duplication and other inefficiencies. We engaged costing experts to scrutinize the 2016 budget proposals. They have already identified certain cost areas that can be centralized for economies to be made.”