The Nation's Budget and Implementation Debacle
By
Bukky Olajide
culled
from GUARDIAN, February 4, 2005
A country’s budget is nothing but a
guideline of the expected revenue, how and what to spend funds on.
In this vein, budgets have become a mandatory prepared
document, which examines the priority projects to undertake and other things
left to be done.
If this is the purpose of a budget, then the preparation
and the execution of it must be taken seriously.
In the Nigerian case, budget preparation is also like any
developed country's budget, where well articulated and well planned projects and
activities are outlined.
Also, priority projects like education, security and
others are well planned and taken care of.
Since one thing is to plan budgets and another is to
execute them, a great gulf had always existed between the country's budgetary
plan and its implementation since independence.
There had never been any correlation between what is on
paper and what is on ground.
For instance, the country's infrastructural facilities of
which has been a major target of the budgets have remained in a state of
comatose, especially electricity.
Also, despite many developmental programmes and pro-poor
projects, poverty has continued to gallop, because the budgets were never
executed with sincerity of hearts and pure hands.
Despite the abundant natural resources, the wealth of the
country could not spread and has continued to be hijacked by a set of people,
who saw themselves as rightful owners of the abundant resources.
Successive budgets have failed to yield positive economic
results, and to redress the structural obstacles and growth while it has also
failed to reverse the legacies of the past budgetary failures.
For instance, in the 2002 budget, the current government
identified some objectives that it wished to achieve.
This includes alleviating poverty by fostering
opportunities for job creation and achieving a high economic growth rate through
better mobilisation and prudent use of economic resources.
Others are, building a strong economy by encouraging
private sector participation while providing continuity to economic reform
programmes and ensuring good governance by transforming development
administration into a service and result oriented system.
But with three years gone, it is obvious that these
objectives are far from being achieved. Poverty level has risen to about 80 per
cent while job creation still remains an illusion.
The economy has not also grown beyond three per cent while
there was nothing like prudent use of economic resources. This is evident in the
way and manner that electricity provision is stagnated despite receiving over
N300 billion in the past five years.
While acting as a guest speaker at a yearly lecture
organised by the Chartered Institute of Bankers of Nigerian (CIBN), the Dean of
Management Sciences, Uthman Dan Fodio University, Sokoto, Prof. Sheidu Aminu
Diyo, said that during the military administrations especially from the 1980s,
budget speeches were mere yearly rituals forgotten after they were read to
public hearing.
Diyo observed that there were various forms of budget
indiscipline, but the height was utter neglect of all budget provisions.
But, he said, with the inception of democratic rule, one
would have expected some remarkable improvement but we are still witnessing late
approval of budgets and questions about extra budgetary spendings are still
being raised.
"The utility of budgets, as instruments of development has
not been fully exploited over the years”, he said.
According to the professor, the phenomenon of development
has never been seriously addressed in a holistic and enduring manner. He said
often times different components of development have been addressed independent
of others, such that projects, which are not complementary or even counter
productive are executed simultaneously.
"Many projects and programmes had no bearing with overall
development frameworks of their times, but were influenced by other interests”,
he said.
Last year, while speaking on review and appraisal of
budgets and economic performance at a seminar organised by the Central Bank of
Nigerian (CBN), Prof. Cyril Ige, an economist and a UNICEF consultant, stated
that a national budget as an instrument of control of government’s expenditure
has two major flaws, which includes inadequate consideration of the future
stream of revenue and weak emphasis of the “greatest good of the largest
majority”.
Ige also said that most poverty reduction programmes of
the government are hardly accountable to anyone except the government that
established it.
According to him, the progress achieved in 2002 was hardly
mentioned in the 2003 budget concerning NAPEP. “It is this kind of stance that
makes one wonder whether indeed there is any hope for the poor”.
Prof. Ayodele of the economic development department,
Nigerian Institute for Social and Economic Research (NISER), Ibadan, also at the
same seminar observed that whatever the degree of the laudability of budget
policies, their effectiveness are usually threatened by some features which
often prevent the attainment of established targets.
According to Ayodele, some of these features in the
Nigerian economic system include, budget indiscipline resulting in deviations
from the established trajectory of operations and undue politicisation of the
budget approved process culminating in unplanned deviations.
Other features are ineffective – cum – poor spending
budget programmes coordination among the tiers of government arising from undue
politicisation and poor implementation framework.
Yet, others are conflicting fiscal and monetary policies
within the same budgetary framework and lack of transparency and accountability
due in most cases to budget distortions and corruption arising from the weak
budgetary process.
The country's budgets are not only fraught with lack of
implementation and discrepancies; they are also being plagued by a malady called
delay.
Delayed presentation of budgets has always been caused by
a sharp disagreement between the National Assembly (the legislature) and the
President (the executive). For instance in 2002, the budget was delayed because
the National Assembly added about N250 billion to the initial appropriation bill
of N848 billion that was submitted by the President. Consequently, the year
ended without a valid appropriation bill.
Ige stated that the process where budgets are not approved
well into the quarter encourages project by project approach to implementation
and development.
That will not take us far, he said, at most, five per cent
growth rate. According to him, government will have to watch its spending to
keep it within limits permitted without National Assembly approval.
“This is not good for the country, as this is the cause of
the current budget malaise of little or no capital expenditure”, he said.
The professor said further that downsizing should begin in
earnest rather than maintaining departments or divisions in government that have
no tools to work with or capital votes to generate output.
According to him, downsizing of government business is in
vogue all over the world using China as an example. He said that China has
strive relentlessly to make its environment conducive for foreign investment and
coupled with hard work has explained their two digit growth rate.
The UNICEF consultant, therefore, called for an
overhauling the budget process to ensure that certain divisions and departments
of governments are not left idle due to lack of capital expenditure.
He also called for early rationalisation or
re-organisation of government business to ensure that skills are not wasted in
idleness while targeting solution to problems in a cross-sectoral programme
approach since problems are not solved through stand-alone projects.
Ige said that government should create an environment of
growth and development that attracts multiple funding sources, which the
programme approach commands while de-emphasising antagonistic at the same time
encouraging collaborative budgeting process with the National Assembly.
Ayodele also said that to avoid budget policy failures,
particularly in the real sector, government must guide against faulty
implementation strategies particularly mismanagement of programmes and
protracted delays in the release of votes to appropriated agencies in the real
sector.
He also advised the government to avoid excessive erosion
of the naira value to aggravate production cost and subsequently worsen the
competitiveness of the products of the real sector in a globalising world.
Diyo observed that with abundant resources and motley of
efforts, the successive Nigerian governments have never achieved tangible
results.
According to him, Nigeria is abundantly endowed with
human, nature and material resources that could sustain high and broad based
growth and development as its population of about 130 million people makes it
the 10th largest in the world.
Diyo said that with a total land area of 923,773 square
kilometres, 31 per cent of which is arable land can feed the whole of West
Africa if properly cultivated.
The professor unequivocally asserted that these resources
of the nation are enough inducement for establishing firm industrial base for
rapid and broad based development and if properly harnessed and proceeds
equitably distributed, could banish hunger and poverty from the face of the
Nigerian territory.
“Today, a net importer of food, Nigeria cannot feed
itself. Truly a nation at work, industrialisation is still journey of unknown
distance why hunger and poverty co-habit with the majority of its citizens”, he
said.
Diyo wondered why a nation with enormous resources and
possibilities should be driven into poverty and wretchedness and why the nation
has never made any shot at economic and human development.
The university don explained that despite avalanche of
national plans, development strategies and supposedly pro-poor programmes, the
nation is still disappointingly characterised by poor economic and development
profile.
He explained further that on the economic front, the
situation has been characterised by macro economic instability, inflationary
pressures and high cost of doing business.
According to him, the average Gross Domestic Product (GDP)
growth rate of 3.3 per cent in the last five years is a performance below all
comparable benchmarks. He said further that Nigeria is the sixth largest
petroleum exporting country in the world and the seventh largest producer, yet
it ranks 187 in the Gross National Product (GNP) per capital.
He said further that in spite of Nigeria's massive oil
exports, its share of world export services of 0.25 per cent in the last decade
is also not commensurate to high demographic profile.
“Ironically, oil imports have formed a large chunk of our
total imports, being as high as 21 per cent in 1998. The dominant role of oil in
the nation's export profile is the result of the failure in the commodities
export sector”, he said.
Diyo said that foreign direct investment has continued to
be on the decrease in the past eight years.
According to him, reasons attributed to the low level of
this include among others, macroeconomic instability evidenced in high inflation
rate, interest and exchange rate volatility arising from fiscal dominance, poor
infrastructural facilities, inadequate and costly telecommunications services,
frequent disruption in power supply and poor road network.
He identified political instability, lack of continuity of
policy design and implementation official corruption and non-diversification of
the economy as some of those things militating against development efforts to
achieving desired results.
His words: Projects are over invoiced, funds meant for
projects are sometimes not released and in some instances, there are outright
looting of the treasury, all of which create leakages and distortions in the
economy and impoverish majority of the people.
Since the discovery of oil, the Nigerian nation has
depended too heavily on the capital-intensive oil sector, which provides 20 per
cent of the GDP, 95 per cent of the foreign exchange and about 65 per cent of
budgetary revenues.
Instead of using the oil wealth to diversify the economy,
the greed of leaders and lack of institutional arrangements to effectively
handle the sudden inflow of money from oil exportation have seriously impeded on
agricultural and industrial production and commodity exports.
“Nigeria is thus a mono-cultural economy that is epileptic
to the vagaries in the international oil pricing which can, and do create
domestic economic shocks and instability”, he said.
He said further that the debt situation has not eased.
According to him, Nigeria, a low-income country is rated to belong to the group
of the world’s highly indebted countries while poverty rate also increased
steadily.
According to him, the total public debt of the Federal
Government outstanding at the end of 2002 was N4.9 trillion, an increase of 17.9
per cent over the 2001 stock and as a proportion of GDP, it rose to 83.6 per
cent from 74.6 per cent in 2001.
Diyo stated that with a total outstanding public debt of
N4.9 trillion in 2002, 76 per cent of which is foreign, Nigeria is a highly
indebted nation.
According to him, examples from other parts of the world
(for instance South Korea) shows that debts, especially foreign debts are not
inherently bad for the economy and that they could be injected into an economy
to stimulate growth or facilitate access to new skills and technologies.
However, he said, the structural problems of Nigerian are
so deep that they cannot be removed merely by receiving foreign loans.
His words: “In Nigeria, debts have been a major source of
private illegal accumulation of wealth by the ruling class, and have led to the
implementation of policies that many consider not in tune with the needs of the
people but the wishes of lender countries and institutions.
“The heavy debt burden has led to outflow of limited
resources through debt servicing ($2.1 billion and $1.2 billion in 2001 and 2002
respectively) and the increasing net transfer of resources has reduced
investible funds that would have aided the development process”.
Furthermore, two economic consultants, Henry Olujimi Boyo
and Adaighofua Ojomaikre, in their proposal for a liberalised foreign exchange
market in Nigeria and its economic benefits, also observed that in spite of the
gigantic quantum of naira yearly budgeted by the tiers of government, there has
been no significant positive impact on peoples welfare and consistent budget
deficits have almost become a permanent feature of fiscal policy.
According to the duo, the prevailing fiscal and monetary
policies of the successive governments have brought about a national economy
that is characterised by low industrial capacity utilisation and high
unemployment, high interest rate, untamed liquidity and inflation, capital
flight and divergent exchange rates, low savings and investment.
Others are deficit budgeting and national debt, inadequate
statistics for fiscal planning and monetary control, mono-cultural export
economy, disbursement of foreign exchange and maintenance of large foreign
reserves as an instrument of international credit worthiness and debt
management.
They explained that low industrial capacity utilisation
has been resistant around 30 per cent over the years as a result of high
manufacturing costs and high interest rates in the face of continuously
dwindling personal disposable income.
“A week social and industrial infrastructure base has
further compounded the start-up and operational costs of all projects”, they
said.
The economic consultants said further that increasingly
high level of unemployment persists in defiance of the huge billions of naira
yearly spent by different administrations to promote agriculture and industrial
activity and generate employment.
“A relatively low level of aggregate demand due to low
purchasing power has continued to be a stumbling block in out path to industrial
and economic growth”, they said.
They also observed that the saving culture has received a
severe battering in the last two decades because the continuous decline in the
value of the naira has discouraged savings.
“The level of savings has continued to hover regrettably
below 15 per cent of gross domestic product and this scenario will remain for as
long as deposit rates remain unattractive vis a vis the unyielding fall in the
nominal value of the naira.
“The paucity of savings as can be expected has resulted in
lack of available funds for investment and employment generating activities. All
attempts by government to stimulate investment and employment have failed
because of high lending rates, which have remained a threat to the survival of
local industry”, they said.
Boyo and Ojomaikre observed further that a mono-cultural
export economy has since become inevitable as high interest rates and very high
manufacturing costs coupled with poor infrastructure and unstable government
policy make export of agricultural and industrial finished goods uncompetitive
and impractical.
“The inability of our industry to match the quality and
price of imported finished consumable goods has made Nigeria a dumping ground
for goods from all over the world”.
