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2016 Budget Review: Structural Challenges likely to affect

Budget Implementation
Wilson Erumebor, Economist
rumewilson@gmail.com, @rumanio; May 2016
Nigerias economic reality suggests the need for an expansionary budget to stimulate
economic activities. Signed into law in May 2016, the federal government budget is
significant for a number of reasons. First, it covers a number of the campaign promises
that were made prior to the 2015 general elections. Second, it is an expansionary fiscal
policy tool that has the potential to cure the uncertainties that has trailed the Nigerian
economy since early 2015 even as each Ministry can begin work to deliver their plans to
Nigerians. Third, the budget remains important in complimenting monetary policy,
which has struggled to keep the economy afloat since 2015.
One of the biggest risks facing the budget is the poor implementation of capital projects.
In Nigeria, annual capital budget implementation has never achieved 65%, whereas
recurrent expenditure has always achieved over 95% performance annually and in some
cases exceeded its budgeted figure. The following factors are responsible for the poor
performance of capital budgets in Nigeria:

Undue elongation in the process to pass the Appropriation Bill into law

Inadequate revenue

Delays in the bidding process

Delays in processing payments for projects

Delays in obtaining approval from Ministers and Permanent Secretaries at


various stages of the procurement process

Lack of planning and experience in project management of some Ministries,


Department and Agencies (MDAs) officials

Poor project supervision and lack of transparency and accountability.

For the 2016 budget to have the desired impact on the economy, it is essential for the
government to address these challenges with the goal to improve performance of the
capital budget.
What should we do as a country going forward?

Place emphasis on growing the capital component of the budget and enhance
its implementation. Given the importance of capex, the government must set

target to ensure that capital budget implementation exceeds 85% each year and
address its poor performance. To do this, the government must reform the
procurement process to remove bottlenecks, undue bureaucracy that causes
delays. If unnecessary recurrent items are removed from the 2016 budget as
presented by the President, capex could be as high as N2 trillion, which would
have a much more bigger impact on the economy.

The government must earnestly pursue reduction in cost of governance by


removing irrelevant and luxury items from the budget. In the State House
(Presidency) Budget of N39 billion for instance, purchase of motor vehicles, buses,
computers, furniture, kitchen equipment etc. accounts for over N4.6 billion, while
maintenance and repairs of buildings, furniture, plant and machinery and
equipment totalled N2.7 billion for the year. These costs raise concerns on whether
we are truly pursuing a lean government in the face of economic downturn. If this
trend continues, recurrent expenditure in the 2017 budget may rise to N5 trillion,
while capex will relatively continue to receive meagre allocation.

We must also review downwards the National Assembly budget which is


currently higher than allocations to key ministries like Youth Development,
Agriculture and Science and Technology. In the best interest of the nation, our
lawmakers must consciously work towards reducing their recurrent expenditure.

Budget assumptions must be realistic and take into cognisance current and future
economic developments.

As a country, we must inculcate a culture of timeliness in the budget process. A


situation where the budget for 2016 was passed in the fifth month of the year would
only stall implementation. It is important to introduce a structured budgetary
process as practised in the United Kingdom and other countries. In India for
instance, the budget is presented to the House on the last working day of February
(themed Budget Day) and it is expected to be passed by the House and come into
effect on April 1, the start of the countrys financial year. Adopting a similar
approach in Nigeria would go a long way to ensure early disbursement of funds to
contractors and overall improve the performance of capital expenditure.

Despite the challenges that the 2016 budget might face, the budget is unique in its
disclosure of specific cost items of MDAs. This is a huge step towards ensuring
accountability and transparency in the public sector. However, more disclosure is
needed on the spending plans of the National Assembly and the Universal Basic
Education Commission (UBEC). Whether the budget will meet up to the expectations of

Nigerians and deliver the promised change depends largely on the implementation of
institutional and structural reforms targeted at improving the budget process.
Wilson Rume E. is an Economist with years of experience in research, finance and advocacy. He is a member
of the Global Colleagues, Academics Stand Against Poverty (ASAP).