The Nation's Budget and Implementation Debacle

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”.