The President recently signed a budget size of 17.21trn. The budget figure is one of the highest ever experienced in the country for the last 10 years.
The components of the budget include a debt service of N3.8 trillion, a deficit financing of N6.9 trillion and a crude oil benchmark of 62 dollars. The sum of N5.61 trillion was earmarked for capital projects while recurrent projects are to gulp a total of N6.9 trillion. For statutory transfers, the sum of N869 billion is earmarked.
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The altercations between the President and the National Assembly on the insertion of about 6,576 new projects into the budget and removal of 10,733 projects from the executive proposals is indicative of the faulty process in the budget formulation. Section 13 of the Fiscal Responsibility Act provides for consultation and input in the preparation of the Medium Term Expenditure Framework and part of the stakeholders to be consulted include the National Assembly.
The annual budget is derived from the Medium Term Expenditure Framework. In essence, if the National Assembly had played a more engaging role in the development of the MTEF, it would have reached a compromise with the executive on the kind of projects that should form the annual budget.
Beyond making decisions on the projects, decisions on the macro-economic indices, such as inflation rate, crude oil benchmark and exchange rate etc would have been determined prior to the submission of the executive proposal. The consultation at the pre-budgeting stage would avert the ensuing altercations between the President and the National Assembly.
Thankfully, the President went ahead to sign and present the budget within the fiscal year with a commitment to present an amendment of the budget to resolve concerns around changes in the budget. While this is ongoing, the Executive and Legislature should bear in mind that 2022 being the last year before elections, any heightened imbroglio around the budget could hamper its implementation. Also, considering the size of the budget, implementation of the budget will become unrealistic. The Executive also made known its intention to borrow additional N12 trillion between 2022 and 2023. This was contained in the 2021 finance bill signed by the President. It is worthy to note that such a request is against the provisions of the Fiscal Responsibility Act (FRA).
The FRA provides that borrowing should be channelled to capital projects and must not exceed three per cent of the GDP.
First is that the capacity to utilise the borrowed funds within two years is of great doubt, since almost a good part of 2022-2023, being an election period, would be dedicated to campaigns and election. The distraction of electoral activities is expected to have its toll on governance and might subject borrowed funds to abuse. On this premise, such borrowing should be treated with caution.
Also, the lazy approach of borrowing to fund critical projects must be discouraged by all means. The federal government must look for internal ways of generating revenues to fund its capital projects.
There are plethoras of ideas available for the government to tap from. One of them is plugging the leakages in government revenue generation. The federal government must work with the Fiscal Responsibility Commission (FRC) to ensure that revenue targets set for the Ministries Departments and Agencies are realised. This means that the FRC must endeavour to monitor the performance of the government-owned enterprises to ensure they remit their operating surpluses to the Consolidated Revenue Fund. To achieve this, the FRC must be properly funded and collaborate with other relevant agencies.
Secondly, remittances of VAT, blocking unnecessary tax waivers and imposition of sin tax on harmful commodities are sure ways of generating revenue. The transparency and accountability in the VAT payment system needs to be strengthened.
Consumption tax is projected to generate trillions of naira into government coffers. Other innovative ways such as mandatory health insurance should also be explored. For instance, if the active population size of Nigeria, with the region of 140 million persons, excluding children and the aged, should make a mandatory contribution of 500 naira monthly as health insurance fee, the country would realise over N840 billion annually for the health sector. When this figure is added to the current health budget, healthy infrastructure would greatly improve, thereby boosting the economy.
Other areas include recovery of fines from international oil companies, under the polluters pay principles, which recommends a certain fee to be paid by the International Oil Companies (IOC) for illegal exploration. NEITI’s recent report indicated that the IOCs owe Nigeria more than N17 trillion. If government must borrow, it should borrow for capital projects that could be ploughed back into the economy. For instance, borrowing to build a refinery would not be a bad economic decision, since the amount borrowed can be recouped from the sales of crude. It would also help to stabilise the exchange rate.
Emejuiwe is a Public Affairs/Good governance expert