Budget 2012: Paradox of Cutting Cost of Governance
Category: Nigeria Economy
04 Mar 2012 / Onwuka Nzeshi
In recent months, everyone in and out of government in Nigeria seems to agree on the need to cut the cost of governance but there seems to be no consensus on how to go about it. In this report, Onwuka Nzeshi writes on the observed wastages in the national budget and the unexplored opportunities of entrenching prudence.
The report made one startling revelation on the issue of security votes. “Over the years, Nigerians have always associated security vote with governors and nursed the belief that it is prone to abuse. It is, however, astonishing to find security vote as an item running through all MDAs. In other words, the budget makes provisions for ministers, heads of parastatals and agencies of government to collect security votes. ……It is reasonably argued that this item amounts to a duplication of the votes allocated to the Ministry of Defence, Ministry of Police Affairs and their various service arms and commands in the budget. As if this was not enough, it has been discovered that even MDAs whose primary functions revolves around security have security vote allocations in the budget. The Nigeria Navy has N32.7million allocated to it for security services; the Federal Ministry of Interior has N5.5m; Federal Ministry of Finance has N29.3m; Ministry of Police Affairs has N12, 941,386.00 while the Nigeria Security and Civil Defence Corps has N158.3million for the same purpose”.
President Goodluck Jonathan presented the 2012 Appropriation Bill to a joint session of the National Assembly on December 13, 2011. As has been the tradition over the years, it was branded “a budget of fiscal consolidation, inclusive growth and job creation" which was designed to create an environment for fiscal prudence in Nigeria .
The fiscal deficit in the budget proposal was projected at about 2.77 percent of the GDP as opposed to the 2.96 per cent in 2011. This, according to the authors of the budget, was within the threshold stipulated in the Fiscal Responsibility Act, 2007 and a clear indication of the government's commitment to fiscal prudence.
While presenting the budget, Jonathan said his administration was conscious of the need to control the cost of governance and would soon commence the process of streamlining agencies with overlapping mandates as a way of realigning public expenditure.
According to him, the preliminary report of the task force set up for this purpose had been submitted and government was prepared to implement relevant recommendations in the report as well as pursue the biometric verification of workers and pensioners in order to cut cost.
Government, he said, was determined to pursue policies that will ensure a stable macroeconomic environment through a strong and prudent fiscal policy, manageable deficits, sustainable Debt-GDP ratio of no more than 30 percent and single digit inflation, thereby promoting real growth.
“Starting from 2012 for the medium term, we shall focus on cutting recurrent expenditure to sustainable level through reducing waste, inefficiency, corruption and duplication in government. Recent reviews of public expenditures provide a basis for taking such measures. In order to make capital spending more effective, government is introducing a new template for analysing the financial and other factors including the economic rates of return, job creation, and environmental sustainability.
“Similarly, government will continue to prioritise its expenditures while focus will be on the completion of viable ongoing capital projects. It is our intention to fund and bring the large portfolio of ongoing projects to completion in the next few years while also taking on flagship projects already identified in the Transformation Agenda,” Jonathan said.
Initially, the money bill proposed an aggregate expenditure of N4.749 trillion, which is a modest increase of six per cent over the N4.484 trillion appropriated for 2011. It was also based on a set of assumptions, reflecting government's determination to maintain prudence in the face of continued uncertainties in the global economy. These include the following: crude oil production of 2.48 million barrels per day (mbpd) up from 2.3mbpd for 2011; oil price benchmark of $70 per barrel and an exchange rate of N155 to $1.
However, some of these projections have been altered following the crisis that trailed the government's attempt to remove fuel subsidy. At least the budget has witnessed a transformation in terms of its volume.
In a recent letter sent to the two chambers of the National Assembly, Jonathan presented a new version of the 2012 Appropriation Bill and gave reasons for the changes.
The letter reads: “Recent domestic developments, key among which was the partial withdrawal of subsidy on petroleum products and the ripple effect on the government revenue and expenditure items, have necessitated the revision of the 2012-2014 Medium Term Expenditure Framework and the 2012 budget proposal which I presented to the National Assembly on the 13th of December 2011.
“In this respect, I hereby forward copies of the revised 2012 budget proposal. It is my hope that the distinguished senators/ members of the House will kindly consider and approve these revised proposals expeditiously.”
In the latest version of the budget, the government has made available N888 billion as provision for the payment of subsidy claims on petroleum products that would be imported into the country. It also slashed the entire budget by N101 billion, bring the total volume down to N4.648 trillion instead of the initial N4.749 trillion. Capital expenditure which initially stood at N1.39 trillion has been scaled down to N1.28 trillion while recurrent expenditure has been reduced to N2.432 trillion from the N2.471 trillion proposed in the earlier version of the budget.
A closer look at the revised budget reveals that there were somemarginal reductionsin the allocation of funds to some ministries, departments and agencies.
In fairness to the Presidency, its budget was slashed by N2.75 billion while the Office of the Secretary to the Government of the Federation also had its allocation slashed by N2 billion, that is from N47 billion to N45 billion.
However, the National Assembly retained its earlier allocation of N150 billion while the Ministry of Defence and its three service arms (Army, Navy and Air Force) had their allocations reviewed upwards from N325 billion to N331 billion. The National Assembly had in the wake of the presentation of the budget, criticised the lion's share of funds given to defence and security and the lawmakers demanded a downward review of the funds and the transfer of same to other critical sectors such as education, health and power.
Citizens Wealth Platform
As has been the trend over the years, the National Assembly may not dig deep enough to discover other areas where the government may have to cut down on its proposed expenditure for the year. Apparently disturbed by the yearly wastage incurred through the budget, some civil society organisations in the country have been advocating for more citizens' participation to ensure prudence, transparency and accountability in the budgeting process.
This year, the Citizens Welfare Platform, a coalition of non-governmental, faith-based organisations and professional associations dedicated to ensuring that public resources were made to work for the benefit of all citizens, has dealt with the problem directly. The coalition recently convened a dialogue to dissect the 2012 Appropriation Bill and the implementation of key fiscal governance reform laws such as the Public Procurement Act, Freedom of Information Act and the Nigerian Extractive Industries Transparency Initiative.
A report of the discourse given to THISDAY exposed many areas of wastages and fund leakages in the national budget over the last 12 years of democracy. In fact, it has become evident that the much-dreaded corruption in the public service exemplified by the looting of public funds starts with the budget. It is an open secret that senior civil servants are some of the richest persons in Nigeria today even though their stupendous wealth cannot be equated with their legitimate wages.
The puzzling wealth accumulation becomes clear when one takes a peep into the national budget and beholds the quantum of funds that are budgeted for either items that have been purchased in the previous year or items that are not even needed. For instance, it has been a tradition that budget proposals presented by MDAs would always have provisions for the purchase of computers and acquisition of software, travels and transport as well as capacity building. In some cases, these items are duplicated under various sub-heads to attract more allocations that would be eventually siphoned at the end of the fiscal calendar.
In its report, the Citizens Wealth Platform identified these leakages and forwarded to the National Assembly a set of recommendations on cutting cost of governance through the budget. Copies of the report which were sent to the 109 senators and 360 members of the House of Representatives advised the National Assembly to embark on a surgical operation on the provisions of the 2012 Appropriation Bill before its passage.
The memorandum observed that the budget made provisions for transfer of lump sums of money to certain organisations which are on first line charge without any details or disaggregation that would enable citizens understand the rationale behind such allocations.
Under this category, we have agencies such as the National Judicial Council, National Assembly, Niger Delta Development Commission, Universal Basic Education Commission and Independent National Electoral Commission benefiting from some unexplained allocations.
In the revised budget, Jonathan has reduced the allocation to the NDDC from N54billion to N48 billion; UBEC had its budget reduced from N68 billion to N63 billion while the INEC had its allocation reduced from N40 billion to N35 billion, but the coalition is not impressed by such executive gestures.
Lead Director, Centre for Social Justice, Eze Onyekpere, who is the driving force behind the Citizens Wealth Platform, said stating statutory transfers as lump sums was not acceptable in a constitutional democracy founded on the rule of law and sovereignty of the people. Eze said going by the provisions of Section 48 of the Fiscal Responsibility Act, no agency of government, under any guise, is allowed to spend public resources in a way and manner and for purposes not known to citizens. He urged the National Assembly to insist on the disaggregation of all statutory transfers and provide details of the allocations like the budget of other MDAs.
“The previous budgets published by the National Assembly are filled with wasteful expenditure from which great savings can be made. Institutions such as the National Judicial Council (NJC) and the National Assembly need to cut down their expenses to free up resources for investments in wealth creation and poverty reduction.
The National Assembly should cut its vote by fifty percent (50%) and the NJC should also consider cutting its vote down by not less than thirty percent (30%) while the NDDC budget should be scrutinised vis-à-vis the budgets of the states that benefit from the commission and the Ministry of Niger Delta to fish out duplication and waste,” Eze said.
The report also noted the recurring presence of a line item referred to as “welfare packages” and questioned the legality of such a provision in a budget of fiscal consolidation. It recommended the removal of all provisions for the so-called welfare packages in the 2012 budget, arguing that it was an illegal practice not founded on any law.
According to the report, the welfare of the staff of MDAs was already provided for in the personnel cost reflecting as salaries, wages and other perks of office; therefore coming back to provide another welfare package is a duplication of costs.
Computers and Vehicles
On the request for computers, printers, software and other office equipment, the report said the demand was not only over bloated, but has been a recurring decimal over the years. Again, the Citizens Wealth Platform advised the National Assembly to demand an inventory of the computers, printers and software purchased in previous years to enable them to determine the appropriateness of the current requests.
The report also called for a review of the demands for new vehicles in line with government's policy on cost control in the acquisition of new vehicles. It, however, reminded the government of the need to continue the implementation of the monetisation of benefits by ensuring that the practice of purchasing fleet of cars for public officers was discouraged.
In line with the monetisation policy, government says in the documents accompanying the budget that procurement of motor vehicles has been deferred except ambulances, Black Maria, and Hilux vans.
“Some of the requests in the budget do not seem to be in conformity with this measure on cost control. The continued implementation of the monetisation programme will save resources and cut down expenditure. By our estimates, government can save over N5billion from the review exercise. The provisions for travel and transport are also too high. The National Assembly should consider cutting down this item by about fifty percent across the board. However, a sector-by-sector analysis may provide exception to the fifty percent rule and more cuts may be necessary in some MDAs than in others.
It observed that there were too many MDAs collecting huge sums of money through the budget and delivering little or no tangible services. The coalition therefore endorsed government's earlier pronouncement of merging, restructuring and even repealing their enabling laws to ensure that non-essential agencies ceased to exist to prune down wasteful expenditure.
“The legislature should collaborate with the executive and particularly review the reports of the committees set up by the president on pruning expenditure and cutting down on the number of MDAs. This should be done before the end of the first quarter to ensure that they do not reappear in the run-up to the 2013 budget,” the group said.
The report made one startling revelation on the issue of security votes. Over the years, Nigerians have always associated security vote with governors and nursed the belief that it is prone to abuse. It is, however, astonishing to find security vote as an item running through all MDAs. In other words, the budget makes provisions for ministers, heads of parastatals and agencies of government to collect security votes.
The Citizens Wealth Platform argued that this item amounts to a duplication of the votes allocated to the Ministry of Defence, Ministry of Police Affairs and their various service arms and commands in the budget.
As if this was not enough, it has been discovered that even MDAs whose primary functions revolves around security have security vote allocations in the budget. The Nigeria Navy has N32.7million allocated to it for security services; the Federal Ministry of Interior has N5.5m; Federal Ministry of Finance has N29.3m; Ministry of Police Affairs has N12, 941,386.00 while the Nigeria Security and Civil Defence Corps has N158.3million for the same purpose.
For each of these and others not mentioned in this article, the report said there was no justification for a special vote for security services and security votes as the normal security agencies funded by the budget should provide this service. The report observed that “security votes have been serially abused and are still open to abuse because they are not subject to the normal channels of accountability”.
However, taking the argument of wasteful resource allocation further, the report stated that at the Federal Ministry of Finance, the supposed driver of the budget of prudence is a questionable allocation to cleaning and fumigation services. The headquarters of the ministry had N66, 458,075.00 allocated to it while the Budget Office which is also in the same building had a vote of N12, 250,120.00 for the purpose of fumigation and cleaning services. If charity, as they say, should begin at home then these bogus allocations would also need to be reviewed. However, who will bell the cat?
Outside The Budget
The Citizens Wealth Platform also dwelt on other cost cutting issues outside the budget and made recommendations on how government can handle them. It observed that part of the problem of bloated cost of governance arose from the over-politicisation of every administration and the configuration of the executive council of the federation.
According to the report, the number of ministers in the Federal Executive Council was too much and should be streamlined to not more than 37 in accordance with the 1999 Constitution. Similarly, no minister should have more than one official vehicle while the legislature should work towards a reduction in the number of special advisers and assistants to the president and ensure they do not exceed 20. The report further urged the Fiscal Responsibility Commission to take steps to ensure that 80percent of the operating surplus of every scheduled corporation is paid into the Consolidated Revenue Fund on time as stipulated in the Fiscal Responsibility Act.
The National Assembly had in the wake of the presentation of the budget criticised the budget because of the lion's share of funds allocated to defence and security. It is, however, unlikely that the legislators would maintain the same position now given the growing insecurity in the country.
Right now in the National Assembly, it does not seem as if the lawmakers are bothered about these memoranda seeking a slash of their own capital votes and the votes of other MDAs. What seem to be taking centre stage are some partisan and regional agitations against the provisions of the budget.
The Action Congress of Nigeria Caucus in the House of Representatives has kicked against the revised budget. It said that the second version of the 2012 Appropriation Bill sent to the National Assembly was unconstitutional to the extent that it was coming in 2012 rather than 2011. According to the caucus, the 2011 budget cycle ended on December 31, last year even though the National Assembly extended the implementation of the capital component of the budget to March 31, 2012.
Minority Leader of the House and Leader of the ACN Caucus, Hon Femi Gbajabiamila, is of the view that the revised budget proposal should have been deferred and presented as a supplementary budget. This, he said, would allow the initial budget to run its own course. The matter has been referred to the Committees on Rules and Business, Appropriation, Justice and Judiciary for examination and advice. This legal and constitutional argument is not likely to change anything.
On the other hand, the Northern Caucus in the House is protesting against the capital allocation to the south-south geo-political zone as against the share of the three geo-political zones in the north.
The lawmakers have threatened to frustrate the passage of the budget if the perceived imbalance was not addressed.
The caucus claimed it commissioned a study of the budget and has produced a 252-page report showing the “Regional Analysis of Capital Allocation in 2012 Draft Budget” which it said has been skewed against the defunct Northern Region.
The caucus alleged that while N116.5billion capital vote has been allocated to the south-south geo-political zone where Jonathan hails from, other regions were given allocations ranging between N40.8billion and N65.5billion. This, it added, is besides when the south-south had the advantage of the 13 percent derivation principle; the N69billion virement for some special projects in the south-south and the funds that accrue to the Niger Delta Development Commission.
“If the president's proposals were enacted in its present state based on our analysis, the fiscal consolidation, inclusive growth and job creation as clearly spelt out in the theme of the budget might not be equitably distributed across the regions of the federation.
“It is our prayer that the imbalance in the proposed capital allocation in the various zones should be objectively reviewed and harmonised in the interest of federal character, equity and fairness among the geo-political zones instead of a particular zone taking the largest percentage,” the caucus said.
Again, this is a fight that may not go too far because oftentimes, the political elite initiate such agitations not necessarily to change the system but to make themselves relevant in the scheme of things. The Northern Caucus may soon discover that there had never been a time successive governments have made budgetary allocations consciously to achieve the kind of balance and equity they now seek in a single year's budget.
As it stands now, the 2012 budget may not witness any major changes along the lines of prudence and fiscal discipline because those saddled with this responsibility may not be interested in looking towards that unpopular direction. The time is already far spent and soon we may be forced to make do with whatever comes out of the legislative mill because the nation needs a new budget before the expiration of the life span of the 2011 Appropriation Act by March 31.