By Jeremiah Angai
For close to 10 years, Nigeria’s political landscape has witnessed a
steady stream of political campaign slogans that seem to resonate with
Nigerians. From ‘Transformation’, to ‘Change’ to ‘Next Level’, these
political totems promise a movement of sorts for Nigerians. Although
often vague on whether the movement will be for better or worse, the
prospect of leaving the proverbial frying pan has often proved too
alluring for Nigerians to resist. It matters little if the shift will
be a back flip into an ever raging inferno.
Thus the country has found itself in a valley of inevitable change.
The fault lines that have miraculously held for decades are
threatening to unravel. Rising population, spiraling poverty and a
multidimensional insecurity, which includes Boko Haram insurgency,
killer herdsmen, banditry and kidnapping, seem to be coming to a head.
Nevertheless, amidst the convergence of these centrifugal forces, one
thing has remained constant – the budget.
On October 8, President Muhammadu Buhari, for the fifth time as
president, presented his budget to a joint session of the National
Assembly. The Buhari government intends to spend N10.33 trillion in
the year 2020. This represents a 15.81 per cent increase on the 2019
budget of N8.92 trillion. While this is a significant improvement on
government spending, historical antecedents suggest an increase in
budget size is the only material change in Nigeria’s budget over the
last 10 years. This is glaring in three major ways.
First is the ambitious revenue targets. Nigeria has over the last 10
years made oil revenue projections that are far above actual revenue
earnings. In 2011, the variance between the projected and actual oil
revenue was 72 per cent. The 2020 budget anticipates revenue
generation of N8.15 trillion, derived mainly from the sale of crude
oil and other sources, such as customs’ collections and taxes. The
government projects an oil production volume of 2.18 barrels per day
(bpd). Although this is a -5.22 per cent reduction on the 2.3 million
bpd budgeted in 2019, current and historic data show the figures to be
overly optimistic. According to OPEC’s Annual Statistical Bulletin,
Nigeria produced only 1.8 million bpd in 2018, while average crude oil
production between January 2002 and September 2019 has been 1.9
million bpd. Furthermore, recent data from the Central Bank of Nigeria
shows that the country earned N333 billion in oil revenue for August
2019, as against revenue projections of N789 billion for that month.
The other revenue lines are not so different. The 2020 budget’s
improved revenue target is premised on an increase in value added tax
(VAT) from 5 per cent to 7.5 per cent. The new VAT change will still
need legislative approval to become law. But beyond the VAT increase,
a more critical issue is whether revenue collecting agencies such as
the Nigeria Customs Service (NCS) and the Federal Inland Revenue
Service (FIRS) will be able to meet their collection targets. In
August this year, the Presidency queried the FIRS chairman on his
consistent failure to meet revenue targets. It follows therefore that
even with a VAT increase, the revenue expectations will remain unmet
if nothing is done to ramp up collection by bringing more people into
the tax net. This, added to traditionally low oil production output,
means the 2020 budget will also not deliver on expected revenue.
Second is the expenditure. The 2020 budget, like most of the budgets
before it, earmarks a huge chunk to non-debt recurrent expenditure.
N4.88 trillion out of the N10.33 trillion will go towards oiling a
bureaucracy that, though considered overloaded, is still only about 5
per cent of the population. The amount will go into paying salaries,
allowances and other expenses of the public workforce. But perhaps the
biggest disappointment is the capital expenditure. It should be easy
to predict the priority or direction of a government’s developmental
plans by its capital allocation.
In 2014, close to N1 trillion or 20 per cent of the budget was
allocated to security. This was done ostensibly to curb the growing
insecurity in the country at the time. However, in the 2020 budget, no
sector received any significant allocation that gives an indication of
the government’s priority development. Yet it is capital expenditure
that can touch every Nigerian. Critical human development sectors,
such as education and health, received allocations of 7 and 4 per cent
respectively. These abysmally low allocations are in keeping with the
budget patterns in Nigeria over the last 10 years. Indeed, there has
never been a point where the allocation to education has reached the
UNESCO recommended standard of 25 per cent.
Similarly, capital expenditure has hovered around 30 per cent of the
budget, while releases at the end of the budget cycle averages 50 per
cent. The capital budget for most ministries basically covers items
like the construction of head office or some other office building,
purchase of operational vehicles, purchase of computers and
photocopiers. These items are constantly appearing in every budget
cycle and constitute the bulk of the capital budget. Thus, even in the
capital budget, a significant portion of the expenditure has no direct
impact on the average Nigerian. Nevertheless, it must be emphasised
that a budget where recurrent expenditure always trumps the capital
allocation cannot deliver development to the people.
Third is the level of budget implementation. In the last 10 years, no
budget has performed over 60 per cent. This is because while recurrent
expenditure is usually 100 per cent spent, capital expenditure
utilisation is abysmally low. There are two possible reasons for this.
First is the usual delay in the passage of the budget. The 2013 budget
was signed into law in May, while the 2016 budget was passed in March
but signed into law in May. The 2017 and 2018 budgets were also passed
in the second quarter of their respective years. Late passage of the
budget leaves little time to spend appropriated funds. Second is the
cash backing for the approved budget. Because projected revenue is
never actualised, the allocation of funds for approved expenditure is
often a delicate balancing act. Releases are tied to the priorities of
the Presidency, the minister of Finance or, in some cases, the
lobbying abilities of a Ministry, Department or Agency (MDA). All
these factors have contributed to the low level of budget
implementation over the years.
*Angai, a Policy and Public Affairs Analyst, wrote from Abuja.
