The President recently signed a budget size of 17.21trn. The budget figures is one of the highest ever experienced in the country for the last ten years. The components of the budget include a debt service of 3.8trn, a deficit financing of 6.9trn, crude oil benchmark of 62 dollars. The sum of 5.61trn was earmarked for capital projects while recurrent projects is to gulp a total of 6.9trn. For statutory transfers, the sum of 869bn is earmarked as statutory transfers.
The altercations between the President and the National Assembly on the insertion of about 6,576new projects into the budget and removal of 10,733 projects from the executive proposals is indicative of the faulty process in the budget formulation. Recall that section 13 of the Fiscal Responsibility Act provides for consultation and input in the preparation of the Medium Term Expenditure Frame work, part of the stake holders to be consulted includes 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, decicisions on the macro-economic indices, such as inflation rate, crude oil bench mark 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 President also made known its intention to borrow additional 12trn between 2022 and 2023, this was contained in the 2021 finance bill signed by MR. President. It is worthy to note that such request is against the provisions of the Fiscal Responsibility Act. The FRA provides that borrowing should be channeled to capital projects and must not exceed 3 percent of the GDP.
First is that the capacity to utilize the borrowed funds within two years is of great doubt, since almost a good part of the year of 2022-2023, being an election year 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 project 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 FG to tap from. One of them is plugging the leakages in government revenue generation. The FG must work with the Fiscal Responsibility Commission to ensure that revenue targets set for the MDAs are realized. This means that the FRC must Endeavour to monitor the performance of the Governments 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 realize over 840billion naira 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 IOC for illegal exploration. NEITI recent report indicated that the IOCs owe Nigeria more than 17trn. If government must borrow, it should borrow for capital project that could be ploughed back to the economy. For instance borrowing to build 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 stabilize the exchange rate.
Public Affairs/Good governance expert