Friday, 27 December 2013

Article: Budgeting And The Proposed Nigerian 2014 Federal Budget

By Jaye Gaskia

Let me begin with a confession; I am no economist, so some of the ways of budgeting may indeed be strange to me. Let me use as an example here, the way some countries, including ours, who are eager to please their people and show some progress dish out new studies which invariably suggests that at the current trend, such economies will overtake and leapfrog other economies in two to three decades hence!

The latest example here is Britain, where some think Tank have just released a study showing that by 2028 the UK will become Europe’s biggest economy, overtaking France, and leapfrogging Germany! Ofcourse the assumption is that the other economies will not grow as fast as the UK economy, and that the other ruling classes are not competitively lowering the cost of doing business and increasing the burden of being working class and poor!

Not to be outdone in this business of ‘ceteris pari bus’; our own treasury looting ruling class is engaged it its own game of self serving economic deception. The Nigeria Bureau of Statistics [NBS] has all through 2013 been engaged in the process it calls ‘rebasing the GDP/economy’. And it has been gleefully hinting us that by the time it concludes the exercise early in 2014; Nigeria’s economy with a current market size of $75bn will have suddenly frog leaped South Africa’s economy with a current market size of $ 680bn to become Africa’s largest economy!

This is not just a season of festivities, being also the Xmas season; it is also apparently a season of miracles! This is indeed the season of voodoo economics!

Now let us get back to the reason for this commentary, that most explicit manifestation of voodoo economics in our national life; the budget process! It is the season of budgets again, when executive arms of government prepare and present to the legislative arms, budget proposals for the coming year.

A number of issues need to be raised and addressed before we go into some preliminary analysis of the figures presented! First, every year we go through the ritual of presenting the new budget proposals for the new year to the legislative assemblies; and always against the background of the non or poor performance of the current, soon to be previous budget!

So for instance at the Federal Level, at no time since the return to civilian rule in 1999, has the budget performed above 60% in any one year. Usually budget performance is far below 50%! Additionally the component of the budget that usually grossly underperforms is the capital vote! The recurrent budget nearly always performs between the 95% and 100% range! This disparity in performance is very instructive, because the component of the budget that funds infrastructural development is the capital vote; and it is the component that has repeatedly and serially grossly underperformed. It is perhaps the reason why between 2000 and 2012 there were well over 12,000 abandoned projects littering and cluttering the country’s landscape; projects valued at more than a whooping N7.7tn and with more than N2.2tn already expended in mobilizations fees! Mind you, we are here speaking of already abandoned projects alone! Confirming this trend of wastefulness, a recent presidential monitoring report on NDDC projects submitted early 2013 also affirmed that nearly 40% of NDDC projects have been abandoned; with only less than 20% projects awarded ever completed and commissioned. Now this is equally very instructive; to complete and commission a project, as we all know in our national experience is not the same thing as delivering a quality and long lasting product! Boreholes without water have been sunk and commissioned courtesy of tanker fetched water hurriedly poured into the borehole and its overhead tanks, the night before the grand commissioning ceremony! The remaining 40% of projects are in various stages of completion, none exceeding 50% completion stage, and no one is sure whther they will ever be completed!

President Goodluck Jonathan has himself attested to this very sorry state of things while recently inaugurating the new board of the NDDC!

But what is even more worrisome, apart from the fact that the victim of budget underperformance is invariably always the capital vote; is the fact that no one bothers to do an analysis of why the budget has serially underperformed, and why it is incapable of performing in order to fix the problem. Is it a capacity problem? At various levels? How are budget estimates arrived at? What skilled and competent human and material resources are available for making this estimates and implementing the budget? And what is more? 

No one ever gives the reason for this underperformance nor makes any returns to the treasury with respect to what was not spent! What percentage of the previous year’s unspent budget is rolled over into next year’s budget proposal? How many of us the unwary electorates know for instance that in the 2013 Federal Budget, apart from the N1bn budgeted for food in the presidency, that there was budgetary provision for 2,399 constituency projects for the constituencies of each of the 360 HoRs members and the 109 Senators? 

How many of us know that constituency projects which ought to be visible in our constituencies had cost our country more than N900bn since 2000? And that is excluding the cost of the 2,399 projects in the 2013 appropriation act!

Now to the 2014 budget proposals! The FGN through the Federal Minister of Finance, and Co-ordinating Minister of the economy [invariably the Prime Minister]; has laid before the NASS, a budget proposal for 2014 of N4.6tn.  Of these, the Capital vote is N1,1tn [27% of the budget]; while recurrent expenditure is N3.5tn [73% of the budget]. Now this capital vote which constitutes 27% of the proposed budget is 4% decline from the 31% of the 2013 budget that it constituted!

This N1.1tn, which is the size of the proposed capital vote is less than the Personnel cost [read salaries, allowances and emoluments] component of the recurrent expenditure which stands at N1.723tn in the proposed 2014 budget; leaving N2.43tn for recurrent non debt, and non personnel cost [read overheads]!

There ought to be something significantly wrong with the budgetary process and with the managers of the economy; otherwise why would personnel costs component of the recurrent expenditures alone far outstrip the entire capital vote by over N640bn? This amount by which personnel cost outstrips the entire capital vote is more than 50% of the capital vote! What makes this even more counter productive and under developing is if we put this in proper perspective. If we as we know from the report of the Adamu Fika committee which looked into the cost of governance in 2012, the country spends averagely on an annual basis the sum of N1.3tn on the salaries and allowances of only 18,000 top Federal government officials; then it means that of the N1.7tn personnel cost, 18,000 [very likely unnecessary and redundant political hangers on] top Federal government officials receive N1,3tn leaving N0.4tn to the several hundreds of thousands of junior and middle level Federal Government Officials to share!

There are still more incongruities to come! Contained in the 2014 budget proposals is the clear and manifest anomaly; the combined budget proposals for the Federal Ministry of Agriculture and Natural Resources at N67bn [it was N70bn in 2013 and a mere 1.6% of the budget contrary to the agreement entered into in the Maputo Declaration of African Leaders to commit not less than 10% of annual budgets to agriculture in order to achieve economic growth rates that can enable poverty to be halved]; and the Federal Ministry of Science and Technology at N31bn; is less than the budget proposal for the Niger Delta Ministry at N111bn!

The N31bn budget for the Ministry of Science and Technology is actually less than the N37bn budget for the National Intelligence Agency [NIA]; and some still think the allegation of training snipers and putting over 1,000 people on a security watch list is spurious?

Furthermore the N20bn budget proposal for the office of the National Security Adviser is just about 66% of the budget of the Science and Tech Ministry budget, and just about 33% of the budget of the Agriculture Ministry! Furthermore the N3.6bn budget for the Directorate of State Security [DSS] is more than the N2bn Federal Government counterpart budget for its much trumpeted North East Development Initiative! We could also compare the North East intervention budget at N2bn with the Niger Delta intervention budget at N111bn! All in all, the total vote to the secret service agencies; DSS – N3.1bn + NIA – N36.9bn + DIA [Defence Intelligence Agency] – N7.4bn + ONSA [Office of the National Security Adviser] – N20.2bn is just about equal [N67.7bn] to the budget proposal for the ministry of agriculture at N67bn! Yet agriculture contributes 33% of the GDP and employs 60% of the productively engaged labour force!

This 2014 budget proposal by the way also includes nearly N900m as cost to fuel generators for the Presidency and the MDAs; with the Presidency and Federal Ministry of Finance being allocated N33.5m and N77m respectively for fueling generators in 2014! The same year we have been promised a minimum of 18hours of light daily?

The 2014 budget proposals also include a fiscal deficit of N912bn, almost the size of the capital vote at nearly90% [for a nation with External reserves of $43.9bn as at Dec 2013; a drop from $ 49bn as at December 2012]? As well as a Debt servicing component of N712bn, more than 60% of the capital vote!

And as a yearly ritual, the budget also includes N150bn allocation to the NASS [360 + 109 + 3,000 (max in support staff)]! Now to put this in perspective, this amount of N150bn is more than the annual budget proposals of Kogi [N129BN]; Kwara [N126bn]; Enugu [N93bn]; Niger [N99bn]; Ekiti [N104bn]; or Bauchi [N133bn]!

This is by far only just the tip of the iceberg, for the full details of the budget proposal are just coming out. Who knows how much will be budgeted for Feeding alone in the Presidency in 2014? Given that 2014 is a year when we expect a lot to happen in and around the presidency; this allocation may very well be doubled from its annual ritual of nearly N1bn!

And ofcourse Fuel subsidy, with a budget allocation of N971bn continues to be a readymade cow to be continually milked at the will of the Presidency. This is more than the size of the fiscal deficit, and is also even closer to the size of the capital vote that the size of the fiscal deficit. What progress have we made with respect to improving domestic refining capacity? How many million liters per day of petrol are now locally refined? Have we been able to scientifically ascertain the true daily consumption rate for PMS? What is this figure? 25 million liters per day? 30 million liters per day? 35 million liters per day? How was this figure arrived at? How much of this is locally refined? And how much is imported? What should our realistic and true subsidy burden be?

This brings us quickly to the supposed subsidy savings and the SURE-P scheme. What is the current landing cost of imported fuel? What is the average landing cost for 2013? It is only if we know the answer to these two questions that we can definitively determine whether any subsidy savings have been made or not. 

Because if as we suspect landing costs have progressively increased since February 2012, then it stands to reason that the size of the so-called subsidy savings would have been progressively diminishing since the N32 per liter that it was in February 2012. The reason is simple; the most decisive factors in the pricing of imported refined fuel remains; the value of the Naira in relation to the dollar! For as long as we import, and as long as the value of the Naira continues to decline against the dollar, for so long will the cost of refining and transportation, and therefore the landing cost of imported refined fuel continue to rise!

Let us end on a somewhat tragicomic note: according to the JTF [Joint Military Task Force], it arrested 1,857 oil thieves, and destroyed 1,951 illegal refineries in the Niger Delta in 2013! What a feat! 

Nevertheless crude oil theft increased from barely 200,000 barrels per day in 2012 to just about 400,000 barrels per day in 2013! Does this have anything to do with the fact that the JTF has been chasing the shadows? Curing ringworm while leaving leprosy? The 1,857 oil thieves arrested and the 1,951 illegal refineries destroyed work out to almost 1 illegal refinery destroyed per 1 oil thief arrested! The only charitable deduction that we can make from this is that these are small scale thieves trying to make a living; resorting to small scale oil theft [scooping of crude from broken pipelines or spills], and refining same as a means of livelihoods. These are not the owners and sponsors of the sophisticated grand criminal empires and enterprises with state of the art equipment, large barges and large tankers; who are responsible for the daily loss of 400,000 barrels per day; the annual revenue loss of near $18bn per annum; and the daily crude oil spill of nearly 40,000 barrels per day into the fragile Niger Delta Environment!

On this note let me wish you all complements of the season. And let me express the wish and the hope that we shall collectively determine to make 2014 a more decisive year for our wellbeing, by resumimg from where we left off the tasks and the agenda of the January Uprising of 2012. And mark my words, there will be plenty opportunity in 2014 to Reclaim our Country, and Take Back Nigeria! We do have to be prepared though.

(Follow me on Twitter: @jayegaskia & [DPSR]protesttopower; Interact with me on FaceBook: Jaye Gaskia & Take Back Nigeria)

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