http://omojuwa.com/2012/10/analysing-the-2013-budget-eze-onyekpere/

The 2013 budget proposal presented to the joint session of the National Assembly last week by continues with the tradition of the 2012 budget as a budget of Fiscal consolidation with inclusive growth. It is still anchored on four major pillars namely: macroeconomic stability, structural reforms; governance and institutions and investing in priority sectors. It is based on the following macroeconomic indicators: oil production of 2.53million barrels per day; a benchmark oil price of $75 per barrel; exchange rate of N160/US$; projected growth rate of 6.5 per cent down from the 6.85 per cent proposed in the Fiscal Strategy Paper.

Like the 2013-2015 MTEF, there is no projected inflation rate. The aggregate expenditure is N4.92tn which is a five per cent increase over the N4.7tn appropriated in 2012. It is broken down as follows; N380bn for statutory transfers, N591.76bn for debt service; N2.41tn for recurrent (non debt) expenditure and N1.54tn for capital expenditure. The capital budget represents 31.3 per cent of the overall proposal as against the 28.5 per cent for the year 2012 while the recurrent expenditure came down from 71.47 per cent to 68.7 per cent of the overall proposal. The fiscal deficit is projected at -2.17 per cent of the Gross Domestic Product as against -2.85 per cent in 2012. However, the leadership of the National Assembly was quick enough to point out that the revenue expected from gas was not reflected in the budget proposal while there is no indication as to the amount to be borrowed from external sources.

However, there are a number of positive developments in the proposal and these include that it was presented early, a departure from the practice in previous years. The proposed mainstreaming of gender concerns in five critical ministries of Agriculture, Health, Communications Technology, Water Resources and Works and the coordination of the initiative by the Ministry of Women Affairs is a very welcome development. However, the N3bn set aside by the administration as incentives to the chosen MDAs to deliver on agreed targets is just a token. The way forward in the future, if the administration is serious about gender issues in budgeting is to set targets, indicators and benchmarks for achieving gender-mainstreaming and these should be used at the MTSS, MTEF and budget preparation stages by all the MDAs

Further, the fiscal policies on machinery and spare parts imported for local sugar manufacturing industries, rice, aircraft and solid minerals and public mass transit buses are steps in the right direction. If implemented to the letter, they will improve local industrial capacity, enhance value-addition, create new jobs and result to greater corporate taxation for government. The fact that solid minerals abound in Nigeria, and have not been commercially tapped make it imperative to prime the sector to make larger contributions to the GDP. The current MTEF estimates of solid minerals contributing 0.6 per cent of the GDP over the medium term will likely be positively reversed if this policy is faithfully implemented. The aircraft policy will improve air safety while the mass transit bus policy will enhance public transport with its cost-reduction implications for other sectors of the economy. However, this discourse recommends that to make our entire automobile industry viable, government should extend this gesture to all vehicle CKDs to encourage local production and assembly of vehicles while discouraging wholesale importation.

On the other hand, contrary to the Fiscal Responsibility Act, there is no approved MTEF which is the basis for the preparation of the estimates of revenue and expenditure required to be prepared and laid before the National Assembly under Section 81 (1) of the Constitution. The MTEF is to be approved by a resolution of each House of the National Assembly. While the House of Representatives has concluded deliberations on the MTEF 2013-2015, the Senate has yet to conclude its consideration. Any discrepancy between the House of Representatives and Senate positions would ordinarily be resolved through harmonisation for the MTEF to have the requisite legislative imprimatur.

The issue of poor capital budget implementation was raised in the President’s speech although he offered no ideas on how to remedy the challenge. Only N711.6bn, out of a 2012 capital budget of N1.34tn has been released and the utilisation rate is 23.94 per cent. SURE-P did not utilise N93.5bn of its N180bn in the 2012 budget which will be carried over to 2013 to make the total expenditure for 2013 to come up to N273.5bn. This shows that the SURE-P will utilise only 48.1 per cent of the resources available to it in 2012. This is even very disturbing considering that a good number of SURE-P projects are augmentation of the regular funding of ongoing capital projects. What is the difficulty in releasing money to contractors to continue work on the Abuja – Lokoja, Benin – Ore Shagamu, East – West, and Port Harcourt – Enugu – Onitsha roads? If the contractor is not performing, he should be replaced.

The President’s account on the implementation of the 2012 budget is short on specific achievements. The 3.5million job creation aimed in agriculture is still a projection and there were no details of the number so far who have benefitted from YOUWIN and the Community Service, Women and Youth Empowerment Programmes under SURE-P. The airport modernisation projects appear stuck and very far from completion while the rail projects are more on the drawing board than having real impact on people’s lives.

The fiscal deficit for 2013 is projected at -2.17 per cent of the GDP as against -2.85 per cent in 2012. However, the challenge is not about the projection but the implementation of the budget to realise the goals stated in the budget speech. It will be recalled that the Federal Government does not stick to its fiscal balance projections. The fiscal operations of the government resulted in an overall deficit of N1,158.5bn or 3.3 per cent of the GDP in 2011. The important consideration for the budget should be for the Federal Government to exercise discipline in its fiscal management.

Unfortunately, there were no sectoral envelopes in the MTEF to enable a comparison between its budgetary allocations and the provisions. The allocation to education (even though it excludes allocations for Universal Basic Education Commission, Petroleum Technology Development Trust Fund, etc) is very low at 8.67 per cent of the budget. It has not met the international standard of 26 per cent of the budget. Coming at a time of the virtual collapse of every segment of the education sector, it needs to be upwardly reviewed. However, there is the need to demand increased transparency, accountability and value-for-money from the managers of educational institutions despite the need for increased funding.

The allocation to the health sector at 5.68 per cent is paltry considering the need for resources to meet the targets set nationally and internationally for the health sector requiring at least 15 per cent of the budget. Agriculture and Rural Development at 1.65 per cent of the budget is an extremely meagre allocation. Considering its contribution to the GDP projected at 38.4 per cent of the GDP in 2013 and the new concept of value chains improvement, the budgetary provision should be enhanced. However, the allocation to security (Defence and Police) of over 13.5 per cent of the budget appears like throwing money at national problems. Despite increased appropriations in recent years, the security situation has not improved a bit as can be shown in the rampant killings and crimes across the country in recent months. Thus, what is needed to contain the security threats may not necessarily be increased funding but the application of more intelligent solutions and greater value for money management of available resources.