With the first quarter of the year here, Jide Babalola, Assistant Editor, takes a look at the chaotic 2016 budget process and the implications.
IT was a big surprise that the massive hope that greeted the new ‘government of change’ was not enough to rescue it and the entire nation from the gremlin of delayed budget. Many criticisms abound against the dictatorial nature of military regimes in Nigeria but it must be said that delay in the preparation and presentation of annual national budget was never one of them. Routinely, the national budget tended to be ready for the military Head of State’s presentation to Nigerians.
However, since 1999 when democratic norms became the principle of state policy, delayed passage of Nigeria’s annual national budget has become unduly too frequent. The timely passage of the 2013 budget seemed to have broken the jinx of lateness. However, what is unfolding before our eyes clearly shows that the imp of delay has ensnared 2016 budget.
What is a national budget? The Policy and Legal advocacy Centre defines it in a simple, easily understood manner that the average person can understand. “A national budget is an accounting tool to reflect a national vision or a grand agenda. It is a tool needed to plan for job creation, social services, infrastructure and development and used in critically analysing the most important sectors of an economy such as health, education and environment.”
Reviewing other intellectuals’ contributions, Patterson Ekeocha notes that budgeting is one of the most important areas of policymaking. Through budgets, governments indicate how much it is willing to spend on public purposes, set substantive policy priorities within overall spending levels, determine the amount that must be borrowed in order to finance approved spending levels, and thus influence the economy. The ability to make timely and sensible fiscal choices is therefore regarded as one of the hallmarks of sound governance.
Towards the end of every year, hopes of various sorts of renewal appear on the horizon, raising expectations that the next national budget would address the issues and perspectives relating to items in the preceding paragraph above. Unfortunately, hope soon turns into mirage for the long-suffering populace.
By far one the most comprehensive and dependable intellectual work on Nigeria’s perennial budget delays is “An Analysis of the Federal Budgeting Process in Nigeria: Implications for Institutional Reforms for Achieving Timeliness.” Its author, Dr. Patterson Chukwuemeka Ekeocha of the National Institute for Legislative Studies, Abuja amply dissects the problem.
Many are of the view that Nigeria’s perennial budgetary problems can only be solved with a law setting stringent budgetary deadlines – from the budget’s presentation, passage, and signing to setting implementation milestones. Indeed, as an Abuja-based development economist, Odilim Enwegbara recently observed, our peculiar self-made handicap with the national budget was resolved by modern economies across the world through the passage of laws that insist on stringent adherence to set down dates and deadlines on their budgetary matters.
The budget process
The delayed passage of the national budgets and the subsequent poor implementation can be explained by several factors but the central aspect is the budgeting process. Articulated concerns by civil society groups, the Nigerian public and even the 7th House of Representatives which gave it a central significance in its Legislative Agenda, as well as the current National Assembly’s initial optimism about getting it right in 2016 have hardly impacted positively on ending the jinx of budget delay.
Long before the budget, which is officially referred to as the Appropriation Act, is presented by the Executive, approved by the Legislature and signed into law by the President, the first step in the budget process is that of Budget Planning/Formulation. Here, the Budget Office of the Ministry of Finance develops the budget in accordance with the government’s fiscal policy very early in the preceding year by meeting with key revenue generating and economic agencies to assess and determine trends in revenue performance and macroeconomic indicators and the implication of such trends for the next three fiscal years. This effort produces the Medium-Term Revenue Framework (“MTRF”) and then, the Medium-Term Expenditure Framework (“MTEF”) which outlines key areas of expenditure (statutory transfers, debt service, MDAs’ Expenditure) as well as the projected fiscal balance.
Next is the Budget Call Circular and Preparation of the Executive Budget Proposal. The Call Circular instructs ministries, departments and agencies (MDAs) to allocate their allotted capital expenditure ceilings across their existing and new projects, programmes and other initiatives. They also forward estimates of their recurrent expenditure requirements for personnel costs and overhead. All these are evaluated and are normally condensed into a draft national budget by August.
Afterwards come the Presidential Submission to the National Assembly as the draft budget would have been presented by the Minister of Finance to the President for approval. A joint session of both the Senate and the House of Representatives formally receives the President’s presentation for consideration.
What follows is the sub-process of Legislative Scrutiny and Approval. Separately, both chambers of the National Assembly utilize established legislative practice and procedures in the consideration of the Appropriation Bill submitted by the President. Their various committees interview the heads of respective MDAs and the committee reports/recommendations submitted to each chamber are subsequently collated and harmonized.
The final outcome is thereafter submitted to the President for his assent and thereby it becomes an Appropriation Act or law.
Horse-trading for constituency, political and even personal interests sometimes take place between the legislature and the executive. This partly explains the birth of ‘constituency projects’ as well as an arrangement under which the Executive turns its attention elsewhere while the National Assembly disburses some N150 billion annual budget without any concern for public calls for transparent procurement and disbursement processes.
‘Budget padding’, which involves the deliberate insertion of huge chunks of several millions or billions to take care of certain interests usually, happens between the MDAs and the legislature.
Depending on the time conclusions, including Presidential assent, are reached, Budget Implementation is then carried out by the various Ministries, Departments, and Agencies (MDAs) of the federal government as funds for capital projects are released on a quarterly basis to the relevant spending by MDAs in line with what is allocated to them in the budget. Since 2005, the Federal Ministry of Finance had instituted a cash Management Committee, that ensures funds’ availability for the smooth financing of government budget. This structure reduces discretionary borrowing from the overdraft (Ways and Means) account of the Central Bank and avoids delays towards completing capital projects.
Finally, the monitoring and evaluation of the Federal Budget is done by the Ministry of Finance, the National Planning Commission (NPC), the National Assembly, the National Economic Intelligence Agency (NEIA), the Presidential Budget Monitoring Committee (PBMC), the Office of the Auditor General of the Federation and the Accountant General of the Federation.
Summarily, Ekocha presents this brief account of the Nigerian budget process, broken down into 14 stages/steps as follows, covering:
Stage 1: Medium Term Revenue Framework Stage 2: Medium Term Expenditure Framework. Stage 3: Set Prospective MDA Envelopes Stage 4: Medium Term Expenditure Sector Strategies (Annual Update) Stage 5: Stakeholder Consultation (Organised Private Sector, CSOs, Public Sector inputs) Stage 6: MDA Envelope Agreed Stage 7: Fiscal Strategy (i.e Revenue/Expenditure Framework/ Priority Focus) Stage 8: FMF Issues Budget Circular. Instructions, MDA Envelopes Stage 9: Submission by MDAs Stage 10: Evaluation and Consolidation of Submission. Stage 11: Presentation of Draft Budget to Mr President & Stage 12: Transmission of Budget by Mr President to NASS. Stage 13: NASS Approves Appropriation Bill. Stage 14: Mr. President signs/assent, turning the Appropriation Bill into law.
It is apparent that except for the long and deep aspect of stage 13, activities at all other stages are undertaken by the Executive.
Section 81 of Nigeria’s constitution stipulates that the President can, at any time before the expiration of the fiscal year, cause to be laid before the two chambers of the National Assembly, the Appropriation Bill.
Budget process in USA
For any sustainable change towards reducing or ending delays altogether, Nigeria needs to learn from other countries where such problems have been decisively solved.
In the United States, the budget process comprises four steps. First, the President initiates the annual budget process by presenting his budget proposal to Congress. This event that usually occurs in early February is in compliance with established rules that except in years where there is a change in administration, the President is required to submit detailed budget proposals for the coming federal fiscal year to Congress by the first Monday in February.
At the second stage, Congress adopts a budget resolution to guide it as it acts on various spending bills. Although lacking the force of law, the resolution establishes targets and assumptions that often dictate results. Within six weeks of the President’s budget submission, congressional committees are required to submit their views and estimates of spending and revenues within their respective jurisdictions to the House and Senate Budget Committees.
At the third stage, each of the thirteen appropriations subcommittees divides the funds allocated to it in the budget resolution among the agency programmes within its jurisdiction. Each appropriations bill must pass the House and Senate in identical form and be signed by the president. A procedural rule called a “point of order” can be raised on the House or Senate floor to block an appropriation bill inconsistent with the resolution.
At the fourth stage, Congress passes a “reconciliation bill” making changes to existing law so that it conforms with the numbers in the budget resolution. The budget process must be completed by September 30th, the end of the fiscal year. Often not all of the appropriation bills have been signed into law by that date, in which case Congress must pass a “continuing resolution” to provide temporary funding to keep the government running. In addition, Congress often passes a “rescission bill” to revoke money appropriated for the current fiscal year, but not yet spent. “Supplemental appropriation bills” are enacted to provide funding in addition to that previously designated for the current fiscal year.
In Nigeria, room for delays
As no constitutional provision or established rules stipulates specific period, various stages of the budget process are subjected to very elastic completion time.
Usually, the Minister of Finance issues the call for budget circular but bureaucratic “red-tape” in the civil service alone ensures that much time is wasted on budget documents.
It is very apparent that the National Assembly’s budget process in stage 13 is regulated by the “Standing Orders” and “Rules” of the House and Senate. Again, here there is no fixed time period for the completion of the process. It depends on the allotment of time issued by the leadership of respective Chambers.
The First Reading of an Appropriation Bill happens when the President has publicly presented the Appropriation Bill to the National Assembly in a joint sitting. For the Second Reading, the Chairman of the House or Senate Rule and Business Committee, in consultation with the chamber’s leadership, fixes a day for the Second Reading and at the end of the debate in the second reading, the President of the Senate or the Speaker then refers the Appropriation Bill to the Appropriation Committee, with all other portfolio Committees serving as sub-committees.
These scores of standing Committees become sub-committees of the Appropriation committee and can organise hearings and scrutinize the appropriation bill. Subsequently, the appropriation committee consolidates the report and reports to the Committee of Supply following order 61 of the House of Representatives.
The Third Reading involves the proceedings in the Committee of Supply and passage. The Committee of Supply looks at the Appropriation Bill clause by clause.
After the passage in both chambers, the report is sent to the Super Committee for harmonization. After the harmonization of the report, it is sent back to the two houses for adoption.
When the two chambers of the National Assembly concur, the bill is eventually presented to the President for assent. In the event that the President withholds assent or fails to signify his assent to the Appropriation Bill or any Money Bill within thirty days, the National Assembly will by two-thirds majority of members of both Houses sitting in a Joint Session of the National Assembly over-ride the President’s veto, and thus pass the bill again which shall become law and the assent of the President shall not be required.
Sections 80-82 of the Nigerian Constitution stipulates that the executive arm at the federal level must adhere to the provisions of in the federal budget process. The Constitution grants the power of the “purse” to the legislature but does not provide or establish any specific procedure for the consideration of budgetary legislation.
Section 81 of the constitution provides that the President shall cause to be prepared and laid before the each House of National Assembly AT ANY TIME IN EACH FINANCIAL YEAR, estimates of the revenues and expenditures of the Federation for the following financial year. Section 82 provides that if the Appropriation Bill in respect of any financial year has not been passed into law by the beginning of the financial year, the President may authorize the withdrawal of moneys from the Consolidated Revenue Fund (CRF) of the Federation for the purpose of meeting expenditure necessary to carry on the services of the Government of the Federation for a period not exceeding six months or until the coming into operation of the Appropriation Act, whichever is earlier.
Senate Rules and House Standing Orders alone explicitly harbour the possibilities of prolonged delay if the National Assembly deems such to be in the national interest.
Section 16 (1b) stipulates that on presentation, the appropriation bill shall be deemed to have been read the first time and a date be fixed for commencement of the second reading. Subsection 2 of same section 16 stipulates that the Rules and Business Committee shall determine the number of days to be allotted for the second reading of the bill. Section 16 (4a-d) stipulates that when the bill has been read the second time, it shall be committed to the appropriations committee.
After the consideration, the sub-Committees shall report back to the Appropriation Committee. The appropriation Committee after deliberating on the report of the sub-Committee shall then report to the Committee of the Whole House which is also known as “Committee of Supply”. Whenever the need arises for the Appropriations Committee to seek clarification on any issue relating to the budget of any Ministry, Department or Agency as submitted by a Standing Committee, the Appropriations Committee may invite the affected MDA to defend or clarify as may be necessary.
These provisions are time bound, yet there is no provisional timeframe upon which these processes and indeed others should be completed. The same process is also observed in the Senate Standard Rules. The time frame given usually depends on the discretion of the President of the Senate or Speaker of the House of Representatives who is at liberty to apportion two or three weeks or even a month as the case may be for the Committees to look into the Appropriation Bill.
Reform options
In his advocacy piece titled: “Nigeria needs stringent budget deadlines”, Odilim Enwegbara expressed optimism about the possibilities of change under the current dispensation and he also emphasized the need for firm rules.
“Since overseeing budget planning and execution is now the core responsibility of the Ministry of Budget and National Planning, there is no doubt that henceforth, there wouldn’t be any justifiable reason for any future lateness in both budget presentation and its implementation in Nigeria. In other words, the lateness in the presentation of the 2016 budget ought to be the last in the history of budget presentation in the country.
“Insistence on early budget presentation has some obvious advantages. First, it gives an ample opportunity for lawmakers to exhaustively deliberate on it and harmonise differences emanating from the two chambers of the National Assembly. Second, there’s enough time for procurement, implementation, monitoring, and evaluation planning.
“Third, the level of transparency that accompanies public participation makes budget more responsive to the needs and priorities of the citizens. Fourth, in promoting transparency, it becomes a fiscal instrument for promoting strategic priorities that deliver maximum value for money, as well as ensure that borrowed money is truly used in promoting growth and development.
“Also, early budget presentation, passage and signing will always make it extremely difficult to bypass the stringent public procurement rules as mandated by the 2007 Fiscal Responsibility Act, especially since these rules are made purposefully to engender transparency and accountability.
“To ensure stringent implementation, the law should re-emphasise that the budget cannot be presented without being accompanied with its Annual Cash Plans and Disbursement Schedule as mandated by sections 25 and 26 of the Fiscal Responsibility Act. It should also insist on the illegality of turning the weekly Federal Executive Council (Wednesdays) meetings into a lobbying ground for such indiscriminate budget implementation rather than for sharpening national economic policies and strategies.
“To engender transparency and accountability in the management of capital projects as international best practices demand, besides insisting on all information regarding the budget being posted on the Internet for free viewing and comments by Nigerians online, the law should also insist on a quarterly televised progress reports on the performance of the year’s budget for Nigerians to see where and how their money is spent.
“Part of the stringent law on implementation is the inclusion of a section that insists on impeachment of any president that allows his or her government to violate the country’s appropriation act in a way that undermines its implementation benefits to the people,” he stated.
Furthermore, lawmakers should ensure that the National Assembly Budget Office is well-funded and well-resourced to attract and retain some of Nigeria’s finest economic policy specialists which is very important if the legislative arm wants to carry out the proper re-ordering of budgetary provisions.
The legislative arm’s moderation of the executive excesses should include setting targets like oil price benchmarks, overall budgetary expenditures, overall budgetary revenues, for deficits and public debts. NABO should provide lawmakers authentic periodic forecasts and analyses of the economic trends, particularly economic best policies and strategies.
Indeed, the 2016 budget that was presented to the National Assembly on December 22, 2015 by President Buhari suffered the additional impediment of late appointment of ministers, especially that of the ministries supervising Budget and Finance. While it has suffered ugly descriptions, there is still hope that the change mantra of the current administration can ensure a wholesome and enduring departure from the delay jinx that has been holding sway over Nigeria’s national budget process for too long.
