Critics score the performance of the 2012 budget low but the federal government says the budget implementation is on course despite security challenges
Against the background of threats of impeachment of President Goodluck Jonathan by the House of Representatives over alleged poor and discriminatory implementation of the 2012 budget, the government reacted last Wednesday with facts and figures, saying budget implementation is now close to 60 per cent and not discriminatory. However, some critics argue that the implementation is as low as 35 per cent. Ngozi Okonjo-Iweala, coordinating minister of the economy and minister of finance, said the finance ministry was not being discriminatory or selective in the release of funds to the ministries, departments and agencies, MDAs.
The House of Representatives had before going on annual vacation warned that it might commence impeachment proceedings against the President if by the time members resume on September 18 the budget implementation had not reached 100 per cent. They complained that in the first half of the year, funds budgeted for the MDAs were not released, and because of that capital projects, especially constituency projects, were stalled around the country.
Okonjo-Iweala confirmed that a total of N403 billion has so far been released to MDAs out of N1.32 trillion capital expenditure, about 28 per cent of the total budget package of N4.877 trillion 2012 Appropriation Act. The sum of N304 billion was released in the first quarter of the year, while N100 billion was released in the second quarter. The 2012 budget, passed by the National Assembly on March 15, is seen by many to have affected the implementation.
Okonjo-Iweala told the House recently that some MDAs have done well in budget implementation. For instance, the National Security Adviser’s office has utilised 98 per cent of its budget allocation for the first half of the year; Ministry of Environment, 55 per cent; Transport 44, per cent; Women Affairs, 89 per cent; Water Resources, 12.7; Works, 37 per cent; and Niger Delta, 80 per cent. Though Ministry of Housing was given its full allocation for the first quarter, its performance is as low as 37 per cent.
Last Tuesday, the Ministry of Agriculture confirmed that it has achieved 68 per cent utilisation of the funds released to it, a remarkable improvement from the previous 12.17 canvassed. After briefing the President last Wednesday at the State House, Akinwumi Adesina, the minister told State House correspondents that of the N48.1 billion budgeted for capital projects, N13.8 billion has been released out of which N9.4 billion has been spent. Okonjo-Iweala said that a 100 per cent budget implementation is not possible anywhere in the world due to some intervening circumstances. However, the utilisation is moving up faster as the year entered the second half. “Mr President is determined to implement this budget as fully as possible and therefore we will be moving towards the figure of full implementation as we can by the end of the year, because the budget was made for the whole year.”
She emphasised that the Executive and the National Assembly are not at loggerheads on the issue of budget implementation. “Let me stress that the objective of Mr. President and that of the executives is very much the same as that of the National Assembly, which is to ensure that there is budget execution in order to deliver on the development programmes for this country. To that effect, we have really been working hard to try and get this done. And I think the proof that the attention the President has been giving to these issues is bearing fruit is the fact that from the review we had last month where implementation and utilisation of resources was at 39 per cent, we are now at 56 per cent. So we have moved from 39 per cent as at the end of May to 56 per cent as at July 20. So I think that is a very good progress and we expect to see continuing progress in that particular area. We have released about N404 billion so far, cash back N324 billion and the utilisation of that is 56 per cent. We will soon be considering the release of the third quarter funds; we hope to do that within the next two weeks or so.”
She attributed the slow take-off of budget implementation to technical deficiencies in the design of the capital projects. “We do face a couple of challenges that we have also been working with the National Assembly on. Effectively and quietly we have been working with them on a couple of these challenges. The first is of course that many of the constituency projects and new projects put into the budget need to be designed and to have feasibility studies because they are new and of course this takes a little bit of time to get those in time before MDAs can actually begin the process of procurement.”
Emeka Eze, director-general, Bureau for Public Procurement, the agency accused of being responsible for the slow release of funds, explained that proper scrutiny is necessary before money is released for capital projects. “Part of the global requirement is that public funds must be subjected to scrutiny. In our law, it is open competitive bidding. Projects must remain in public domain for the period of six weeks.... Most projects awarded in the past were without proper designs and the present government says this can’t continue. So, with the directives of Mr. President, by the end of October, virtually all projects would have been completed.”
Apart from increasing the capacity utilisation, government is also working to reduce domestic debt which is currently at over 16.4 per cent of gross domestic product, GDP. Okonjo-Iweala says government will launch a sinking fund in the 2013 budget to retire some of the domestic bonds. The government has a medium-term target to reduce the annual domestic borrowing requirement to N500 billion. In 2011, government borrowed N852 billion to fund the budget; this was reduced to N744 billion in 2012. Nigeria will spend N560 billion in debt servicing alone this year.
Okonjo-Iweala is worried that federal government’s naira-denominated domestic borrowing is crowding out private sector businesses and driving up interest rates. She believes the federal government can get foreign loans at concessional interest rates, much lower than the interest rates being paid for the naira-denominated domestic debts.
The issue of domestic debt came up during the sixth meeting of the National Economic Council, made up of the 36 state governors and top officials of the federal government. Governors are responsible for much of the domestic debt. The council maintained that the total debt stock of about 17 per cent of Nigeria’s GDP is marginal and healthy for the economy. Ministry of Finance says most of the foreign loans amounting to $5 billion were concessionary loans payable in 40 years while the level of the domestic debts was not critical. Therefore, they are confident that the debt burden would not in any way slow down the transformation agenda.
While the debt profile is being reduced, the government is also working on a deliberate savings programme to shore up its reserve. The watchword, says Okonjo-Iweala, is the quality of economic growth, and “that means that we have to save a little bit more.” As a result, the Excess Crude Account has been grown to about $5.6 billion. “I believe that to have a strong coffer, we should be able to save up to $10 billion,” she insisted.
However, some critics feel Nigeria should stop borrowing because all the benchmarks of the 2012 budget are being overshot. But the finance minister does not share this view. “We cannot stop borrowing completely overnight, because if we do, we won’t be able to finance so many things. We must bring the rate of borrowing down and that is what President Goodluck Jonathan has asked me to look into and we are doing that.”
While the economic indicators are improving by the day, economists are saying that positive statistics should translate to tangible improvement in human terms; that it should create jobs and reduce unemployment. Nigeria’s unemployment rate is very high at 23 per cent. Even worse, graduate unemployment is getting to a detonating point at 38 per cent. And every year, another batch of over 200,000 graduates are demobilised into the dry labour market. But Okonjo-Iweala has insisted that the economy is on course: “I believe we are on the right path.... We need to create jobs…. We are expected to create 370,000 jobs a year over the next three years, that is a lot of jobs.”
