The 2017 Proposed Budget Of Recovery And Growth: Personal Reflections By Jaye Gaskia

It is important to approach the recent presentation of the budget to the National Assembly by President Muhammadu Buhari from both a process and a content perspective. It is only by so doing that one can begin to unravel the intricacies of the entire range of issues involved and their interconnectedness.            
But first a very general observation is required. Looking at the 2017 Budget, both process and content wise, it appears as if we haven't learnt anything. It seems as if Nigeria's ruling political elite in government or in opposition have learnt nothing from our history, and even recent history. And even more shockingly, it appears as if they are incapable of learning anything.

Sadly, this seems to confirm the increasing notion of the initially gradual, but now apparently steep, decline in the quality of leadership of the ruling class plotting a trajectory of their quality since independence.

But I am jumping the gun here by beginning with my conclusion, so let me return to the present issues as they pertain to the proposed estimates of the 2017 federal budget, the second to be prepared by the All Progressives Congress ruling party, and the PMB Regime.

Process wise, the estimates in their entirety represent a breach of the Fiscal Responsibility Act [FRA] 2007, and this by a government that came into office not only promising change and insisting that it will not be business as usual, but also one that proclaims zero tolerance for impunity and the breach of due process and the rule of law.

The budget estimates have been prepared and presented without the benefit of a fully debated and legislatively approved Medium Term Expenditure Framework [MTEF], Fiscal Strategy Paper [FSP], Medium Term Sectoral Strategies [MTSS], as well as a full report of the analysis of the performance of the 2016 budget – all of which processes and documents are perquisites mandated by the FRA 2007 before the preparation, presentation and consideration of the proposed estimates for the new year, which in this case is the 2017 estimates.

Neither the MTEF nor the FSP, which were prepared and presented for legislative consideration and approval in contravention of the requirements of the FRA, have been passed and approved by the NASS as of the time of presentation of the 2017 estimates.

Also, as of this moment, we do not know the content of the required MTSS; we do not know if there is even a draft prepared yet. Amazingly too, there has been no comprehensive analysis of the performance of the 2016 budget and its accompanying Strategic Implementation Plan have been prepared or laid before NASS for consideration.

Why are these prerequisite documents and processes necessary? It is because they represent a framework that highlights government’s strategic thinking and priorities, as well as the strategic thrust of governance in the medium term. They represent a foundational skeleton upon which the annual budgets are based as instruments of realising the medium term frameworks.

And although they are no substitutes for a full-fledged National Development Plan, they are clearly instruments that are intended to guide governance such that governance becomes systematic, and not ad-hoc in character.

For a government that promised change, the foundation of this change ought to be evident in the way we plan in our processes and structures of governance, not only in the content and promises of governance.

On the part of the NASS itself, it has yet to consider the report of the Auditor General for the 2015 financial year, so how is it expected to make any informed inputs into the budget process except through the process of guesstimatation and barter [that is the arbitrary allocation of resources on the basis of give and take, and ‘you rub my back, I rub your back’]?

Another critical process issue is the undue lateness in preparing and presenting all of these documentations, including the 2017 budget estimates itself, the consequence of which is that there will be late passage, late signing of the appropriation bill into law, and consequently, late kick-off of the implementation of the budget with attendant deleterious impact on the implementation of the budget and its capacity to achieve the intended outcomes.

Just take a look at the shoddiness that has characterised the implementation of the 2016 budget. According to the president, as of the time of the presentation of the 2017 estimates, only N758bn of N1.8tn capital vote for 2016 has been released. That is barely 42% performance level.

If we had a full analytical report of the budget performance and access to a sectorial breakdown of the capital vote released, we would find that for many sectors, this would be much lower in percentage terms than this average of 42%. We would also be able to know the differential impact on critical and priority sectors identified in the SIP for the 2016 budget, and be able to determine their level of impact, positive or negative, on economic and national development that was envisaged in that budget.

Perhaps we shouldn’t go too far; one of the priorities of the 2016 budget was the Special Intervention Programs [SIP], with a budgetary allocation of N500bn, which was roughly 8% of the 2016 budget. However, we now know that only approximately N71bn of this amount representing a mere 14% of the allocated budget has been authorised for release as of today, and of this only N1bn representing 1.4% of the N71bn and a mere 0.2% of the budgeted N500bn for the much promoted Social Investment Spending that was supposed to help reflate the economy has actually been spent.

Little wonder that in the 2017 budget estimates, the FGN has allocated only N150bn for its social investment program, a 70% reduction in the allocation for 2016.

This raises a few questions about the special intervention program in particular and about the budget’s overall objectives, aims and goals in general.

First, is this an indication of a reprioritisation and the abandonment of social investment as a tool of not only reflating the economy, but also ensuring inclusive growth? Is this an indication of the recognition and acceptance by the regime that it lacks the capacity, and is incapable of implementing a social investment program? And more importantly, is it another indication of the chaotic approach to governance, the absence of clear cut, commonly shared strategic vision and plan of governance by the government and the ruling party? My thinking is that unfortunately it is a combination of all of these.

We are already moving into the realm of the content of the 2017 budget estimates. Again, it does not give any clear indication that we are moving away from the failed approaches of the past.

The 2017 proposals retain the 30% allocation to capital votes, but in the absence of a clear strategic and development plan, it is not clear, nor is it possible, as in the case with the Social investment program, that the real critical programs and projects will be given priority with respect to timely release of allocations, or that there will be any integrated approach to implementation. What we are likely going to see, as we have seen with the implementation of the 2016 budget, will be a piecemeal, chaotic, and ad-hoc approach that completely undermines the quality of the potential impact on the economy and growth.

If inflation continues to rise, and the value of the Naira continues to fall and remain unstable and volatile, then in the absence of a clear strategic plan to support critical sectors such as manufacturing, industry, power, transport as well as MSMEs, then increased volume of spending may actually mean reduced capacity and value of the funds. For instance, the proposed capital votes of N525bn, N262bn, N140bn, N81bn, N51bn, N50bn, etc. to Power [housing and works], Transport, Defence, Industry [trade and investment], Health, and Education have different values at an inflation rate of 18% now, and a potential inflation rate of say 21% in Q1 2017.

Furthermore, the FGN has christened the budget one of recovery and growth, and the President has stated that it is based on their Economic Recovery And Growth Plan [ERGP], yet no one, not even the national assembly [NASS] is in possession of this plan!

Take another example: assuming there is a transport policy and road map, how is this road map and investment plan to be holistically implemented in a situation where a huge chunk of what constitute transport infrastructure, that is, roads, is under the purview of the Ministry Of Power, Housing, and Works, and not under the Ministry of Transport?

And with a debt service allocation of N1.66tn [23% of the budget] in the 2017 budget estimates and proposals, should we be seeking to further compound debt servicing as a ration of budget through a desire to borrow some $30bn over a three-year period? Let us not forget that there is an additional N177.6bn allocated for a sinking fund to cover returns on some maturing bonds [that is, returns on loans taken through bonds].

Can this budget, even if fully and properly implemented, provide the enabling environment that will lead to envisaged economic recovery and inclusive growth? Particularly when the envisaged GDP growth is around 3% for 2017 according to the MTEF 2017 – 2019?

To achieve +3% GDP growth in 2017 requires a 5% expansion of the GDP and economy given that as at Q3 2016 GDP growth rate is -2.07%.

How do we intend to make this leap? How do we intend to bring down the composite unemployment rate from about 30%, around which it is currently hovering, to a single digit? How do we intend to stop economic decline and achieve economic expansion? What forms of support, policy wise, are we going to give to the critical sectors? What are our priorities? Why are they our priorities? How would positive impact on these critical priority sectors impact on the rest of the economy?

What are we going to do to support local manufacturing and their value chains? How do we intend to support MSMEs and thus make growth inclusive? How do we intend to address the challenges of the power sector beyond spending more and more money, bearing in mind that a problem is not solved by merely throwing money at it?

At the moment, none of these is clear, and the budget, like previous ones, seems to be a result of guesstimation, and consequently seems to be anchored on nothing concrete beyond platitudes.

And finally, like all previous budgets, this budget seems to have been the product of at best exclusivist consultations with stakeholders held in secrecy behind the back of the general public; or at worst the product of consultations with Ghost-Stakeholders.

This is a provisional reflection, so perhaps I should stop here. Once the budget details are presented by the Budget and Planning Minister, and the Economic Recovery And Growth Plan, along with a new Strategic Implementation Plan [SIP] for the 2017 budget have been released, then one can engage more robustly with the entire edifice.

But as it is, with the way things are, it is not yet Uhuru, and “Change” seems to have stubbornly remained a mantra, refusing to be transformed into a Program of Action and Strategic Plan.