Delayed passage of 2018 budget: Implications for the economy

The news released by the National Assembly that the 2018 Appropriation Bill will not be passed until heads of Ministries, Departments and Agencies appear in the hallowed chamber to defend their budget proposals is not a cheering one. Rather, it has heightened apprehension among the organized private sector and other business concerns especially regarding the implications of delayed passage of the bill on the economy. This is coming few days to the end of the first quarter of the new fiscal year.

The lawmakers in the senate had last week put the executive on the defensive, blaming the lackluster attitude of heads of Ministries, Departments and Agencies for the delayed passage of the budget. They accused some government functionaries of feeling too big to appear before the National Assembly to defend the proposed budget estimates for their departments.

However, following the meeting of the leadership of the National Assembly with the executive, President Muhammadu Buhari gave agencies, parastatals and government-owned companies up to last Friday to submit the details of their budgets for consideration in accordance with the law. He also directed heads of the agencies to honour invitation from the National Assembly to defend their budgets without further delay.

The Secretary to the Government of the Federation, Mr. Boss Mustapha, in a circular dated March 19, 2018, said it had come to the government’s attention that the agencies had not fully complied with the provisions of Section 21 of the Fiscal Responsibility Act 2007. He, therefore, reminded them that “the FRA 2007 provides that consequent upon laying of  summary of  budget estimates of agencies listed on the schedule to the FRA, alongside the National Budget by the President, it is required that details of such  budgets are made available to the National Assembly for consideration and passage.”

It read: “Mr. President has directed that agencies, corporations and government-owned companies on the schedule of the FRA 2007 to comply with the provisions of the law.”

“All submissions (109 copies to the Senate and 360 copies to the House) should be made available to the appropriate committees of the National Assembly.”

“Copies should also be made available to the SSAP on National Assembly Matters (Senate and House of Representatives), not later than Friday, March 23, 2018.”

“All agencies, corporations and government-owned companies should honour invitation to defend their estimates.”

Even at that, there are strong indications that the budget may not be passed earlier than April, which is the beginning of the second quarter of the new fiscal year. This is contrary to the excitement that greeted the appropriation bill when President Buhari laid the document before the joint session of the two chambers of the National Assembly on November 17, 2017.

An enthusiastic Buhari, while presenting the N8.612 trillion Appropriation bill to a joint session of the National Assembly, said the projected expenditure would drive rapid economic recovery. He explained that with a benchmark of 45 dollars per barrel at an exchange rate of N305 to a dollar in 2018, the budget would consolidate on the achievements of previous budgets to aggressively steer the economy to the path of steady growth. “With the economic recovery made so far, it is clear that we made the right decisions. “And I urge you all to support the Federal Government’s policies towards economic recovery,’’ he said.

Shortly after the annual ritual of presentation, some serious hiccups which marred the smooth process of passing it into law began to emerge. Some of these signals had even manifested even before President Muhammadu Buhari laid the document. For instance, the Medium Term Expenditure Framework (MTEF) with the Fiscal Strategy Paper (FSP), which is a platform for the various assumptions and projections in annual budget of the federation, was not passed before the presentation of the budget proposals to the National Assembly. That was a sharp departure from the budgeting process which has been on since the country’s return to civil governance in 1999. Eventually, when the MTEF with the FSP was sent to the National Assembly, the lawmakers quickly went through it and expressed reservations on some of the assumptions in the document.

They noted some inconsistencies and unrealistic proposals, warning that such would make the 2018 budget more difficult to implement than the 2017 edition, which has witnessed very dismal performance as the year ended on December 31, 2017. The 2017 Appropriation Bill tagged Budget of Recovery and Growth’ had a total amount of N7.4 trillion (N7, 441, 175, 486, 758) with N2.2 trillion (N2, 177, 866, 775, 864) for capital projects. Of this amount, capital performance was put at 47 percent.

The Minister of State for Budget and National Planning, Mrs. Zainab Ahmed, blamed the low performance on low remittances of independent revenue by generating agencies. She‎ said: “Independent revenue has continued to lag behind with low level of remittances. The GDP growth rate planned for 2017 was 1.7percent and at the end of 1st quarter, we have achieved 1.4percent, giving a positive indication that we will attain the 1.7 percent target and possibly surpass.”

Beyond the issue of revenue, one other major reason why the 2017 budget underperformed was its delayed passage. This was due to the failure of the two arms of government to work in synergy in the overall interest of the citizenry. And with the scenario that is now playing out, economic experts have warned that delayed passage of the 2018 budget would impact negativity on the economy that has just come out of recession. According to them, when there is a delay in signing of the budget, it affects economic growth, as many jobs would be lost, thereby saturating the labour market and endangering the economy. Some analysts have also expressed the fear that the government may not be able to execute up to 50 percent of capital expenditure. And consequently, there would be low aggregate of income, as government borrows to pay salary. Another negative effect of delayed budget, they say, is that it discourages foreign investors from coming in to invest which could make them to divert their investment capital to other countries.

Going by the latest development, full implementation of the 2018 budget is unrealistic. A presidential candidate of the United Peoples Party (UPP), Chief Checkwas Okorie expressed dismay with the late passage of the 2018 budget, adding that it would affect the programmes of the government. His words: “The implication of the delayed passage is very grave on the economy. It is not only grave for the economy; it is also very horrifying for the citizens of this country whose poverty endurance has been stretched beyond tolerable limit. By not passing the budget, it has held up all capital expenditures expected to stimulate growth.”

He, however, blamed the MDAs for their arrogance and failure to go to the National Assembly to defend their budgets. “Presenting budget proposal is a worldwide phenomenon. I won’t blame the National Assembly for insisting that whatever is proposed is defended.  It is height of arrogance and insensitivity for the MDAs not to submit to the National Assembly their budget defence to the plight of other Nigerians. It adds up to the fact that the president is not in control. And I don’t see why any minister should remain in office, if he has contributed in any way in making it difficult for the budget to be passed. Any minister who has not defended his budget up till now, can be described as a cog in the wheel of progress of the country. Such person has no business being in office and earning tax payers’ money. What I am worried about is the president sitting down unconcerned, while his men are behaving this way and he is doing nothing about it,” he fumed.   

Nigeria has been experiencing delays in its budget process since the return to democratic rule in 1999, owing to power tussle between the executive and the legislature. Also speaking in the same vein, Senator Rufai Hanga, argued that the late passage of the budget would affect the implementation of capital projects, which according to him, is not good for an economy that is planning to recover from recession. He said he suspected a foul play by some aides of the president. “It has a serious implication on the economy. In fact, whoever is delaying the passage of the budget should be sanctioned. It is disrespect to the National Assembly. Everybody has got his own responsibility in running this government. The Ministers and the government are supposed to work harmoniously. But unfortunately, some people are out to sabotage this government. The impunity of some government functionaries is becoming something else and is not helping the government. It is sabotage. They are sabotaging the government,” he said. 

He, therefore, urged the president to ensure that appropriate sanction is meted out to any erring individual. “Some of them believe that the president is not in charge; so they are disregarding him. My opinion is that Mr. President should sanction them. He should do something about it. He gave them instruction to go and defend the budget, they refused. It portends danger to the government,” he stated.