A COMPARATIVE ANALYSIS OF THE NIGERIAN BUDGET FROM 1999 – 2013

ONOWA SIMON
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ABSTRACT
This study examines the Federal Government budget in Nigeria between 1999 and 2013. The analysis of this study showed that for more than a decade of democratic dispensation in Nigeria, there has been a consistent increase in the total recurrent expenditure of the Federal Government. This has led to budget deficits. Thus a key macroeconomic issue addressed in this study is the rationale underlying government fiscal deficit, the significance of the rational expectation hypothesis in Nigerian economy and the consequences and impact of this action on the economy. Data for this study were collected from CBN statistical bulletin and gazette of the Federal Ministry of Finance. The study employed a descriptive analysis. Government has been allocation more fund to recurrent expenditure over the period under study. Using key fiscal indicators the study recommended that for overall sustained economic growth and development; federal government should increase substantially allocation to capital projects in rural Nigeria to trigger economic growth and development.

Introduction
A Budget is focused on the Government’s drive to achieve its developmental goals as entrenched in its Vision. It is also anchored on the commitment of the Government to improve the socio-economic status its people by strategically implementing plans and programmes to boost economic activity and launch the nation onto a path of sustained development. In the above respect, a Budget is planned to accelerate economic recovery through targeted fiscal interventions intended to further stimulate the economy and support private sector growth. This is to be achieved through the implementation of growth promoting strategies that will alleviate the effects of shocks from the external sector arising from the global economic recession by addressing challenges of infrastructural deficiencies among other measures. Capital expenditure was rationalized and prioritized to avoid spreading resources too thinly across too many initiatives.
A budget can also be referred to the prediction of government revenue and expenditure for the coming year. It is used as an instrument of economic policy. Though a micro or mini economic plan of action for a specified period (usually one year) and designed to fashion out a way of achieving the macroeconomic objectives of promoting economic growth, price stability, full employment of resources and income redistribution within the context of effective and efficient allocation of human, material and financial resources, the budget also contains all elements of socio-political and economic ingredients. Budget is an annual ritual in all countries around the world. However, presentation of the budget by the President, the Governors and the local government Chairmen in Nigeria has become more of a fanfare in recent time than a serious business it was, up to the mid-1980s. Under the military governments, the first day of January was usually regarded as a sacred day for budget presentation at the national level and subsequent presentations at the State level. The seriousness with which budget presentation should be taken had waned over time, so also is the implementation. In most cases, budgeting at the grassroots level i.e. local government level rarely take place in most part of Nigeria. The total breakdown in budget presentation and implementation occurred during the General Abacha regime when budget presentations were as late as three months into the year. Under the present democratic dispensation, budgets have to be presented to the joint sitting of Senate and House of Representative at the Federal level and to the State House of Assembly at the State level before the end of an outgoing year. This procedure on its own has further shrouded in secrecy, the period of budget implementation. For instance, President Goodluck Jonathan presented his budget to the joint sitting of the Assembly in December 2011 for the 2012 year and the budget undergone consideration in both houses in the National Assembly. Thus the implementation of the budget, particularly the capital expenditure, which is supposed to propel some level of growth become unnecessarily delayed. The unpredictable nature of budget presentation and the commencement of implementation have serious implications on the populace, which the outcomes of the budget are supposed to affect positively. The kernel of this paper is to critically appraise the 1999 - 2013 federal government budgets as presented in the appendix. To achieve this, it is imperative that I include that due to unavailability of requisite data and consolidated Nigerian budget reports on earlier year’s capital and recurrent expenditure will be used as a major factor in comparing the scope of the study.
The Nigeria budget is made up of four components:
Part A – Statutory Transfers
Part B – Debts Service
Part C – Recurrent Expenditure (non-debt)
Part D – Capital Expenditure

* Statutory Transfer: The Federal Government is required by law to make certain mandatory expenditures annually in respect of (NJC) The National Judicial Council, The Niger Delta Development Commission (NDDC), The Universal Basic Education Statutory Commission (UBEC), The Independent National Electoral Commission (INEC), The National Assembly (NASS), and The National Human Rights Commission (NHRC).
Whenever the Federal Government Debt Service spends more money than the revenues it earns, it must find the financial resources to pay for this additional spending. Domestic Moneys borrowed within Nigeria Debts Debt Service Foreign moneys borrowed from outside Nigeria Debts When the government pays interest and principal on its debts, this is referred to as Debt Service.
Statutory Transfers and Debt Service currently make up on average about 18.73% of Federal spending * Recurrent Expenditure (non-debt): (non-Spending by the Ministries, Departments and Agencies (MDA) of Government on Salaries Pensions & Overheads Salaries, The Federal Government employs people to work in the various MDAs and Salaries pays them salaries in order to maintain the administration of government and continue to provide public goods and services. In addition to the pension contributions paid on behalf of workers under the Recurrent Contributory Pension Scheme, the (non-debt) Pensions Federal Government continues to pay the pensions of existing pensioners under the old Pay-As-You-Go System. Payment for electricity, water, telecommunications, office rent, office Overheads equipment and consumables, staff training, transportation, etc. * Capital Expenditure: Capital Expenditure is used to provide infrastructure such as roads, water and power; fund educational services such as schools, colleges and universities; and provide health care facilities and services among others.

The 1999 – 2007 budget of the Federal Republic of Nigeria was computated as an estimate of N12,012,528,596,534 (12.01 trillion), consisting of N6,165,949,700,030 (6.1 trillion) in recurrent expenditures and N3,627,060,282,585 (3.6 trillion) in capital expenditures. The balance was in debt servicing and statutory transfers. On the other hand, the 2008 - 2013 budget is estimated at N28,542,329,559,254 (28.5 trillion), which is made up of recurrent expenditures of N12,325,451,176,915 (12.3 trillion) and N7,271,019,391,174 (7.3 trillion) in capital expenditures. Again, the remainder is for statutory transfers and Debt servicing. The figures below are extrapolated from The Federal Republic of Nigeria 2013 Amendment Appropriation Act from the National Assembly, march 2013; The Federal Republic of Nigeria 2013 Appropriation Bill; and The Federal Republic of Nigeria 2012 Amendment Appropriation Act from the National Assembly, April 2012. So, if you are concerned that the sum of the recurrent and capital expenditure does not equal the total budget amount, it because you have other items such as debt servicing and statutory transfers, as explained

Table of summarized selected annual budget estimates from 1999-2013

YEAR | TOTAL BUDGET | RECURRENT EXPENDITURE | CAPITAL EXPENDITURE | 1999-2007 | 12,012,528,596,534 | 6,165,949,700,030 | 3,627,060,282,585 | 2008-2013 | 28,542,329,559,254 | 12,325,451,176,915 | 7,271,019,391,174 |
Computed by researcher 2013

Recurrent vs. Capital Expenditure Recurrent expenditures can be simplified to mean those expenses that “recur” yearly such as salaries, while capital expenditure are those for new or ongoing projects such as building refineries and roads. According to Dr. Ngozi Okonjo-Iweala, the Minister of Finance (also coordinating Minister for the economy), on-going capital projects will receive priority in the budget implementation. It is easy to notice that the budget is very bloated in favour of recurrent expenditure. How can we have development when the recurrent expenditure eats up so much of an annual budget?
The total budget for the 1999-2007 fiscal years as seen by the table above is N 12.012 Trillion, a significant increase over the amount appropriated for the country since independence. Also, the recurrent expenditure for years under comparison reflects the bloated nature of our government. In a situation where you have a Ministry, A Ministry of State, and several PAs and SAs in one ministry, you are bound to have a bloated government. Besides the Executive Arm, the cost of the Legislative branch is also astronomical. Recall the controversy that trailed the uncontroverted statement by the Governor of the CBN that the NASS ate up too much of the annual budget. If you understand that our population is about 167 million (extrapolated from Source: World Bank 2010 & National Population Commission 2011) in comparison to the US population of about 311 million (extrapolated from Source: US census 2011), you may be tempted to think that our budget is not so bad because our budget is only 4.7 trillion Naira (at exchange rate of 1US$ to 155 Naira), whereas the US budget for FY2012 is $3.796 trillion. The mistake will be comparing apples to oranges, we have seen that the spending rate of our government is on aggressive increase by which both years under comparison the rate of recurrent expenditure doubled and is still growing fast and is directly inverse to the rate of capital expenditure which is more necessary for the growth and development of the Nigerian economy.
Conclusion
It is imperative that government must find a way of presenting budget three months before a new year so as to allow proper scrutiny by the legislature and contributions from non-governmental agencies, civil societies and professional bodies that might not have the opportunity at the budget drafting stage, such that budget implementation starts at the beginning of the respective fiscal year. This will require legislation and there is therefore the need for such legislation to compel submission of budget by the Executive at the end of September of each year. Such practice will make the effects of the budget, particularly the capital expenditure be felt within the year.
There is the need for proper synchronization of policy measures between the fiscal section or Ministry of Finance and the Central Bank of Nigeria which in charge of monetary policy. However, it is imperative that a budget derives its strength from a development plan. The Malaysian Inclusive Growth programme derives its strength from the 10th National Development Plan while the Nigerian counterpart programme is derived from a Transformation Agenda that is only clear to its authors rather than Nigerian. The Auditing Phase of the budget cycle must be obeyed and there is the need to give quarterly report on budget performance, both in terms of revenue and expenditure. The report should be distributed and on the website of the Ministry of Finance.
As an extension of the above, the budget speech should explain whatever happens to the difference between the projected revenue based on benchmark price and the actual revenue based on actual average price of crude oil. A situation where such money is shared out and the country would have to go borrowing in the international market is economically unwise. Where the sharing is constitutionally agreed, the fund must be tied to specific welfare enhancing project since it is what is referred to as transitory income. There is the need for the federal government to tie the excess crude oil that is often shared with the other tiers of government to some specific project since such fund can be regarded as transitory and therefore unplanned for in their respective annual budgets.
Monitoring of budget implementation should be enhanced both at the level of the Executive arm and particularly the Legislature while appropriate civil society groups act as checks and balances by publishing their own budget monitoring reports.
In summary, the Nigerian Budget of fiscal consolidation, inclusive growth and job creation has generated lots of discussion like no other. Since, according to President Goodluck Jonathan, it is a “stepping stone to the transformation of our economy and country in our walk to economic freedom”, it has at least achieve that aim, as Nigerians have now been transformed, more than ever before, into appreciating the importance of the structure, nature and content of a budget to their existence as citizens and corporate responsibility as Nigerians. In a more important parlance, fiscal consolidation, inclusive growth and job creation are long-term economic concepts and must be seen as such. Thus, the title fits more into a medium to long term development programme than an annual budget.

Reference

Agu, Chukwuma and Sundayson Chidi (2012) “The 2012 Federal Government Appropriation Bill: Analysis of the Macroeconomic Framework”, presented at the Citizen Wealth Platform under the auspices of Centre for Social Justice, Abuja. February. Central Bank of Nigeria (2000) The Changing Structure of the Nigerian Economy and Implications for Development. Lagos: Realm Communications Ltd.

IDASA (2002) “Transparency and Participation in the Budget Process” Africa Budget Watch (November).

Izedonimi (2007), “Budgeting and Financial Control: Improving Government Budgets: Transparency and Accountability in Public Expenditure Management”, a paper presented at a course on Public Finance and Government Statistics organized by WAIFEM, October. Lagos.

Jonathan, Goodluck (2011) “2012 Budget Speech”, delivered to A Joint Session of the National Assembly, Abuja, 13 December.

National Association of Nigerian Traders (NANTS)(2012) “NANTS Perspectives on Nigeria’s 2012 Proposed Budget for Trade and Investment Ministry in the Transformation Agenda” presented at the Citizen Wealth Platform under the auspices of Centre for Social Justice, Abuja. February.

Obadan, M.I. (2000) “The Public Sector Budget as an Instrument of Development Policy” a paper presented at the Federal Level Workshop on Public Expenditure Review, organized by the National Planning Commission in Kaduna. 5-6 November.

Appendix 1 YEAR | CAPITAL EXPENDITURE₦000 | RE-CURRENT EXPENDITURE ₦000 | AGREGATE EXPENDITURE₦000 | 1999 | 198,027 | 249,662 | 499,947 | 2000 | 239,500 | 461,600 | 598,701 | 2001 | 338,700 | 579,300 | 894,218 | 2002 | 321,400 | 696,800 | 840,180 | 2003 | 241,700 | 884,300 | 1,446,000 | 2004 | 349,868 | 539,286 | 1,790,848 | 2005 | 617,284 | 737,330 | 1,799,938 | 2006 | 539,233 | 961,108 | 1,876,302 | 2007 | 781,530 | 1,056,563 | 2,266,394 | 2008 | 673,155 | 1,259,121 | 2,492,076 | 2009 | 796,737 | 1,649,429 | 2,870,510 | 2010 | 1,853,906 | 2,077,358 | 4,608,616 | 2011 | 1,005,989 | 2,481,705 | 4,226,191 | 2012 | 1,319,777 | 2,471,814 | 4,749,100 | 2013 | 1,621,455 | 2,386,024 | 4,987,220 |
Source: annual reports from CBN, NBS, NBC and researchers computation