Thursday, 28 December 2017

ANOTHER ROLL OVER OF CAPITAL EXPENDITURE FROM 2017 BUDGET TO 2018 BUDGET LOOKS CERTAIN

Mrs. Kemi Adeosun
With just a few days to the New Year and the much anticipated debate on the 2018 Budget by the National Assembly, the acknowledgment by the Federal Ministry of Finance that only 21 percent of the capital component of the 2017 Budget was achieved raises serious concerns about the implications of this development for the economy.

Despite the assurances of the Minister of Finance, Mrs. Kemi Adeosun, that N750 billion would be released to take the released capital expenditure funds for 2017 from N450bn to N1.2 trillion, which is about 50 percent of the amount budgeted amount for the year, the 21 percent implementation so far is the lowest in five years. It is a slump of 3.9 percent from the figure for 2016. Mrs. Adeosun had said mid-December that N377.53bn infrastructure fund would be released before the end of the year to achieve the 50 per cent implementation. The infrastructure for which the funds are to be released include power, roads, water and health projects across the country. The implementation of the capital component of the budget so far amounts to a deficit of N1.7trn, against the sum of N2.18trn budgeted for the year.

The low level of capital expenditure implementation is worrisome. It has highlighted the need for greater transparency and accountability. It also suggests that something is wrong with our fiscal administration that repeatedly fails to ensure the timely release of funds for the implementation of the capital components of our budgets. The 21 percent implementation for this year was achieved six months after the budget was passed by the National Assembly and signed into law by the President. Proper budget execution demands that funds are quickly released for the execution of capital projects to reduce the time lag between budget approval and implementation.

Sadly, this has been the bane of our successive budgets. The 2017 capital budget implementation level seems the worst in years. Capital expenditures in each of the four years between 2012 and 2015 were higher than this year’s. For instance, as at December 15, 2017, only N450bn of the capital expenditure had been released for capital projects. As the year nears its end, there is little evidence of specific infrastructural projects such as roads, bridges railways, hospitals, schools etc which have either been completed or taken beyond far beyond their former states. Yet, the capital component of the budget, as distinct from the recurrent expenditure, is by far the part of the budget that can have the greatest impact on the lives and welfare of the people. This is so because it involves the building of infrastructure and provides the foundation for economic growth. In that respect, it is obvious that proper funding of capital expenditure is the hallmark of successful budget implementation.

Unfortunately, data from the Ministry of Finance and that of Budget and National Planning show that in the last ten years, the average expenditure as percentage of the overall budget implementation has been about 22 percent. Successive administrations, from Olusegun Obasanjo to Goodluck Jonathan, to the current Muhammadu Buhari administration, never kept their promises to ensure 70:30 ratio for recurrent and capital expenditure. The promise was even 60:40 ratio in the case of Obasanjo administration. All the same, only full implementation of the capital component of the budget can lead to economic recovery.

We are not unaware of the finance minister’s explanations on why Nigeria could not fully fund its capital projects in this outgoing year. She laid the blame on the backlog from the 2016 Budget and the inability of government to access foreign loans. She had, in October, told the Senate Joint Committee on Finance and Appropriation that the capital projects in the 2016 budget were rolled over to 2017. As a result, government had to prioritise by spending on projects that are nearing completion. We recall that the Accountant-General of the Federation, Ahmed Idris, stated that the Federal Government had extended the execution of the N1.58trn capital expenditure of the 2016 budget to the end of March 2017. But, nine months after, the implementation remains abysmal.

As things stand now, another roll over of capital expenditure, from 2017 budget to 2018 budget looks certain, a situation that may further delay the implementation of the 2018 budget and the momentum of economic recovery that has been gradual in the last few months. Little can be achieved in the quests for the welfare of the people and the overall development of the country if the capital component of the budget is poorly implemented.

Heads of Ministries, Departments and Agencies (MDAs) should give ‘progress reports’ on what their offices have done with their capital votes. As part of the way forward, we advise government to curtail the level of recurrent expenditure currently at 70 percent and steadily raise capital expenditure to a minimum of 50 percent. We say this because the capital component of the national budget is one of the most important instruments for the development of any nation. It is through it that resources can be allocated to meet the infrastructural needs of the people and deliver good services to them. (SUN)