The Federal Government’s yearly appropriation laws, documents once considered the Holy Grail of public financing, are fast sliding into wish lists. Already, the implementations of the first two of the important documents in the life of President Bola Tinubu have been compromised and their most impactful components ‘burgled’.
Historically, the FG’s budgets are known for underperformance and poor execution. But last year may have passed as the worst in memorable history, forcing the National Assembly to extend the implementation of its capital component three times since it was due for wind down.
The third extension pushed the deadline to December 31 – taking the full cycle of the 2024 appropriation. Two separate interim reports point to an over 200 per cent increase in its performance this year – from N1.28 trillion to over N4 trillion. But it is fallacious to equate that for impact as the real value creation may be far less than the original value contemplated by the appropriation – no thanks to inflation and naira depreciation.
Still, the country, for the first time, is struggling with the burden of funding, executing and monitoring two budget cycles, outstretching the capacity of the relevant institutional frameworks.
Even with multiple extensions, the 2023 capital expenditure performance will be a far cry from its mark at the end of this year when it winds down, perhaps alongside the current appropriation.
As at the third quarter, its performance was 19 per cent or 56 percentage points behind the prorated 75 per cent. In absolute terms, the total capital budget – ministries, departments and agencies (MDA), government-owned enterprise (GOE) and multilateral/bilateral project-tied loan spending – was N1.28 trillion.
In comparative terms, the amount spent in the corresponding period of 2022 by an administration whose performance the World Bank and other authorities described as retrogressing, was 194 per cent higher. From January to September 2022, President Muhammadu Buhari’s administration released N3.77 trillion for capital expenditure.
There is, however, a gap between released and executed sums. As of September 2023, MDAs had utilised 78.6 per cent or N962.9 billion out of N1.23 trillion cash-backed budgets.
This came on the back of a sharp rise in revenue inflow. For one, the net oil receipt rose by approximately 327 per cent to N1.64 trillion in the third quarter alone while non-oil receipts rose by 71 per cent to N3 trillion in the same period.
Perhaps worried by the poor capital release in the face of rising earnings, the National Assembly extended the execution timeline to December 2024. It was earlier extended to the end of the first quarter and later further to June 30.
Effectively, a key component of the 2023 Appropriation Act, 2023 Supplementary Appropriation Act, the 2024 Appropriation Act and its supplementary will run till December 31. The lack of timely execution may have complicated the fiscal tragedy and worsened the budget efficiency level.
The country may also be paying a premium to execute the underlying projects as prices of construction materials have gone up significantly. For instance, 50 kilogramme of cement, a major component of building materials, has increased from about N3,500 to about N8,000. Prices of iron rods and other materials have similarly gone up.
This implies that unspent capital votes have about 60 per cent of their value, considering strictly the price of cements. Since June, also, the naira has lost nearly three-quarters (about 71 per cent) of its value to the dollar.
Perhaps, owing to the staggered implementation, the Budget Office has held back the full report of the 2023 budget performance. But according to the 2023 Fiscal Accounts Report of the Accountant General of the Federation, the total capital expenditure had risen to N4.49 trillion, which is only 52 per cent of the debt service cost (N8.56 trillion).
To put it differently, 192 per cent of the actual capital expenditure went into debt service. But the real value of what was spent is far lower as much of the nearly N4.5 trillion would have been washed away by foreign exchange loss and inflation.
The deficit to revenue ratio was 225 per cent, that is, over three times what it earned in the year. Whereas the total FG’s retained income was N5.99 trillion, the fiscal deficit ballooned to 13.5 trillion – the highest the country recorded.
Less than three months to the end of this year’s budget cycle, the Budget Office has not made public the interim performance of the 2024 Appropriation Act. Until last year, the reports were released for public assessment quarterly.
The additional burden of a new minimum wage, which is yet to be implemented, is expected to increase the recurrent expenditure. The implementation, as captured in the N6.2 trillion supplementary budget, was to be funded with windfall tax on foreign exchange (FX) gains by banks.
Unfortunately, the windfall tax debate seems to have been stalled. The National Assembly raised the tax to 70 per cent, which was received with pushback from the Chartered Institute of Bankers of Nigeria (CIBN), the Bank Directors Association of Nigeria (BDAN) and other stakeholders.
And even if it scales through, its proceeds (pegged projected at N2.3 trillion) is less than 40 per cent of the N6.2 trillion additional spending contemplated by the supplementary budget.
There is a general suspicion that the earmarked capital votes in the 2024 budget are being sacrificed to meet the rising recurrent expenditure. This is a dominant pattern in 2023, 2022, 2021 and several other recent appropriations.
Earlier, The Guardian reported that the Federal Government starved critical sectors of funds in the first half of the year as captured in the Government Integrated Financial and Management Information System (GIFMIS) with the State House, National Assembly and the Presidential Air Fleet overreaching their prorated allocations for the period.
The three recurrent spending items received N140.56 billion in the face of a 50 per cent shortfall in the value due for release in the period. If the trend continues and is sustained throughout the year, the government may spread the 2024 capital expenditure plan across next year again to save its face.
Sadly, the new trend may only compromise the fiscal culture rather than give Nigerians an opportunity to enjoy better infrastructure, with inflation and the FX crisis becoming major setbacks to project delivery.
Also, midway into October, there is no clue when the President will present the 2025 Appropriation Bill to the National Assembly to kickstart the legislative process, suggesting Tinubu may hold it off until November, as in last year.
A late budget presentation could alter the January to December budget implementation cycle, which the Tinubu administration said it is committed to achieving.
Unmindful of the complication of multiple budget implementations, federal lawmakers, last week, called on the President to, in two weeks, present the 2025 appropriation, which would necessarily go alongside the 2024 budget performance report. The reports were, until last year, published quarterly to give Nigerians an opportunity to assess the performances.