Professional Documents
Culture Documents
February 5, 2016
@rumanio
The year 2015 was a tough year for Nigeria. The country recorded one of the lowest
growth profiles in decades with GDP growth averaging 3.1% in the first nine months of
the year, compared to 6.3% in the previous year. For the most part of the year, inflation
rate trended upwards to a peak of 9.6% in December, the highest since December 2012.
Similarly, dollar scarcity and rationing arising from the fall in crude oil prices was
dominant while government revenues and consumer spending fell significantly.
Furthermore, unemployment rate rose to 9.9% in 2015q3 from 8.2% in the previous
quarter. To resuscitate the Nigerian economy would require massive investment in
infrastructure,
skills
&
training;
enacting
and
enforcing
enabling-business
laws/incentives to stimulate production of goods and services for local consumption and
exports and having a clear fiscal and monetary policy direction for the economy. This
report attempts to examine whether the 2016 budget has the necessary provisions
required to resuscitate the economy.
About seven months after assuming office, President Muhammadu Buhari in December
2015 presented Nigerias 2016 Appropriation Bill before the National Assembly,
detailing the administrations spending plans for 2016. The bill, which proposed an
expenditure of N6.08 trillion for the federal government (FG), the highest in the nations
history, is themed the Budget of Change with specific focus on infrastructure, job
creation and promotion of social welfare.
The 2016 budget is significant for a number of reasons. First, it is the first budget
presented by President Buhari with the expectation that it covers a good number of the
campaign promises that were made prior to the 2015 general elections. Consequently,
many Nigerians have placed high hopes on the budget, which of course is a vital
document through which Change will come to Nigeria. Second, it is an expansionary
fiscal policy tool that has the potential to cure the uncertainties that has trailed the
Nigerian economy since early 2015 even as each Ministry can begin work to deliver their
plans to Nigerians. Third, the budget remains important in complimenting monetary
policy, which has struggled to keep the economy afloat since 2015.
Ideally, the budget is a subset of a broader economic policy, which details how the
government influences the economy and performs three overarching roles: Allocative,
Stabilization and Distribution functions. The absence of such coordinated and clear
macroeconomic policy framework raises the level of uncertainty on the direction of the
economy and as such limits the movement of capital and investments in productive
sectors.
The 2016
budget is an
expansionary
fiscal policy
tool that has
the potential
to cure the
uncertainties
that has
trailed the
Nigerian
economy since
early 2015 even
as each
Ministry can
begin work to
deliver their
plans to
Nigerians.
2
1
programs.
Recurrent
expenditure
increased
in
2016.
stakeholders.
1
2
harsh
revenue rather than GDP and also given the low tax-
operating
environment
and
other
capex
borrow
technically
recurrent
borrow
to
fund
4
3
As a country, we must
inculcate a culture of
timeliness in the budget
process. to ensure early
disbursement of funds and
improve the performance of
capital expenditure.
The following factors are responsible for the poor
performance of capital budgets in Nigeria:
of
some
Ministries,
capital
While
records
lower
and
provision
of
recreational
is
truly
pursuing
lean
towards
reducing
their
expenditure.
Lower and realistic crude oil benchmark price contractors and overall improve the performance of
and other key variables would facilitate capital expenditure.
adequate planning and encourage savings for
the rainy days when crude oil price exceeds the There must also be disclosure on the performance of
benchmark in the budget. Nigeria must adopt the budget in a frequently and timely manner
conscious efforts to build its economic buffers (budget implementation report), in line with section
such as Excess Crude Account (ECA) or the 30 (2) and 50 of the Fiscal Responsibility Act, to
Sovereign Wealth Fund (SWF).
update stakeholders on budget variances, and status
of selected projects.
Place emphasis on growing the capital component
of the budget and enhance its implementation
Despite the challenges that the 2016 budget might
Capital expenditure is the most important aspect of face, the budget is unique in its disclosure of specific
the budget that connects with the common man on cost items of MDAs. This is a huge step towards
the street. The government must set targets to ensuring accountability and transparency in the
ensure that capital budget implementation exceeds public sector. However, more disclosure is needed
85% each year. The situation where recurrent on the spending plans of the National Assembly and
expenditures get over 95% implementation rate and the Universal Basic Education Commission (UBEC).
capital budget suffers low implementation rate must Whether the budget will meet up to the expectations
be addressed. To do this, the government must of Nigerians and deliver the promised change
reform the procurement process to remove depends largely on the implementation of
bottlenecks, undue bureaucracy that causes delays. institutional and structural reforms targeted at
In addition, where savings are made through the improving the budget process.
blocking of leakages, funds should be channeled to
capital projects. If unnecessary recurrent items are
removed from the 2016 budget, capex could be as
high as N2 trillion, which would have a much more
bigger impact on the economy.
APPENDIX
Capex share of total budget
35%
34.2%
32.8%
29.0%
FG Recurrent Budget
31.2%
28%
25.6%
26%
2,277
3,395
3,577
3,904
4,475
1,948
12.5%
2008
2009
2010
2011
2012
2013
2014
2015
2016
94%
2
Capital
Expenditure
26%
106%
101%
101%
3
3.2
3 3.4
3 3.4
3.6
3
4 3.5
2010
2011
2012
2013
2014
99%
93%
2.1
Recurrent
Expenditure
44%
2009
Debt
Servicing
24%
Implementation rate
Wilson Rume E. is an Economist with years of experience in research, finance and advocacy. Wilson has
made several television appearances discussing issues on the Nigerian Economy, Education and Youth
Development. He has also delivered keynote speeches at conferences/seminars and has participated in a
number of high- profile engagements including the World Bank Stakeholders Session on Governance
and Accountability Framework in Basic Education in Nigeria; World Bank Stakeholders Workshop on
Skills Development; Presentation to the transition team of President Buhari among others. In May 2015,
He was selected to be among the first cohort of the Global Colleagues Program of Academics Stand
Against Poverty (ASAP).
Wilson is a research analyst, with interest and expertise in monetary policy, fiscal policy, industry
analysis, macroeconomic management, Education, Youth Development and poverty studies.
All views expressed in this report are those of the author and do not represent the views of, and should not be attributed to, any
organization he works for.