Highest Capital Spending In Nigeria Recorded Under Buhari – Ahmed
Zainab Ahmed is the Minister of State for Budget and National Planning. In this exclusive interview with Daily Trust, she says Nigeria recorded the highest capital spending in history under the present government led by President Muhammadu Buhari. She speaks on the performance of 2017 budget, delay in passage of 2018 budget and preparations for 2019’s.
What is your take on the level of implementation of the 2017 budget?
The 2017 budget has done very well.
Let me say in terms of personnel emolument. You know the budget expenditure side of it has personnel, recurrent and capital. Personnel cost was fully performed, 100 per cent. Salaries have been paid as at and when due; pensions and even arrears of some pensions were paid in 2017.
In terms of recurrent expenditure, over the course of the year, we were able to release seven months out of the 12 months. Capital expenditure also did appreciably well. We budgeted N2.2 trillion for capital expenditure but released N1.56 trillion. That was about 60 per cent and that is the highest capital spending that has happened in this country.
Revenue on the other hand, we had a projection of about N5 trillion and we ended up with a revenue performance of about N2.7 trillion, which was about 54 per cent. So, revenue under performed and the under performance did not reflect in the oil and gas sector because, despite the fact that production did not go up 2.3 million barrels per day that we planned, we were able to have about 95 per cent performance because we had high prices of oil. But for non-oil revenue, it was not as high as we had expected.
Customs performed 99 per cent of what was projected, Federal Inland Revenue Service was 60 per cent.
Where we had a significant shortfall, where we had 25 per cent performance, was in independent revenues, that is, revenue that is expected to be generated by government-owned enterprises like NNPC, NIMASA and CBN that are supposed to be remitting operational surpluses. What we had projected to realize from those enterprises really grossly under performed.
Also, related revenue to oil, we were expecting to have some revenues from the restructuring of the joint operating arrangement with the oil and gas industry. The plan was that some equities were going to be sold to change the holding so that the private partners are holding more than government. There was some N700bn that was to be realized but that transaction did not hold. It didn’t happen as it is still work in progress.
As we speak, there was supposed to be sale of marginal oil and some licenses that have expired but that didn’t happen. We have also been able to fully settle out debt service obligation. That was also 100 per cent performed.
So, in general, the 2017 budget performed reasonably well and even all the debts we were supposed to offset, local and international, we were able to do so 100 per cent. So, it was a good performance. But the weakest part of it was the revenue part that was not encouraging and if you are not able to realize the revenue you projected, you will be struggling to meet even your debt service.
Was there any explanation by the FIRS for not meeting their target?
The Company Income Tax and Value Added Tax under performed – 30 per cent for CIT and 45 per cent for VAT.
The taxes you collect are also indicative of the performance of businesses in the economy. Because of the recession, a lot of businesses were struggling and couldn’t perform as they should and getting taxes will be as a result of the profit declared by companies. So, for FIRS, in 2015 when this government came into power, we had a tax payer base of about 13 million and they were able to push that up by 17 per cent because of the fact that we have a very low tax to GDP ratio. In 2015 it was 5 per cent to GDP, now it is about 6.5 per cent. So, ideally, as an economist, what we would have just done is to increase taxes but the country was in recession, so we decided to increase tax base because the VAIDs programme was also supposed to expand the tax base so people are expected to pay taxes for assets they have held within and outside the country, but were given concession to declare and pay without any interest. So the VAIDS programme also did well as it had a three-month extension, it is still ongoing. But what I can’t say is whether the finance ministry is still allowing those concessions, however the process itself is easier for people to declare under the VAIDS programme.
Inland Revenue performed over 95 per cent and I think it’s because of the increased efficiency of the customs service and also the increase that we have seen in exports going out of the country.
You said the 2017 budget performed well in terms of capital releases. Is there any connection between early submission and passage with its implementation?
The Appropriation Act for 2017 that was passed was for 12 months and the acting president assented to it on the 4th of June, so it lasted to the 3rd of June 2018. The delay in the passage of the budget had an inherent effect on the performance of the budget. Let me give you an instance. The 2017 budget was submitted in December and was passed in June. That is, it lasted for seven months. The law encourages the executive to submit the budget by September. The idea is that by December, the budget is passed. We submitted it two months before but it was passed six months after the lateness of the submission. The 2018 budget came into effect by 22 of November by law but the law allows us to start operating the recurrent expenditure side by January, the operation is that you’re expending against the new one so once the new one comes you make the change for the other budget that has been expended.
Let’s take capital, it was running for 12 months and in this case, because we don’t know what will come out from the National Assembly and what will come out from the borrowing, we have designed it to be financed by borrowing. Capital budget is the one that fills the gap and right now, when the National Assembly approves the budget, it is also saying you should borrow from the deficit. So we can borrow locally and we are doing that to fund the 2018 budget, but we can’t borrow internationally because we require a National Assembly resolution to further approve the borrowing for any specific purpose.
We are not able to do any foreign borrowing because the National Assembly has not resumed to approve the resolution to embark on the borrowing. So, for now, it is the capital that is being affected because we haven’t been able to do any borrowing.
What stage are we in the implementation of the zero-based budget? Are we still using it in preparation of the budget or has it been jettisoned?
Zero-based budget is still being used in the preparation of the budget. The concept of zero-based budgeting means every year, an agency has to defend what it requires. It’s not because you used N1 million last year, then this year we say we give you N1.5 million. So, every project must be independent, that means because you did a particular project last year doesn’t mean you should repeat them. So, we try to focus towards government’s priority and we are making sure it is designed to implement the economic drive.
Many Nigerians have been hearing about focus labs, what is it really about and what is the implementation stage of the Economic Recovery and Growth Plan (ERGP)?
The ERGP is a medium term plan that is designed to remove our country from recession and also facilitate growth within the economy. One of the things we made commitment to is that there are five key priority areas.
We decided to partner with the World Bank and be part of the World Bank ease of doing business ranking and the result is that we have moved from the target we set in the ERGP, from 146 where we met ourselves when we came, to 24 places which means we did more than we had even planned to. There is another round of measurement that the World Bank is doing, so after one year we will see how we would have fared.
The ERGP focus lab was simply a tool that we used to enable us concentrate more in a few sectors.
The ERGP is covering all the sectors in the economy but we thought we should start the focus labs in agriculture and transport, manufacturing and processing as well as oil and gas and power. These labs were made up of six sectors and what we did in the labs was to bring the MDAs, investors, regulators, financial institutions together in one room to discuss how best specific businesses can be unlocked, how specific investments can be unlocked. We ended up with a process that saw us harvesting within the lab about $22 billion of investments out of which $10 billion were investments that had just a few things that needed to be done. Some of them just needed some permits to be issued or some licences that they have been following up – one thing or the other that a regulator or ministry is supposed to do. So, bringing everybody together those things were unlocked very easily.
How about project assessment of MDAs?
This ministry is responsible for monitoring and evaluation and it includes monitoring of projects, programmes as well as budgets. The last monitoring we did full year in 2016 is posted on the Ministry of Budget and National Planning website and half year 2017 is also posted. We have finished the physical review of projects for 2017 because we have to wait until the budget year closed which was around June 12 before we go out to do the inspection. The inspections have been done and the reports are ready now to review. On the budget, every quarter the Budget Office prepares budget performance report so you see what has been disbursed, what has been utilised and they post these on the website. There is always a quarterly report and the last quarterly report was posted June 2017. We are now in the first quarter of 2018 budget.
When are we expecting the 2019 budget to be submitted to the National Assembly?
Our aspiration is that we want to meet the requirements of the law to submit it by September but as you know the National Assembly is itself away on recess to resume by September. Also we were able to consult more with them in the preparation process prior to the submission but we already have a schedule towards submitting by September.
Some people argue that it is cumbersome for the National Assembly to ask all MDAs to come and defend their budgets. Can’t the ministry do that on behalf of them?
You see, that’s the thing we can’t dictate to the National Assembly – how they do their work. In the process of budget preparation the Ministry of Budget and National Planning meets with every MDAs to defend their budget before us and then we collate that budget and submit to the National Assembly. We simply cannot decide or dictate to NASS how they handle the budget process or any of their processes for that matter. They are a different organ of government. Its just like saying the judiciary and the executive is trying to determination how they take cases in court you can’t do that.
How far have you gone with the Northeast intervention?
This ministry started coordinating the Northeast Intervention Humanitarian Response Plan in 2016. In 2016 we did a humanitarian response plan, we did one in 2017 and we did another in 2018. So in 2017 humanitarian response plan was $1.05 billion and we were able to realise 70 per cent of that. In 2018 it was also $1 billion, the current one that is being implemented. So far as at June what has been realised is about $500 million, about 50 per cent. But let me pause here to say that the humanitarian response fund is a fund that donors contribute to and is warehoused by the UN system. When a donor is contributing they will say my contribution is for the food security sector or for the health sector or for the water and sanitation sector and in each of these sectors there are key international partners that are active in, for example, the health sector. The leading agencies are WHO and UNICEF and when a country donates to the fund and they say our fund is for the health sector, the UN system will sit down with the partners and donors and say okay, how much of it should go to UNICEF, how much should go to WHO. These two bodies, and they are more, I am just giving an example we now look for other partners that they will work with and a lot of then are Nigerian NGOs.
So it’s not funds that come to the government. What happens is they do periodic reports that show us this is how much of what was planned, this is how much that has been collected, these are countries and donors that contributed, and this is how we are distributing it over the sectors and the agencies that are handling it. The agencies will make quarterly, biannual reports to say this amount that has been disbursed to us this is what we did and we, when we get such reports, do monitoring visits to validate what they are reporting.
In general, the humanitarian response in the Northeast has reached a level where we have attained stability. From a situation in 2016 where there was acute humanitarian conditions – people were dying from lack of food, from lack of medical care – we have moved now to a point where we are talking about people moving from camps back to their homes and communities. So that is some progress.
We still have some challenges. Its not over because the nature of insurgency is that though Boko Haram has been degraded but they are able to get involved in opportunistic attacks. They go and detonate bomb carried by human beings setting the process back and also still putting challenges within the city centre. The security agencies are there securing the communities and every once in a while these things happen and disrupt the plans. But what is happening are the arrangements for people to go back to their communities. We have some Nigerians in Chad, Cameroon and Niger as a result of the insurgency. We are trying to bring them back to their communities.