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Budget And Budgeting Process In National Assembly

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Being a Text Delivered by Femi Gbajabiamila, (Leader of Opposition, House of Representatives) at the Progressive Governors'/Legislators/Civil Society Organizations Roundtable on 24 th of March, 2014 at Barcelona Hotel, Wuse 2, Abuja

Protocol
What exactly is a budget? Question and the definition is important because it is only when the exact meaning of a budget is understood that those who are charged with its preparation, its approval and its execution can begin to appreciate its gravity.  It is only when all stakeholders know the importance of a budget in a nation's life and economy that even the public will begin to take a heightened and closer scrutiny at its contents, passage and implementation.

A budget has been defined severally in many different ways but for the purpose of this exercise and for ease of understanding of the unlettered man out there on the streets I choose to draw a parallel and analogy with the family unit which we can all relate to.  The budget process involves 3 sets of people, the executive represented by the President who presents the budget, the legislature and legislators who approve the budget and authorise spending in line with its approval and the Nigerian people who are meant to be the ultimate beneficiaries.

For simple understanding, the President is analogous to the head of the family, the legislature is the family banker who keeps and gives money to the family for spending based on its stated needs, and the people are the children in the family who are the ultimate beneficiaries.  The father presents the needs of his children and family to the bank for necessary approval and funds, the bank in this case legislature after going through income and expenditure of the family grants approval so that the family can continue to develop and grow, produce and reproduce.  I will continue to refer to this analogy as we continue especially to drive home certain salient points.

Now once we agree that the sustenance of a family is very important and tied to its input, output and outcomes, the importance of a budget to a nation becomes very glaring.

Many have argued that the most important law that a legislature passes in any given year is the budget through the instrument of the Appropriation Act.  Whilst this may be arguable, it is certainly not without merit given its importance to the sustenance of a nation as illustrated earlier.  In recognition of the seriousness of the budget and the importance of the role of the legislature, the constitution in the spirit of separation of powers in section 80 enjoins and perhaps one should say commands in majestic language that the President SHALL submit proposals of the countries annual budget to the National Assembly for consideration.  The word SHALL and the word PROPOSAL carry their imports.  Whilst the word shall means presentation to the legislature is not optional or discretionary, but mandatory, (otherwise the word may would have been used), the word proposal suggests that the figures contained therein are not sancrosanct or final and cannot be until approved by the legislature.  It is important to note that this provision in different forms and whether explicit or implicit is found in practically all democracies world over.  It reflects the twin essential democratic principles of checks and balances and separation of powers and indeed underscores the difference between a democracy and an autocracy.  The power of the purse and spending authority is guarded jealously by all democracies and its limits, boundaries and extent has always been a bone of contention between the 2 contending powers, the executive and the legislature.  Because of this and because it is important to get right the process that would affect the economic life of a nation one way or the other, the budgeting process has always been and is indeed desirable that it be painstaking and thorough.

This thoroughness is unfortunately and inadvertently undermined by the provision of the same section 162 which requires the President to present the budget proposal at “anytime” in the financial year. The financial year ends December 31 st , it means therefore by the constitution as it stands the President can present the budget to the legislature December 21 st or 27th or thereabouts. This is not far fetched as indeed the budget has been presented several times in the month of December. Now the financial year starts January 1 and ideally the budget for the new fiscal year is meant to kick off at that time.  This becomes virtually impossible as the legislature which is meant to scrutinize such proposals needs ample time to do so. For instance, the fiscal year in America begins in August but the law requires that the budget is presented first week in February giving the US Congress 9 clear months to deliberate on it.  Several other advanced democracies mandate the presentation of budgets 3, 4, 5 months before the fiscal year begins. To plug this loophole and make the process more effective, I proposed an amendment to the constitution changing the words “anytime” to September 30 which gives the legislature 3 clear months to work on the budget before the beginning of the next fiscal year.  This amendment has passed through the national assembly and awaits the approval of the state assemblies.  As at today and due to the little time available to the NASS in scrutinizing the budget and much as the NASS may try to be alive to its responsibility in budget formulation, the exercise remains largely a ritual resulting  sometimes in garbage in , garbage out.  Most times it is the NASS the public blames for late passage of the budget.

However, being critical stakeholders and representatives of the people, it is impossible to wish away the participation of the legislature in the budget process or to water down its role.

The budget as we have it today and as has been passed remains in my opinion unconstitutional in its form and in its substance. Our National Budget proposal comes into the National Assembly and goes out as an unconstitutional law. Why do I say this? I have repeated over the years and written several papers that the constitution of the federal republic of Nigeria does not recognize or provide for the idea of a benchmark for oil revenue.  Indeed the constitution clearly goes against it.  The Minister of Finance in addressing my concerns came out to cite several countries like Qatar, Kuwait etc that set benchmarks in their various countries. What she failed to mention was that none of the countries pretends to practice neither federalism nor constitutional democracy and that indeed they are all monarchies and autocracies with no section 162 provision in their constitutions.

Section 162 states that ALL REVENUES of the federation must be paid into the consolidated account and this is the only account recognized under the constitution for this purpose for distribution to the states.  Setting a benchmark and keeping monies above a certain amount into an illegal excess crude account is unconstitutional. Therefore our figures, our parameters and our revenue calculations are already off mark from the beginning.  I am glad to announce that the 4 Principal Officers of the APC in the House and the Chairman Public Accounts in the House have taken up this challenge to test the constitutionality of this matter in court and the case comes up for hearing in about 2 weeks.

It will be impossible to address the budget without addressing issue of Constituency projects which has been given notoriety and misunderstood by the unsuspecting Nigerian public. Whilst some in the public believe the National Assembly has no business with constituency projects and it is purely an executive function, others believe, the members of the National Assembly are given funds to execute these projects. It is important to set the records straight on these two misconceptions.

First, it is a misunderstanding of representative democracy for anyone to straightjacket or limit the role of legislators to lawmaking. Whilst the core responsibility of a lawmaker can be said to be lawmaking, there are tangential ancilliary or if you like consequential responsibilities attached to that role.  One of such is the attraction of federal presence to one's constituency. This is done all over the world albeit with different names such as earmarks or pork barrel legislation. The pertinent question that needs to be asked is how does a legislator attract federal presence to his or her constituency or state without constituency projects?  We must remember that during campaigns and thereafter, it is the legislator that the constituents extract electoral promises from. It is them they complain to or call when certain things e.g. hospitals, classrooms, electricity, water etc are required in their constituencies. They don't call the ministers of the relevant ministry, neither do they call Mr. President, who in turn cannot know the needs of my constituency better than me if at all he knows their needs. No doubt without the ability or capacity to influence these projects the legislator is being set up for failure when its  time for re-election. Ironically, the unelected minister and his special assistants and P.As are able to influence projects in the budget which they ultimately use to campaign during elections against the hapless legislator. What did you do for us in the last 4 years as a legislator is a phrase all too familiar to many lawmakers and trust me the people are not talking about what laws did you pass for us.

On the second misconception about legislators being given money to execute projects, I believe this story was planted by the Ministries and of course perpetuated by the Presidency when they know full well it is not true. All that simply happens is a legislator during the budget process identifies certain needs in his constituency, puts it in the budget and the relevant ministry awards and executes the project.  Lets face it how can I have the power to give you almost 5 trillion Naira to spend wherever you want and not have the ability or power to include just 40million for my own people. What is the sense or equity in that?

For a budget process to be seamless, the relationship of the two arms of government have to be symbiotic and cooperative so long as such is done in the national interest.   That has to be the starting point or approach.

This is a good point to segway into the issue of budget implementation.  When the executive gives reasons for non-implementation of budgets, right up there on the list is distortion by the national assembly through constituency projects. Now let us very quickly put this ridiculous excuse to bed. The budget comes in at say 4.6 trillion and goes out at 4.7trillion. The distortion the executive talks about is always on the average of 100 billion.  Now, the level of implementation over the years has remained at 30 percent.  The 100 billion is only about 2 percent of the budget. Lets assume the constituency projects are taken out of the budget leaving the budget at 4.6trillion as introduced by the executive,  is there implementation to the tune of 1.6trillion? 30 percent implementation is only about 1.3 trillion.  Now in terms of the capital component of the budget which itself is about 30 percent and only 30 percent is implemented, it means only about 400 billion is released for the development of a country of 160 million. Truly amazing voodoo economics. Now breaking it down and going back to the simple family analogy which I tried to use to explain a budget, we can all imagine what would happen to the family structure and unit, if the moneys approved by the bank for the education of the children or for their medical care or clothing is not spent for those things as budgeted or only 30 percent is spent on them. The family will begin to fall apart, the children will begin to look malnourished, will not be able to go to school and soon you will have a dysfunctional family same as a failed state. That's the importance of budgets and budget implementation.

The lopsided nature of our budget framework must be addressed if we are to have real budgeting that will propel economic growth and social and infrastructural development. A situation where recurrent takes up 70 percent of our budget and a paltry 30 percent (this year about 27 percent) is allocated to capital can only stunt our growth as a nation.

The national assembly must be prepared to deal with this problem through the instrumentality of the law. I have sponsored the Economic Stimulus Bill which has passed the second reading in the House. The Bill seeks to dedicate for the next 5 years a minimum of 40 percent allocation in our annual budget to capital. If the Executive refuses to do the right thing, then the legislature must pick up the gauntlet and compel it   The strangest thing is that this is an election year and in most countries, government allocates more money to capital in an election year to woo and impress the electorate. Not in Nigeria. In this election year, capital has been further reduced.  Yet we come up with soundbites and nicknames for our budgets. If its not budget of transformation, its budget of hope. How about a real budget for the people?

Our budget has an omnibus sub-head which no one has been able to define and which is in my considered opinion a conduit pipe for channeling slush funds. That sub-head is called service wide votes and in it is embedded all sorts of monies which in many respects duplicate monies already voted for other agencies in the same budget.

Again our budget is based on what the executive today call the envelope system. Meaning each agency is given a certain ceiling or amount to work with and cannot go beyond that. This sounds okay at a surface glance but a critical analysis will show that it is a system that doesn't work and cannot work. First I would expect if you give me an envelope I should assume that you will release my money contained in that envelope to me. It becomes a total waste of my time and everyone's time when that envelope represents a lie and you never had any intention of releasing the money in the envelope.  The envelope is invariably paper money with no value. It is only in Nigerian budgetary process that you hear cooked up phrases like release, cash backing etc.  Now in many cases the envelope system is not based on any national or economic indices and figures are allocated with little economic thought process. The national assembly unfortunately has failed to ask questions based on economic and fiscal indices as to why is this particular amount allocated to this particular agency, department, commission or ministry and figures are thrown around in whimsical  fashion.

The three year rolling plan called MTEF is another joke which unfortunately the national assembly has failed to address frontally and with proper legislative skill. For instance the law (fiscal responsibility Act) is clear that the MTEF cannot be changed materially yearly unless there is a compelling reason and this is why its called a 3 year rolling plan. However we are presented every year with an MTEF different from the previous year, a clear violation of the Act.  This year for example the so-called benchmark was reduced from 79 dollars to 77 in spite of the fact that the price of oil has increased and continued to climb.  The government talks about volatility and shale oil but the facts on ground don't support these assertions and the same volatility and shale oil were present the previous year.   Some of us have argued that rather than violate the law and if you so much believe that the price of crude will drop from about 108 to 77, then when we begin to see it happen, bring an amendment to the appropriation law at that time and the NASS will immediately amend the benchmark. These arguments fell on deaf ears. For me there is more to this issue of the lowering of the oil benchmark than meets the eye. Besides the lower the benchmark, the less money available to the states we represent.

How do we improve on our budgeting process? First the National Assembly must beyond relying on its own innate capacity engage economic experts and set up a full and comprehensive budget office similar to the congressional budget office of the US Congress. It should be an independent non-partisan body made up of technocrats who can dispassionately analyse and scrutinize the budget proposals as presented by the executive. Steps have been taken towards achieving this but we are not there yet and it must be given priority.

Second, Fiscal federalism must feature prominently in allocation of resources and the issue of benchmark done away with. Third, the national assembly must be more hands on in the budget process and take a less partisan approach putting the interest of the nation first.  The President asking a subordinate no matter who, to present a budget to another but equal arm of government undermines the legislature and reduces the significance of what should be serious business.  Indeed it prevents the Nigerian people from hearing their President address them through a budget speech on the performance of the previous year and the aims and objectives of the budget. Fourth, we must restructure our budget in line with the Economic Stimulus Bill described earlier. Fourth, the envelope system must be discarded or at least based on verifiable and sound economic indices and fifth but perhaps most important all arms of government need to start seeing an Appropriation Act for what it is, a law that must be obeyed and implemented fully and not as it pleases the executive. A situation where a President declares in a budget speech that the previous year's budget was implemented 40 percent and gets a deafening applause or that the next year's budget implementation will be significantly improved makes nonsense of the process and undermines the role of the legislature.  Budget like all laws are sacrosanct and meant to be implemented 100 percent and implementing 40 or 50 or 60 percent does no one a favour.  There are legislative procedures in every appropriation act that must be followed such as virement, impoundment etc if implementation becomes difficult or impracticable.  We must also begin to think outside the box and insist on carrying over a previous capital budget if not implemented into the next year. This way we achieve faster and steadier growth than having abandoned projects scattered all over the country.

Finally the National Assembly carries the full weight, burden and pains of this country. Therefore it must take its oversight functions more seriously, conduct more vigorous and rigorous public hearings and in performing its oversight functions and its role as a check and balance to the executive, it must as a matter of necessity, speedily and without further delay scrap the service wide votes sub-head of the budget.

FEMI GBAJABIAMILA
LEADER OF THE OPPOSITION
HOUSE OF REPRESENTATIVES