Why Nigeria Needs A Medium-Term Fiscal Framework
In Nigeria, the Medium Term Expenditure Framework (MTEF) stability can be said to be struggling or a work in progress. This is based on a number of factors that have adversely affected the early and effective budgetary allocation and policy formulations in the past.
Firstly, it is necessary to review and rationalise the Medium Term Budget Policy Statement as a common tool that will enhance stability among the states, ministries, and other government agencies to know the resources that will be due to them on a medium term basis over a specified period.
MTEF, being the basis for the preparation of Nigeria's annual budget, cannot at this stage of our economic regression afford to not be utilized in fully implementing the Fiscal Responsibility Act (FRA) of 2007, which mandates the federal government to develop strategy papers within a workable medium term expenditure framework for the next three years.
By implication, it is obvious that previously formulated fiscal policy have been greatly disconnected from economic realities, even before the fall of global oil prices. There are pointers to the fact that the disruption of oil production within the Niger Delta region – due to the bunkering activities and deliberate sabotage – led to a shortfall in production output. This loss, no doubt affects our fiscal buffer with the simultaneous depletion of Nigeria’s excess crude account.
Ultimately, this is where stability in political economy affects MTEF and SFP indices. However, MTEF formulated policies should be more of an economic model than a political /governance tool. This will help ensure that wasteful spending is curbed, as agencies of government will begin to focus on what they actually ‘need’ to get the job done, over what they ‘want’ to get the job done – placing ‘affordability’, over ‘desirability’.
So, How Important is MTEF as an Economy Driving Tool?
The importance of the Medium Term Expenditure Framework in Nigeria cannot be overemphasized, especially at this period where the need for accountability in all spheres of government has become a key factor for economic functionality. Corruption and over-bloated budgets have in the past hampered the effectiveness of the MTEF, thereby denying critical sectors of Nigeria’s economy much needed growth.
Ordinarily, MTEF is not expected to change the economy overnight. However, its implementation would have set us up on a disciplined pedestal with which genuine policies can be made. What we will get in return is an improved budget management system that caters for realistic policies only – as the finance ministry will be properly equipped with useful information as to how best to advice the government on effective spending.
Most importantly, the MTEF will improve transparency, as the agencies of government will be in the habit of setting long-term policy goals and strategies. A system like this, will provide a stable framework that the public can access, evaluate and contribute towards the effectiveness of government-run programmes.
A case study is the build up to the 2015 budget preparation where the Presidency sent a draft copy of the MTEF to the 7th Senate - proposing an oil benchmark of $78/barrel for the implementation of the 2015 budget.
In a swift response, Senator Bukola Saraki who was a member of the finance committee rejected the proposal citing the growing inconsistencies in global economic trends – based on the falling price of oil in the international market. Saraki further challenged the federal government to fully disclose the state of the nation’s economy in the wake of the caving revenue base.
This move led to a reduction on the earlier benchmarked oil price, and provided a platform for collective and workable frameworks that can easily cushion the effect of unforeseen crisis that may arise within the budget year. In the process, public trust was gained thus passing a vote of confidence on the public financial management system – at least, to an extent.
Ironically, Senator Bukola Saraki currently presides as the President of the 8th Senate. In his new role, he will be saddled with a similar responsibility of inaugurating a fiscal/economic monitoring team as the Buhari-led government submits its MTEF for the 2016 budget year. This time, all eyes will be on the red chamber to review, debate, and proffer mechanisms that will enhance effective medium term fiscal framework of the country.
As it stands, the MTEF needs to be designed to meet different needs. These needs will have a structure and coverage that will focus on the aforementioned benefits. If the parties involved are willing to make sacrifices with less profligacy and the highest level of government, then we are assured of sound policies, planning and effective budgeting.
It is expected that these medium-term inputs will help increase transparency and accountability and smoothen the process of resource allocation among all the workable sectors. These will in turn lead to industry growth, economic stability and employment generation.
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