20180507

Our Pains Over Non-passage Of 2018 Budget

These are not the best of times for real sector operators, particularly manufacturers. For a sector struggling to bounce back after a debilitating recession forced it on its knees, the delay in the passage of the N8.6 trillion 2018 Appropriation Bill by the National Assembly (NASS) may have added to its litany of woes.

Not a few operators who spoke with The Nation lamented that the delay in the passage of the budget has naturally slowed down economic activities. To them, critical business decisions have been put on hold. Some of them believed key capital/infrastructure projects would be delayed or abandoned.

The Director-General, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, said the delay in the budgetary process would entrench the vicious cycle of poor budget implementation.

On the likely effect of the budget delay on its implementation, especially its capital component, Yusuf said: “The risk is that recurrent spending will be fully implemented while capital projects suffer the usual implementation deficiency.”

Strategic planning, for many organisations, takes a cue from the budget structure and the policies that come with it.

The National Assembly reneged on its promise to pass the N8.6 trillion 2018 Appropriation Bill on April 24, 2018. The “Budget of Consolidation”proposal was on November 7, last year, presented for consideration and approval to the joint session of the National Assembly by President Muhammadu Buhari. But, the executive and the legislature have been trading blame for the delay in its passage. The chambers again raised the hopes of operators and Nigerians that the budget will be passed this week

The Chairman, House Committee on Media and Publicity, Abdulrasak Namdas, told reporters in Abuja: “By the grace of God, we will lay the budget on Tuesday (tomorrow) and then try to pass it that same week. Actually, we’ve been working hard so that we can beat the deadline, and hopefully this time around, I can assure you that by next week (this week), everything about the budget will be concluded and passed.”

His assurance followed that of the Senate spokesman, Aliyu Sabi Abdullahi.

If both chambers make good their promises this time, it means that the implementation of the budget will begin five months into the fiscal year.

The delay, according to Yusuf, has implications for planning in both the public and private sectors of the economy.

“To the extent that the budget is not in place, uncertainty and associated business risks are heightened,” the LCCI chief said, adding “this is surely not good for investors’ confidence, either from a foreign investor’s perspective, or from domestic investor’s standpoint.

Equally worried is the Manufacturers Association of Nigeria (MAN). Its President Frank Udemba Jacobs said: “As a key player in the real sector of the economy, MAN can boldly say that the delay in passage of the budget would have dire consequences on the economy.

“This is chiefly because the delay in the passage of the budget would make implementation of the capital expenditure component of the budget for the year an uphill task and these capital expenditure components are needed for sustainable economic growth as against our present growth rate that is premised on improved oil production and increase in crude oil prices in the international market.”

He described the annual budget as a vital compass expected to give stakeholders in the economy information on the likely flow of the economy as well as income and expenditure in a given year.

He also said the budget is a strategic indicator that helps domestic and foreign investors and businesses to plan their economic activities, decisions, projects and expenditures for the year.

Dr. Jacobs, therefore, said that the late passage of the budget slows down economic activities.

He said: “Critical to the private sector is the expectation that the budget shows the direction the government aims to take for the year in terms of provision of incentives, infrastructure development needed for the smooth operation of businesses and procurement of goods and services.”

The MAN chief pointed out that the delay would negatively affect the job creation capacity of government contractors.

Those job losses, he added, would worsen the purchasing power of the populace, with its resultant effect on the economy and the manufacturing sector in particular.

Stating that the delay has dire consequences for the economy generally, he said: “For an economy such as Nigeria, a budget is more than just a plan; it a fiscal tool that has been empirically used for the development and growth of economies in many other climes.

“In fact, national budget provides the link between public sector activities and that of the private sector needed for the growth of the economy. Taking the budget expenditure angle for instance, through public procurement for government capital projects, particularly locally-made products, the entire sectors will be stimulated as liquidity expands.

“Expansion in these activities stimulates growth and development in terms of employment creation and poverty reduction.

“Early passage of national budget therefore ensures early commencement of implementation and full-blown economic activities.

“Conversely, the late passage of the budget as we are witnessing in Nigeria at the moment causes sluggishness in the economy, which affects all economic actors and agents negatively.”

The non-passage of the 2018 budget is affecting sales of goods in warehouses of many manufacturing firms. Since the budget is yet to be passed, there has been no money in circulation, leading to low purchasing power of Nigerians.

With lots of unsold goods, manufacturers are hurting. Their production targets have been disrupted.

The MAN president said: “What the National Assembly is doing presently by not finishing up with the 2018 budget is causing a major challenge to the economy because the disposable income is not there for Nigerians to spend at will.

“It is only when this budget is passed and implementation begins that the public will have money to spend freely. As long as they don’t have money to spend freely, the manufacturing sector will continue to have large stock of unsold inventory of goods and these could decay and be at production risk.”

Jacobs also expressed worries over the proposed budgetary deficit of N2.22 billion, which the government intends to finance to the tune of about 42.4 per cent from domestic borrowing.

According to him, this would crowd out private sector borrowing, particularly the manufacturing sector.

Jacobs argued that with debt service charges rising to N2.014 trillion, accounting for 24.7 per cent of the 2018 budget, this portends imminent danger. Besides, high debt profile, he said, leads to debt over-hang, which discourages investment, particularly foreign investment.

the Nigeria Employers’ Consultative Association (NECA) warned of the dangers in delayed passage of the budget was dangerous for the economy.

Conveying NECA’s concern at the end of its recent Governing Council meeting in Lagos, its President Larry Ettah said the development could drag the nation into a state of inertia.

He said: “It appears to have become a tradition in this democratic dispensation for the budget to be unduly delayed, thereby plunging the economy into a state of inertia, particularly in the first quarter of the year.”

He recalled that in December 2016, the President presented the Appropriation Bill for last year to the National Assembly, but lamented that the lawmakers did not pass the bill until May 11, 2017, almost six months after it was presented.

Ettah, also recollected that the President presented the 2018 budget to the legislators in November 2017 and expressed dismay that the budget is yet to be passed.

He implored the two arms of government to mutually agree on a time frame that would ensure that the budget for the following year is passed into law before the end of every current fiscal year.

The Nation learnt that the delay in the passage of the budget was caused by the alleged refusal of heads of Ministries, Departments and Agencies (MDAs), to appear before the chambers to defend their votes.

The refusal, or late appearance of some heads of MDAs was said to have made the sub-committees of both chambers to also submit their budget reports late to the Appropriation Committees.

By Tuesday last week, when the National Assembly failed to pass the document as promised, reports of sub-committees were reportedly still being collated by the Appropriation Committees for onward submission to the Senate and House in plenary for passage into law.

But, Jacobs blamed the delay on administrative challenges, saying: “From all indications, it appears that the reason for the delay of passage of the 2018 budget is due to administrative challenges.”

According to him, economic activities have been dampened and the private sector that grows the economy in real terms could not find any impetus and direction, which the government is supposed to provide through the passage of the budget.

On the efforts made by the manufacturers to end the cycle, Jacobs stated that in various representations, MAN has always advised the government to begin early budget preparation in the preceding year.

He said in doing that, all administrative hiccups would have been resolved early before the current year.

“I hope the National Assembly and the Presidency quickly resolve the current quagmire and move on to pass the 2018 budget,” he said.

NLC President Ayuba Wabba blamed the delay on lack of synergy between the executive and the National Assembly. He called on the executive and the legislature to expedite action to pass the budget.

Pointing out the implication of the long, Wabba noted that the implication of not passing the budget five months into the year translates to delay in delivering on infrastructure development and dividends of democracy.

The unionist said: “Based on facts in the public domain, the position of both arms of government was wrong-headed and does not warrant holding the nation to ransom.

“We find it rather unwarranted to play politics with such issue and refuse to carry out their statutory functions. We call on the Senate and the Federal Government to bury their hatchet to expedite the passage of the budget.”

According to Wabba, there must be synergy in the work of the three arms of government through meaningful consultations, constant communication and collaboration for the common good of the people.

Echoing the labour leader, Yusuf said: ”They need to be on the same page with regard to the fundamental principles of the budget.”

The LCCI the boundaries of responsibilities between the executive and the legislature in budgetary appropriations should be clearly defined to avoid the recurring problem of delays.

Noting that the ruling party has a role to play in this matter, especially when it has the majority in the legislature, he added that a judicial pronouncement is necessary to lay the matter to rest.

He said: “It is important as well for all arms of government to demonstrate an unmistakeable commitment to the spirit and letters of the Nigerian constitution and other complementary legislations.

“It is worrisome that many agencies of government are not complying with the provisions of the Fiscal Responsibility Act.

“Compliance with this Act would improve the budget process and enhance the capacity of the NASS to discharge its responsibilities with regard to the appropriation,” Yusuf told The Nation.

The Federal Government had in 2017, made a commitment to an early submission of the 2018 Appropriation Bill for early passage before the end of 2017. The idea was to return the nation’s budget cycle to the regular January-December.

Subsequently, the 2018 budget, which was put at N8.612 trillion, was presented to the National Assembly by President Buhari on November 7, 2017.

But five months into the year, the budget is yet to be passed, as lawmakers accuse the executive of refusing to submit the 2018 Finance Bill, which it said traditionally accompanies the budget proposal.

The parliament was said to have requested the submission of the finance bill as part of its working tools, saying that it was necessary as it guards against revenue leakages and inconsistency in government fiscal policy.

As it is, the controversy over submission of the 2018 budget and budget defence by ministers and directors has continued to hold the nation to ransom, with predictable consequences for businesses and the economy.

The situation, according to experts, is hurting the country’s quest for both local and foreign investors.

Because budget approval and implementation are critical to investment decisions and enhanced economic activities, experts believe that the nation’s recovery from recession on a sustainable would have been accelerated had the 2018 budget been passed on time.