Drafting Nigeria’s 2016 budget: Should it be done by the National Planning Commission or the Ministry of Finance?

The success of our budget is defined by its contribution to building a more equal, prosperous society, as envisaged in the National Development Plan – Nhlanhla Nene, South Africa Minister of Finance

The National Planning Commission (NPC) on August 3rd 2015 got a presidential directive to prepare the framework for the 2016 national budget. The instruction was also specific as the Commission is expected to produce a draft financial plan that has a lower component of recurrent expenditure.

This commentary provides a viewpoint on which government agency should prepare the budget. Should it be the NPC as directed by the President or should it be the Ministry of Finance that has been performing this task in the past? Which of these agencies have the legal mandate to produce the country’s budget? What is the practice in other countries and can we make inference(s) from them?

A review of the objectives, functions and powers of the NPC as contained in the National Planning Act (1993) shows that the Commission does not have the legal mandate to prepare the national budget. On the contrary however, the Ministry of Finance is by law empowered to carry out this function. This power is derived from section 13(1) of the Fiscal Responsibility Act (2007) which authorizes the Minister of Finance to prepare the Medium Term Expenditure Framework (MTEF).

In preparing this document, section 13(2b) of the Act provides that the Minister of Finance shall seek inputs from relevant government agencies including the NPC. In addition, section 18(1) of the Act stipulates that the MTEF shall be the basis on which the national budget is prepared. Apart from the legal issue, it is not certain if the NPC as presently constituted, has the capacity to prepare the MTEF and by extension the national budget. The Finance Ministry, through its division, the Budget Office of the Federation, has over the years built capacity in preparing the MTEF and the national budget through scenario-based techniques.

Having established that the Finance Ministry is empowered by law to prepare the national budget contrary to the directive to the NPC by the president, it is important to look into what obtains in some countries. For the purpose of this commentary, the examples of New Zealand, South Africa, Uganda, Malawi and Ghana are looked at. The basis for examining the practice in these countries is that while New Zealand and South Africa were ranked first and second in the global Open Budget Index survey of 2012, Uganda, Malawi and Ghana were among the top 10 performers in Africa. So which government agency is responsible for preparing the budget in these countries?

In New Zealand, the Treasury department prepares the country’s annual budget and starts by issuing guidelines to the various spending departments and agencies. South Africa has a National Planning Commission that comes up with strategies aimed at influencing the long term development of the country. The Commission is however not responsible for preparing the government budget in South Africa as this role is carried out by the Finance Ministry.

The national budget in Uganda is prepared by the Ministry of Finance and Planning for Economic Development (MFPED), guided by the government’s sector strategies and inter-ministerial policy discussions. Similarly, Malawi’s annual budget is prepared by the Ministry of Finance, Economic Planning and Development (MFEPD), which has the mandate to formulate economic and fiscal policies for the country. The government budget in Ghana is prepared by the Ministry of Finance and Economic Planning (MFEP) through its Budget Division.

Making deductions from the practice in these countries, Nigeria’s current model of having its Finance Ministry separate from the Planning Commission mirrors what obtains in New Zealand and South Africa. Therefore, Nigeria may on one hand maintain this approach and allow the Finance Ministry to continue carrying out its legal mandate of preparing the national budget.  On the other hand, the government may consider merging the NPC with the Finance Ministry as is the case in Uganda, Malawi and Ghana. In the interim, it will suffice if the 2016 budget is prepared by the Finance Ministry.

Maxwell Ekor