Thoughts on Akwa Ibom’s 2017 budget proposal – 1

A fortnight ago, Governor Udom Emmanuel of Akwa Ibom state laid a budget proposal of N365.25 billion before the Akwa Ibom state House of Assembly. This year’s proposal is N58 billion or 13.7 percent less than the 2016 budget of N423 billion.

At face value, the year 2017 budget proposals appear much smarter than any in recent years. For one thing, the executive appears to have learnt a lesson or two from the macro-economic environment. At $35 per barrel oil price benchmark and one million barrels per day projected oil output, the state’s 2017 budget is clearly based on more realistic and modest macro-economic assumptions than that of 2016.

Also, the 2017 budget proposals have apparently benefitted from the poor history of budget performance in the state. It is no longer news that capital budgets in Akwa Ibom state have consistently underperformed in the last six years, with things getting to a head in the general election year 2015, and for obvious reasons. Huge budgets spun out of an oil-derivation induced appetite got the state budgeting beyond reality, often with equally huge supplementary appropriations in tow before the end of the fiscal year. The budget was therefore reduced to an annual ritual rather than a tool to discipline government towards the delivery of its policy objectives and political promises to citizens.

Another bane of budget implementation in the state that this year’s budget has managed to avoid is the issue of unrealistic revenue projections. For instance, for 2015 and 2016, revenue receipts stood at 37 percent of total projected recurrent revenue as at September 31st of each year, a disappointing outing by any standard. Therefore, with a total projected revenue of N175 billion for the 2017 fiscal year, as against N408 billion and N284.7 billion for 2015 and 2016 respectively, government appears to have learnt its bitter lesson as this year’s projection has a better chance of being realized.

The government also deserves commendation for its early adoption of leakage-plugging reforms such as the Treasure Single Account (TSA) and the Biometric Capture for civil servants. Akwa Ibom State adopted the TSA policy long before it became a condition for accessing federal government bailouts and budget support. Unfortunately, Governor Udom Emmanuel missed an opportunity to report back to the Akwa Ibom people through his 2017 budget speech on the gains of these reforms. Right now, we do not know how much has been saved from TSA implementation and how much of those funds will contribute to funding the 2017 budget. Similarly, the public remains in the dark as to the exact number of persons on the public payroll. If this blind spot is charitably taken to be an error of omission, then how much savings has the state government recorded from the payroll reforms? How have such savings been reflected in the recurrent estimates for this year’s budget, such as the huge proposals on personnel costs (N50.489 billion), and the equally high outlays for pensions and gratuities? And by the way, why has no offender been prosecuted and punished more than a year after about 9,000 ghost workers were allegedly discovered on the payroll, with huge implications on the state’s recurrent budget?

The 2017 budget proposals have also done a good job of raising capital spending to 53.1 percent of the total outlay. The capital budget is the fiscal muscle of development and at face value, the capital budget proportion is a signal that the government intends to take the business of development more seriously. While the governor’s 2017 budget speech is silent on capital budget performance for 2016 (and in the absence of Budget Implementation Reports), we are left with the option of simply subtracting actual recurrent expenditure as at September 2016 (N74.6 billion) from actual recurrent revenue for the same period (N104.8billion) which left only N30.2 billion or about N10 billion per quarter for capital spending during the period. A mere N10 billion per quarter for “development” out of a budget of N 423 billion leaves much to be desired.

This means that if this year’s budget must live up to its billing as a “budget of consolidation”, it is time for government to move away from merely “presenting” pro-capital budgets and start demonstrating real commitment to capital budget implementation. Furthermore, the intention to spend 46.9% of the 2017 budget to service debts and administrative charges, run government overhead, pay salaries, pensions and gratuities and generally fund the machinery of government shows that the pro-capital “posturing” of the 2017 estimates actually masks a business-as-usual disposition when it comes to the cost of governance. It would appear that the predilection for running “big government” has refused to abate in spite of the biting effects of the recession on the state’s fiscal health over the last year.

In view of the foregoing, it is curious that an important tool for ensuring fiscal prudence in the state has been left in the cooler for too long. Word has it that work had long concluded on the draft Fiscal Responsibility and the Public Procurement Bills for the state but one wonders why the governor is yet to send both executive legislations to the House. A legal framework for fiscal governance in the state is long overdue. The same applies to public contracting. It has been repeatedly suggested that the biggest problem of budget implementation in Akwa Ibom State is fiscal indiscipline. If both bills were sent to the House soon and expeditiously passed into law, the 2017 budget would be a good place to experiment a new regime of budget implementation, one that is guided by a supervening restraint on executive fiscal powers.

 

Tijah Bolton-Akpan