• Sunday, May 19, 2024
businessday logo


2021 Supplementary budget: Matters Arising

2021 Supplementary budget: Matters Arising

The National Assembly (Senate and House of Representatives) on Tuesday 22nd June, 2021 received President Muhammadu Buhari’s request for the approval of the 2021 Supplementary Appropriation Bill of N895, 842, 465, 917. A whopping sum of N722.4 billion of the amount is slated for capital expenditure on defence and security. But this begs the question; what happened to funds amounting to over $1billion (one billion dollars) earlier released for the same purpose with no tangible result? Why present supplementary budget in the middle of the year when the substantive 2021 budget is below 30% implementation?

In responding to the increasing insecurity in Nigeria, federal and state governments have been allocating hundreds of billions of Naira to defence and security-related expenditure with no tangible results. Rather than abate, the situation continues to get worse by the day. Today, no part of the country could be said to be free from security threats. Even international communities are warning their citizens against visiting Nigeria.

Unfortunately, the large sums of money spent on tackling security challenges are funds that should have been going elsewhere in the economy, especially in the education and health sectors.

The domestic economic impact of this exorbitant defence expenditure is further devalued as long as it is mostly foreign procurement-based. This is not helpful to the growth of the economy as we end up providing jobs to foreign security equipment manufacturers at the detriment of our own population with over 40% unemployed.

Furthermore, the chaos and uncertainties created by insecurity can provide the breeding ground for corruption. On the one hand, insecurity can provide an environment for some government officials to corruptly enrich themselves. And on the other hand, fighting insecurity can spread the government too thin, limiting its ability to fight corruption effectively.

Read also: China grew economy on land reform, Nigeria can

As we adapt to the challenges of a changing world and re-position our economy for growth and increased employment, security must be sorted as a matter of economic priority. But we cannot achieve that by spending all our resources on just one sector.

If the truth must be told, acquiring all the security hardware in the world does not solve security issues. Adequate and effective intelligence gathering and other proactive measures including citizen’s active participation do. But that is lacking in our current fight against insecurity in Nigeria. Evidently, public cynicism and apathy are affecting the success of the exercise. Apparently, some people in highly-placed positions seem to benefit not just from the current situation but equally from the budgetary provisions for security.

With pervasive insecurity comes internal displacement of people and the crippling of economic activities in the worst-affected areas. We have witnessed the virtual death of economic activities in the northern states of Nigeria. We have also seen how agricultural produce in Benue, Kebbi and Traba and a number of other states of Nigeria have been badly affected by the herdsmen-farmers clashes. Insecurity in these states has also created internal refugees within the country. As a result, people in the refugee camps are not able to contribute to economic activities.

We vividly recall that President Buhari signed the 2021 appropriation bill (2021 Budget) into law on Thursday, 31 December 2020. The revised budgeted expenditure was N13.59 trillion. Buhari also signed the 2020 Finance Act the same day. Whereas the Finance Act became effective from 1 January 2021, the 2021 budget became operational from 31st March 2021. In other words, as of Tuesday 22nd June 2021 when Buhari submitted the 2021 supplementary budget to NASS, the substantive budget has been operational for just 3 months.

Without mincing words, Nigeria’s fiscal position is on the brink and it requires an immense response from its political leadership. The courage to rationalise costs, ensure brutal efficiency in the management of capital expenditure and expand revenues by intentionally investing in economic growth, needed especially in periods of boom and mild recovery has been grossly lacking.

By its recent action, the government of President Buhari has intentionally increased Nigeria’s budget size despite its weak ability to gather revenue. Nigeria’s budget in nominal terms has grown from N4.5tn in 2015 to N10.8tn in 2020. With the inclusion of 60 Government-Owned Enterprises (GOEs) whose total expenditure stands at N1.35tn, the Nigerian budget in 2021 is projected at N13.08tn. While the expenditure component of the budget might have expanded, the federal government’s actual revenue has only increased from N3.24tn in 2015 to N3.86tn as of 2019, a 19.3% increase. The only way that the FG has continually met its expenditure has been through the escalation of debts and unfunded deficits provided by the Central Bank of Nigeria.

According to the Budget Office, the federal government’s actual deficits in the last five years have stood at N1.52tn for 2015, N2.19tn (2016), N3.80tn (2017), N3.64tn (2018) and N4.17tn (2019). The consequence of this is the rising cost of debt servicing which has grown from N624bn in 2014 to N2.45tn as of 2019 while the debt service to revenue ratio has grown to 94 percent.

This is a gross anomaly in the public finance analysis of a sustainable entity. Moreover, the true story is that Nigeria has failed to gather revenues and its leaders do not want to take drastic measures required to significantly rationalise expenditure.