• Friday, January 24, 2025
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NASS to jack up Tinubu’s N49.7 trillion proposed budget as MDAs demand more cash

NASS to jack up Tinubu’s N49.7 trillion proposed budget as MDAs demand more cash

…experts say unfolding issues expose gaps in govt’s budgeting process

There are strong signals that the National Assembly will substantially raise the N49.7trn budgetary spending proposed by President Tinubu for 2025 as Ministries, Departments, and Agencies (MDAs) increasingly demand for more cash to enable them implement their mandate for the fiscal year.

Experts say this is not only worrisome considering inflationary concerns, but also spotlights the inefficiencies within Nigeria’s budgeting process.

As the budget defense progress at the National Assembly (NASS), BusinessDay has observed that several MDAs have raised concerns about inadequacy of their proposed allocations, asking for substantial raise, while criticising the current envelope system.

The demand of the MDAs is pushed by rising costs and the naira exchange rate.

Read also:Present realistic, actionable budgets, Senate tells MDAs

For instance, on Monday Dele Alake, minister of solid mineral development, said the N9 billion allocated to his ministry is inadequate.

Alake who spoke while defending his ministry’s budget at the National Assembly detailed his efforts to secure additional funding for the ministry before President Tinubu presented the document to the law makers on December 18, 2024, but to no avail.

“We proposed N539.7 billion for capital in 2025, but the envelope that came is a paltry N9 billion,” he told the law makers.

Consequently, the NASS Joint Committee on Solid Minerals summoned Wale Edun, Minister of Finance and Coordinating Minister of the Economy; Atiku Bagudu, Minister of Budget and Economic Planning; and Tanimu Yakubu, Director-General of the Budget Office, over the insufficient budgetary allocation for the Ministry.

Mahmood Yakubu, the Chairman, Independent National Electoral Commission (INEC) also raised a similar concern and rejected the N40 billion allocated to the agency.

Yakubu explained that the proposed N40 billion was insufficient, and would cover just less than one-third of INEC’s projected spending of over N126 billion.

He later secured approval for the N126 billion it earlier proposed to the National Assembly through its joint committee on INEC and Electoral Matters.

Also, Abubakar Momoh, Minister of Regional Development, solicited the law makers support for additional funding to enable his Ministry to deliver on its mandate.

A summarised outline of the budget envelope for the ministry’s 2025 budget had a ceiling of N28.9 billion.

This, according to the minister, is made up of N24 billion capital expenditure and N1.6 billion recurrent expenditure, while N2.7 billion was earmarked as personnel expenditure.

In the same vein, the National Assembly Joint Committee, also decried the allocation to the ministry of livestock development as insufficient.

The committee asked Idi Maiha, the minister to harmonise the adequate financial needs and re-present it in the form of a supplementary budget, promising prompt approval.

Saliu Mustapha, chairman, Senate Committee on Livestock Development pledged the commitment of the lawmakers to ensure adequate funding support that the new ministry would require.

Read also: Finally Senate approves 2025 budget for Auditor-General office

Meanwhile, in the early days of the budget defence, the ministries of Defence, Education and Health who even got the lion’s share in the 2025 proposed Appropriation also lamented that the funds allocated to them were insufficient for the activities of the ministries.

Lawmakers signal substantial upward budget review, call for improved budgeting process

With the flood of requests for increased allocations, experts predict that the National Assembly could double the initial proposed N49.7 trillion planned spending.

Various committee chairmen had promised the MDAs to increase their appropriations, despite the significant implications that the potential increase in spending would have for Nigeria’s fiscal stability.

Speaking with BusinessDay, Osita Izunaso, the APC Senator representing Imo West and chairman, Senate Committee on Capital Markets and Institutions expressed dissatisfaction with the budget envelope system adopted over the years by the federal government. He called for its review and improved coordination in budget preparation by the executive arm.

Izunaso noted that repeated requests by MDAs for additional funds signal a lack of confidence in the envelope system.

He also criticized the executive for inadequate preparation before presenting the budget.

Ideally, the Ministry of Finance, Budget, and National Planning should have engaged MDAs comprehensively to ascertain their funding needs and integrate them into the initial proposal.

He said, “If many of the MDAs are now coming to say the money is not enough for us, what it means is that they have lost confidence in their envelope system and I also believe that the system has to be reviewed.

“ The envelope system came because of, the government biting what they could chew, what they could swallow.

“But at the same time, you can see that it’s not in every establishment that it works.”

He said this, it also implies that the executive arm of government did not prepare effectively before bringing the budget.

He noted that as much as it is the law makers’ responsibility to scrutinise and approve the they are also careful of not being accused of budget padding.

He, however, predicted that the National Assembly might increase the budget, given the compelling needs of various MDAs and the revenue surpluses generated by some.

He noted, “I don’t think that this budget will stand as it is. I see the National Assembly increasing it because there are compelling demands that you can’t just wish away.

“And some of the revenue generating agencies have even surpassed their threshold, which is a very good indication that more revenue will come into the system.”

Izunaso highlighted discrepancies in funding for key sectors, citing housing as an example. “In 2023, the renewed housing delivery program was allocated N100 billion. It dropped to N90 billion in 2024, and now it’s down to N37 billion in 2025. This suggests a potential shift in government priorities, but it raises concerns about how they plan to cover the remaining states,” he said.

Read also: Senate dismisses 2025 budget proposal of Investment and Security Tribunal

He stressed the need for proper planning and coordination by MDAs to avoid last-minute adjustments, adding, “So that brings me to what I said earlier, that maybe they didn’t put their house in order before bringing the budget to National Assembly.

“And the National Assembly cannot be a dumping ground for this. We just have to do our work to the best of our ability.”

Izunaso’s comments underscore ongoing debates about the effectiveness of Nigeria’s budgetary processes and the need for reforms to enhance fiscal transparency and accountability.

Also, Senator Ede Dafinone, (APC, Delta Central), a chartered accountant, noted that the current budgeting system can be improved upon.

“The initial envelopes have been fixed and are being increased in line with price increases. However, mistakes made with the initial envelope are being carried forward in subsequent years.

“And there is a need for a more comprehensive review of the envelopes annually to ensure that they are fit for purpose,” he told BusinessDay.

In his comment, Adams Oshiomole, ( APC senator representing Edo North) noted that the envelop system of budgeting remains the best for the country at the moment.

He, however, added that the processes could be enhanced.

He said, “Even Nigeria itself is on that envelope. You can’t have 100 spending. We can’t just give funds to people like that, there has to be an envelope that restricts your spending and how much you get.

“We would just keep improving on what we have at the moment.”

Experts recommend way forward

With a debt servicing cost at over N16 trillion and already, accounting for a huge chunk of revenue, any upward adjustment would imply additional borrowing, further exacerbating the country’s debt burden.

Analysts argue that a more strategic approach, focusing on critical projects with high socio-economic impact, is urgently needed.

Seyi Adenuga, a Research and Policy Analyst at BudgIT, is worried about the significant discrepancies between the initial budgetary requests submitted MDAs and the additional demands made during budget defense sessions.

Adenuga noted that the prevailing inflationary pressures and high debt levels make these discrepancies particularly troubling, as they pose risks to fiscal stability.

“A budget revision that increases borrowing and worsens the debt-to-GDP ratio could push out private investment and increase the risk of inflation,” he said.

He further warned that the perceived disparities in budget allocations or poor administration could undermine public confidence in the government’s financial management, potentially fueling broader dissatisfaction.

Adenuga cautioned that an expanded budget size, if improperly managed, could exacerbate fiscal instability. Increased borrowing could strain government finances, diverting resources from critical development projects to debt servicing.

Additionally, low revenue generation may lead to persistent budget deficits unless tax collection and governance improve considerably.

Adenuga emphasized the need for alignment between the proposed budget and national priorities, such as infrastructure, healthcare, and education.

“Ignoring these sectors could hinder long-term growth and stability,” he noted.

Adenuga called for improved collaboration between MDAs and the Ministry of Budget and National Planning to ensure realistic budgeting and effective prioritization.

He advocated performance-based budgeting, linking funds to measurable outcomes to enhance accountability.

Read also: Oyetola seeks senate support, advocates increased funding for Marine, Blue Economy in 2025 budget

He said, “In order to overcome these obstacles, MDAs and the Ministry of Budget and National Planning must work together more closely to ensure that priorities are set and budgets are realistic.

“By linking funds to quantifiable results, performance-based budgeting can encourage accountability.

“While concentrating on creative income-generating techniques can support required budget increases without worsening debt levels, increasing transparency through public participation in the budget process will aid in restoring trust.

He also observed that regular budget effectiveness monitoring and assessment will also make it possible to make changes to maximise resource allocation and promote long-term economic growth.”

Muda Yusuf, an economist and former Director-General of the Lagos Chamber of Commerce and Industry, has expressed concern over the widening gap between budget proposals submitted by Ministries, Departments, and Agencies (MDAs) and the allocations approved by the National Assembly.

Yusuf noted that many MDAs have complained about grossly inadequate budget provisions, attributing the cuts to the government’s revenue constraints.

“The budget office likely adjusted the proposals based on the government’s capacity to fund the budget and the underlying revenue assumptions,” he said.

The issue is widespread, with most MDAs lamenting insufficient capital releases for projects. Yusuf revealed that some agencies received as little as 10% to 15% of their allocated funds for capital projects in the 2024 budget, adding that this has created frustration among lawmakers.

He noted, “Unfortunately, this complaint seems to have cut across practically all ministries and agencies. It’s a very big issue. And even for 2024, many of them are complaining about paucity of funds to implement most of their capital projects.

“Some only got about 10%, 15% capital releases for their capital projects. (And I could even feel the frustration of some of the senators, claiming that the budgetary exercise is looking more academic, if those budgets will not be implemented. And the level of implementation, from what we are hearing from the budget defence, is extremely very low.”

The economist warned of significant risks if the current trend continues.

“There’s a serious mismatch between the demands of MDAs and the government’s capacity to meet those demands.

While the National Assembly promises to review budgets upwards, funding those increases is another challenge, he explained.

He said, “I’m talking of implementation of the 2024 budget. Although I’m aware that has been rolled over now to June next year. But the reality is that there’s a very serious mismatch between the demands of the MDs and the capacity to fund or meet those demands.

He said eventhough the National Assembly has been promising that most of those budgets will be reviewed upwards to meet the demands of the MDAs, “meeting those ability to fund it is another.”

Yusuf outlined potential consequences, including a bloated budget with low implementation rates, higher fiscal deficits, and an increased debt burden.

“Already, debt servicing accounts for nearly one-third of the budget, which is alarming. Bigger deficits mean more borrowing, and that threatens macroeconomic stability,” he stressed.

To address these challenges, Yusuf emphasized the need to explore alternative funding sources beyond traditional revenue and debt.

He suggested partnerships with the private sector, leveraging government assets for equity investments, and selling stakes in government investments to raise funds.

His words: “We face a number of risks as a result of this situation. One is that you may have a bloated budget, which at the end of the day may not be significantly or substantially implemented. Two, you also have run the risk of incurring a much bigger fiscal deficit than we have in previous years.

“If those things in the appropriation bill have to be implemented substantially, and if you run much bigger deficits, that means increasing the level of debt. And those things have far-reaching implications for macroeconomic stability.

Read also: Steel minister seeks upward review of 2025 budget

“The debt service provision in this budget is almost one-third of the budget, that is very scary, and speaks to the need to look at other sources of funding for the budget.

“You cannot rely just on the revenue and debt to be funding the budget. We need to look at other sources.”

Yusuf suggested that government may need to explore partnerships with the private sector to fund some of those projects; leveraging on some of the government assets to get equity investments or equity funds to be able to finance some of those assets; or even divesting some of the equity stakes in some of the country’s investments to be able to raise enough funds to be able to fund the budget.

“Given the huge gap between appropriation and implementation, especially of capital projects, it’s a very, very disturbing trend and we need to do something to correct it.”

On the implications of increasing proposed spending by NASS, Sheriffeedeen Tella, a professor of economics emphasized the need to streamline the budgeting process to prevent MDAs from presenting new requests to the legislature.

He said, “If the legislature increases the allocation, it will increase the budget deficit and consequently borrowing.

“This will affect financial stability and fund management. However, there has always been public distrust of government financial management so this will not be different.”

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