Budgeting Process and Implementation Challenges

1
Budgeting Process and Implementation Challenges

• The Way Forward

2
Budget09 - Assumptions and Deliverables

• Budget Assumptions
• Benchmark Crude Oil price US45/barrel
• Oil production 2.292mbd (vulnerable)
• Deliverables
• Power Generation delivering 1.2 billion SCF of
  gas to the domestic market attainment of
  6,000MW of power by the end of 2009
• Works, Housing Urban Development completing
  the construction and rehabilitation of 3,293km of
  roads and maintenance of over 10,000km of federal
  roads every year for the next 3 years
• Health completing modernising work on three
  Teaching Hospitals in Awka, Calabar and Ife, and
  seven Specialist Hospitals in Kaduna, Lagos,
  Kano, Calabar, Enugu, Maiduguri and Abeokuta
• Security a 40 per cent reduction in crime in
  seven cities nationwide, namely Abuja, Lagos,
  Kano, Ibadan, Port Harcourt, Maiduguri and
  Onitsha.
• Food Security increasing land under cultivation
  by 5 per cent,
• optimising 220,000 hectares of irrigated land and
  
• irrigating 12,000 hectares of arable land
• increase crop yields by between 50 per cent and
  250 per cent and
• increase agricultures contribution to GDP by 5
  per cent

3
Highlights of the Budget

• Revenue Profile
• Non-Oil N1.973trn
• Oil
• Total FG Rev N2.265trn
• Expenditure
• Recurrent N1.627trn
• Capital N1.022trn
• Statutory Transfers N0.168trn
• Debt Service N0.283trn
• Total FG Exp N3.101trn
• Deficit N0.836trn
• Projected deficit amounts to 3.02 of GDP

• Breakdown of Contribution by various non-oil
  revenue sources
• Customs Excise N500 billion
• Coy Inc Tax N587 billion VAT N580 billion
• Independent Rev N305billion
• Deficit funding sources
• Outstanding signature bonuses
• Proceeds from privatisation and
• and withdrawal of some accumulated reserves that
  the government has with the African Development
  Banks Nigeria Trust Fund
• Borrowing

4
Budget Process

• Budget Institutions
• Budget preparation initiated by the Executive
  Branch
• Budget Office of the Ministry of Finance
• Ministries, Department and Agencies (MDAs)
• Federal Executive Council
• National Assembly scrutinizes and approves
  appropriation bill submitted by the Executive
  branch
• Presidential approval
• Key process Elements
• Budget Framework
• Medium Term Sector Strategies (MTSS) determines
  the objectives/goals
• Medium Term Financial Strategy (MTFSS)
  determines available resources
• Medium Term Expenditure Strategy (MTES)
  determines expenditure allocation
• Budget Call Invitation to MDAs to submit and
  defend proposals
• Planning Research Statistics Departments of
  MDAs presumed to engage in on-going collection
  and analysis of information to guide budget
  preparation and monitoring
• Draft Budget
• Legislative scrutiny and approval
• Implementation

5
The Challenge of Implementation

• A perennial feature of the budget implementation
  process in Nigeria is mixed performance
  affecting both the revenue and expenditure sides
  of the budget
• In reviewing the 2008 FG budget, HE Pres. Yar
  Adua noted
• While releases of budgetary allocation to the
  MDAs have been on course, with 100 of the
  capital vote released by the middle of November,
  actual utilisation has not kept pace with the
  releases due to a number of factors which we are
  closely looking into
• He further noted that
• overall revenue performance has been below
  expectation due to domestic oil production
  disruptions and declining international energy
  prices.......

6
Mixed Budget Performance Possible Causes
Options

• Budget Philosophy
• Nigerias national sub-national budgets are
  based on assumptions which reflect a single
  scenario
• This limits the flexibility of responsiveness to
  changing circumstances
• It thus creates uncertainty as to policy reaction
  to changing environmental circumstances
• Adoption of a multiple scenario budgeting
  framework enables a-priori articulation of
  government reaction in different circumstances

7
.......Mixed Budget Performance Possible Causes
Options

• Process Deficiencies
• Timing
• Submission of the budget proposals in the last
  two months of the year assures that the budget
  cannot be ready for implementation until the end
  of the 1st qtr of the fiscal year
• A law which demands that the budget proposals are
  submitted to the National Assembly at the
  beginning of the 4th qtr of the year enables
  scrutiny by the legislative arm and preparation
  for implementation both pubic and private sector
• Realism of underlying assumptions
• It is already clear that there is a high
  likelihood of the underlying assumptions in the
  2009 budget not being met

8
Mixed Budget Performance Possible Causes
Options

• Preparation deficiencies
• It is not clear whether the capacity (human, data
  and technology) available to the various MDAs in
  budget preparation is robust enough to ensure
  that the proposals are consistent and internally
  coherent
• A programme of continuous review and
  strengthening of the capacity of Planning,
  Research and Statistics units of MDAs would
  improve the proposals submitted
• Oversight capacity
• The National Assembly (the legislative arm of
  government) is arguably the least developed of
  the arms of government.
• This limitation circumscribes its ability to
  improve the proposals forwarded to it
• As with the Executive branch, the capacity of the
  Appropriation Committees must continually be
  improved