The Fiscal Responsibility Commission set up under the Fiscal Responsibility Act of 2007 recently released its report for the year 2010. The report is in compliance with Section 10 of the FRA, which mandates the commission to submit to the National Assembly, not later than June 30 in each financial year, a report of its activities including all cases of contravention investigated during the preceding financial year and a copy of its audited accounts. The report covered the mandate of the commission including monitoring activities, the Medium Term Expenditure Framework and annual budgets, debt, indebtedness and borrowing, budgetary planning of corporations, transparency and accountability, research and dissemination of standards and challenges for the future, etc. However, the report contains uncontroverted evidence, which shows why Nigerias budgeting system is still in the woods. Indeed, it will be very difficult for the country to develop without cleaning up its budgeting system.Part of the foundation for budget failure is the timing of its presentation and approval. In the years 2005, 2006, 2007, 2008, 2009 and 2010, the budgets were presented to the National Assembly on October 12, December 6, October 11, November 8, December 2 and November 23 of the preceding year respectively. Incidentally, the presidential signing of the Appropriation Bills to become law for the years 2005, 2006, 2008, 2009 and 2010 took place on April 12, February 22, April 11, March 3 and April of the budget years respectively. There was only one exception, the 2007 budget, which was signed into law on December 22, 2006. On the average, this shows that Appropriation Bills never become law until after the end of the first quarter of each financial.The second leg of the failure was the gulf between figures approved in the annual budget and the MTEF, which is supposed to guide the budget. In the 2010 budget, for instance, the following variance were recorded; 134.6 per cent on projected GDP growth rate; 10.9 per cent on the inflation rate; 14 per cent on the benchmark price of crude oil per barrel; 66.3 per cent on total oil revenue; 18.6 per cent on non-oil revenue; 30.5 per cent on federally collectible revenue; 22.4 per cent on the Federal Governments estimated revenue; 30.7 per cent on its expenditure and 47.8 per cent on the extent of the deficit.The report also noted the wide variance between revenue projections and targets for Ministries, Departments and Agencies and what they eventually remit to treasury and the shortfall came up to an incredible 98.11 per cent.The third leg of the failure documented in the report is that contrary to the spirit of Section 16 of the constitution, both the MTEF and annual budget have been silent on employment creation. The report was right on target when it stated that the 7-Point Agenda mantra was so loud that the MTEF and budget could not hear the melancholic cries of the unemployed. It seems that if non-governmental organisations were consulted in the course of preparing the MTEF, some measures would have been recommended or taken against unemployment. Again, the report rightly states that 2010 witnessed virements not known to the law when monies were withdrawn from health and education sub-heads of account to supplement the budget of the Federal Capital Territory. Virements can only be made from one sub-head under the same head of account to another sub-head under the same account. Quarterly budget reporting by the Budget Office of the Federation came five months, two and 1/2 months, four months and five months behind schedule in the first, second, third and fourth quarters respectively. Total capital expenditure for the year came up to 50.60 per cent of the approved capital budget.A very interesting and fourth aspect of the report is the elucidation of the debt issue. It noted that Nigerias domestic debt increased by 21 per cent in six months between June and December 2010 and the total national debt increased 17.87 per cent in the same six-month period. Essentially, debt was growing faster than revenue; debt to recurrent revenue of 269.86 per cent was higher than the prescribed threshold of 250 per cent and the projected ratio of 129.4 per cent prescribed by the Debt Management Office. Thus, while recurrent revenue grew by 3.13 per cent in 2010, the debt grew over 17 per cent in the last six months of 2010. The ratio of debt service to revenue in 2010 was 21.40 per cent, which is substantially higher than the 11.7 per cent projected by the DMO. However, this is lower than the 30 per cent threshold prescribed by international standards. It also noted that debt was growing faster than the GDP in 2010, which caused a lot of stress on the economy manifesting as high interest rates, inflation, crowding out of the private sector and mounting deficits. The commission states that reliance on Debt-to-GDP ratio of 40 per cent as threshold for determining debt sustainability should be used with caution because Nigeria went bankrupt in 2005 when its Debt to GDP ratio was about 28 per cent.Through the efforts of the Commission, over N21.6bn and N36.7bn were paid over to the treasury as operating surplus of scheduled corporations in the years 2009 and 2010, however, there is still reluctance on the part of majority of the scheduled corporations to cooperate with the FRC and pay over their surplus to the treasury. Notable defaulters include the Nigerian National Petroleum Corporation, Nigeria Customs Service, Bureau of Public Enterprises and Nigerian Maritime and Safety Agency.What are the lessons from this report and how can it help to improve the budgetary and fiscal system' The first is that things need to be done properly and contextualised for the growth of the economy and the benefit of the people. Budgets must be submitted on time by the executive to the legislature. The current attempt to amend the 1999 Constitution to fix a definite time-frame is a step in the right direction and should be pursued to its logical conclusion. Budgets should be submitted before the end of August every year. The MTEF undergirding the budget of every year must be the product of genuine and popular consultation. The current MTEF before the National Assembly did not benefit from any such consultation and appeared to be an afterthought by the Ministry of Finance to satisfy all righteousness going by its scanty nature. Employment creation should be mainstreamed in the budget and economic policy formulation and implementation. It should not be the type that deposits N50bn in the Presidency for an imaginary job creation scheme and part implementation activities are launched in October for a budget which expires in December! Employment generation is a practical thing that runs through trade, investment, education, procurement and other policies of government.The DMO should reconsider the methodologies and frameworks it employs in the yearly Debt Sustainability Analysis. Nigerians are not interested in creative ways to justify borrowing monies that do not impact on their lives. We need to rein in the debts. The Budget Office of the Federation has shown enough contempt for the provisions requiring it to report on budget implementation on a quarterly basis. For the year 2011, there is no single budget implementation report. It is time the legislature took concrete steps to call the Budget Office to order.Onyekpere is the Lead Director, Centre for Social Justice. He can be reached on censoj@gmail.com or 08127235995.
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