As the 2024 budget preparation commences, the grossly inadequate revenue accruing to the government and the high cost of governance, among others, must be considered in formulating the financial plan, writes JOSEPH INOKOTONG.

The Budget Office of the Federation has begun preparations for the 2024 budget by training Ministries, Departments and Agencies (MDAs) of the government on the nitty-gritty of budget preparation. The training focused essentially on the Government Integrated Financial Management Information System Budget Preparation Sub-System (GIFMIS/BPS) for all MDAs.

The crucial training is aimed at enhancing the collective capacity of MDAs to effectively use the Budget Preparation Sub-System of the GIFMIS in the budget preparation process. It reaffirms the shared commitment to advancing the efficiency and transparency of the country’s budgetary processes and underscores the determination to enhance fiscal discipline and accountability in the management of public funds.

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As Mr Ben Akabueze, Director-General of the Budget Office of the Federation, told the participants: “It is imperative that those saddled with the responsibility of preparing the budget recognise the significance of their roles in aligning their activities with the aspirations of the Nigerian people and the development agenda of the current administration. President Bola Tinubu’s administration is firm in its commitment to fulfilling its promises to the citizens. Therefore, the MDAs’ focus should remain steadfast on using the budget as a veritable tool for delivering the government’s commitment to all Nigerians. To achieve this, collaboration and synergy between the various MDAs is paramount.

“We must harmonise our sectoral policies and programmes with the overarching National Development Plan 2021- 2025 and the specific programmes of this administration. We must ensure that our efforts are synchronised, resources are optimally utilised and the impact of our collective work resonates across the nation. Furthermore, it is essential to note that President Tinubu’s Agenda sets the stage for a transformative era in our great nation. This agenda outlines the framework for sustainably achieving inclusive socioeconomic growth, infrastructural development, and the overall wellbeing of our people. It is, therefore, incumbent upon us to integrate the tenets of this agenda into our respective roles and responsibilities.”

The GIFMIS Budget Preparation Subsystem training programme serves as a platform to equip the MDAs with the tools and knowledge required to facilitate their budgetary processes. The technology-driven system is expected to enhance their efficiency, minimise bottlenecks and enhance accountability.

Based on this, the need to share insights and seize the opportunity to foster collaboration among the MDAs is much desired. The power of information technology should be harnessed to build more transparent, accountable and effective government machinery.

The view of the Director-General of the Budget Office of the Federation is very instructive when he said, “MDAs are enjoined to study the Budget Call Circular in detail and avoid making mistakes that should ordinarily be avoided if they had complied with the relevant sections of the call circular. To this end, emphasis will be made in one of the modules this year on key items and sections to note in the 2024 FGN Budget Call Circular. For the avoidance of doubt, we have the BOF Helpdesk running at full capacity currently to take care of all inquiries that budget officers may have in the course of the preparation of their respective budgets.”

The FGN 2024 Budget Framework was prepared against the backdrop of the weeks of democratic transition and it reflects the new direction of the present administration in addressing key fiscal challenges and policy issues. Factors impacting the medium-term fiscal outlook include slow global growth and supply-chain disruptions; rising geopolitical tensions and unabating Russia and Ukraine war, with severe implications on global food and energy prices; grossly inadequate domestic resource mobilisation and challenging domestic macroeconomic and business environment.

Other factors include the negative impact of pervasive and persisting insecurity on the domestic economy; concerns over debt sustainability and need for strategic debt management; persistent inflationary pressures in most economies, prompting monetary tightening in advanced economies with the inherent negative impact on capital flows to developing/emerging market economies.

The 2024 Budget Call Circular sets out the requirements and instructions that must be satisfied and followed in the preparation of the 2024 Federal Government of Nigeria (FGN) budget proposal, as such the preparation of the budget estimates for MDAs should take into consideration the policies/strategies contained in the Draft 2024–2026 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF&FSP) which is the FGN’s pre-budget statement.

 

In preparing the 2024 budget, the budget officers must take cognisance of the performance of the 2023 Appropriation Act. For example, as of June 2023, FGN’s retained revenue was N4.06 trillion, indicating 73.5 percent of the pro-rata target of N5.52 trillion. FGN’s share of oil revenues was N604.10 billion, representing 54.2 percent performance. Non-oil tax revenues totalled N1.14 trillion, showing a 92.7 percent performance. CIT and VAT collections were N592.68 billion and N195.08 billion, indicating 127 percent and 101.8 percent of respective targets. Customs collections made up of import duties, excise, fees, and federation account special levies, recorded N306.18 billion vs. N474.80 billion budget, representing 64.5 percent.

Other revenues amounted to N2.14 trillion, of which independent revenue was N963.25 billion, showing 60.8 percent, Government Owned Enterprises (GOEs) recorded N354.77 billion, indicating a mere 29.3 percent.

In terms of deficit performance, the fiscal deficit for 2023 is estimated at N10.78 trillion. As of June 2023, a N3.70 trillion deficit was incurred as against a prorated sum of N5.39 trillion (N1.70 trillion below the pro-rata level).

However, multi-lateral-bilateral debt drawdowns are yet to be accounted for.

The challenge for 2023 budget implementation has been grossly inadequate revenue accruing to the government. Low revenues are the key risk to fiscal and debt sustainability and oil revenues have continued to be low, despite higher oil prices in the period under review.

The low revenue is compounded by the rising cost of governance and low spending efficiency. A direct result of Nigeria’s high cost of governance is that less than 30 percent of FGN’s resources have been available to fund capital projects since 2017 when the government set itself a minimum target of 30 percent. Even then, a significant part of this is for “administrative capital” expenditure rather than core capital expenditure.

Perhaps this must have informed the World Bank’s pronouncement that it would 300 years to close Nigeria’s infrastructure gap at the current rate of capital spending.

Taking this into consideration, the BOF has warned that “Further to Part 4, Section 4.1.1 of the 2024 FGN Budget Call Circular; MDAs are required to work within and not exceed their 2023 capital and overhead ceilings for the purpose of preparing their 2024 budget submissions. Disaggregated these sectoral ceilings to ceilings for individual MDAs have been issued subsequently. The capital budget ceilings reflect FGN’s commitment to the effective implementation of the Medium-Term National Development Plan (MTNDP) 2021 – 2025.”

In order to remedy the huge revenue gap, it is advisable for MDAs to collaborate through Public Private Partnerships (PPPs) and explore it to finance projects that are commercially viable. Another way is to leverage multi-lateral financing for infrastructure developments and advance projects that align with the priorities of donors and philanthropic partners.

Under the prevailing situation, it is important to uphold transparency and accountability as the watchword. MDAs are advised to upload their respective budgets on their website once Mr President transmits to the National Assembly (NASS). There is also the need for collaboration with the Independent Corrupt Practices and Other Related Offences Commission (ICPC) to curb budgetary abuses, standardisation of MDAs’ capital item descriptions.

MDAs are enjoined to accord priority to ongoing projects, especially those nearing completion that fit into the government’s current priorities

Global Positioning System (GPS) coordinates of the location of ALL projects above N150m in value.

The Medium Term Fiscal Framework shows that there are continuing global challenges. Overall, fiscal risks are somewhat elevated for Nigeria due to persisting economic weaknesses and slower-than-expected recovery. The weaker-than-expected economic performance threatens the ambitious revenue growth targets, as seen in the 2023 performance up to June. Non-oil revenue performance has been impressive and heading in the right direction. Efforts should be sustained in this regard.

 

 

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