Bisi Ojediran
7 July 2009
analysis
Lagos — For a people desperate for improved government delivery of its promises to better their lot, an announcement of a low 20.7 per cent utilization of capital funds provided by the 2009 budget for the first quarter of the year is bad news.
It is even bad news for the government also, but it shows one key strength of the budget in a democracy. Transparency! The First Quarter Budget Implementation Report recently released by the Finance Ministry in line with Section 30 of the Fiscal Responsibility Act 2007 is rich with information. It had been presented to the Federal Executive Council on June 17, and the full report is available on the Federal Ministry of Finance website.
Strong on budget promises and execution, one of the attractions of the report for me is that it provides an opportunity to verify claims made by some MDAs. I just needed to put in a call to Bode, my friend in Ogbomosho who visits me often, to confirm claims made over the Ibadan-Ilorin road.
The report says under the dualisation of the Ibadan-Ilorin Road, Section III, that, "Messrs. R.C.C. Nigeria Limited was contracted to execute this project at a total cost of N15.85 billion. According to information from the Ministry, the sum of N692.474 million was paid to the contractor on this project in the first quarter bringing the total amount paid to date to N14.76 billion. This project was completed in the first quarter with two per cent of work done during the quarter".
Looking back, I wonder how I survived that very dangerous road, with sharp bends and narrow bridges, I travelled on almost every week for about one year.
Bode's confirmation is particularly useful here because according to the report, "the assessment of MDAs' level of implementation of their projects and programmes in the quarter is based strictly on responses received from them".
The report, however, assures that, "physical verification and inspection of the various projects is reserved till the end of the fiscal year when the 2009 Budget would have been fully implemented".
Indeed the section of the report, a survey of seven key MDAs, from where I lifted the claim on the Ibadan-Ilorin road should interest any reader. The bottom line of a budget is its execution, which impacts the people. In the next report, it would be nice to have a survey of all the MDAs.
We had noted on this page that the N3.10 trillion 2009 budget was handicapped at birth and President Umaru Yar' Adua acknowledged that much. He said that he may not be able to implement the 2009 budget up to 100 percent because of dwindling revenue.
Indeed, he signed the 2009 federal budget into law on March 10 with reservations about the faulty assumptions on which the budget was based. The assumptions included those on oil prices and production shortfalls, a crashed stock market and the depreciation of the Naira. The budget had itself been stuck at the National Assembly for about three months.
As envisaged, there was a shortfall in revenue. According to the implementation report, "Revenue from both oil and non-oil sources were below projections in the first quarter. The aggregate revenue available for distribution to the three tiers of government fell short of projected estimate of N895.85 billion by N241.30 billion (or 27 per cent).
"At the Federal Government Budget level, oil revenue underperformed by N52.97 billion (or 21.86 per cent) compared to the projected level of N242.27 billion. Similarly, non-oil tax revenue underperformed by N53.60 billion compared to the projected level of N144.20 billion while other revenues fell short by N75.67 billion compared to projected aggregate of N179.83 billion. For the first quarter of 2009, the total revenue available for implementation of the Federal Government Budget, (including the budgeted unspent balance of N75 billion for the first quarter of 2009 from the 2008 financial year), consequently fell short of its budgeted estimate of N566.30 billion by N182.24 billion (or 32.18 per cent).
"To manage this position, the unspent balance was further drawn down to N221.43 billion bringing the shortfall to N35.82 billion (or 6.32 per cent). This development shows clearly the challenges of implementing the 2009 Budget in the first quarter".
But to some people, the real issue has been the poor execution of the budget. The House of Representatives has complained about it, but the Presidency has been consistent about its position on the challenges facing the budget. A day after the House condemned what it called the selective implementation of the budget by the Executive, the President responded by pointing out revenue projections and deficit financing as challenges facing the optimal implementation of the budget. He also said some projects added to the budget by the legislature have created a problem of implementation as they were not properly designed. From recent media report, the disagreement between the House and the Executive is resurfacing. We just hope the issue is not one of constituency projects.
Citing a similar situation last year when out of the N785.4 billion voted for capital projects in the 2008 budget, only N178.4 billion or 22.71 per cent was spent, some people are still uncomfortable about the pace of budget execution. They seem to have a point, considering the urgent need to fix national infrastructure and provide other basic needs. Indeed more than any budget, this one which allocates about 93.2 percent of the capital vote to the key priority sectors central to Government's Seven-Point Agenda, was fashioned to address such needs.
Some more bad news in the first quarter: The report also admitted weaknesses in the rate of inflation and the exchange rate of the naira. External reserve levels dropped off to $47.08 billion by the end of March 2009. However, the overall economic growth for the quarter was reported as relatively robust as compared to the same period in 2008.
I have found the report to be fair enough, so rather than overly lament the budget's poor implementation during the first quarter, I spent days and nights asking questions. These are my findings, some of which are indeed news breaks:
The poor budget execution in the first quarter was partly due to the usual time lag between the release of first capital votes and application of the money, which involves setting up transparent contracts in circumstances of a rather slow procurement process of the public service bureaucracy. It was towards a speedy, yet integrity compliant procurement process to improve the implementation of the budget, that the Budget Office organized a two-day workshop on budget implementation, monitoring and evaluation at the end of March 2009. The workshop even adopted some consequent management measures for MDA officials and banks responsible for failure to keep to set timelines.
Now, rather than leaving the MDAs to assign just any personnel to the process, government is building a cadre of procurement professionals to close the gap.
The Budget Office has developed a monitoring and evaluation system using special electronic templates to systematically track progress on the outputs and outcomes delivered by the MDAs. The templates were developed by the Ministry of Finance, the National Planning Ministry and the office of the Chief Economic Adviser.
Worried by accusation of non-performance, President Yar' Adua has taken personal interest in the implementation of the budget. He is paying closer attention to monitoring and tracking, and convenes meetings at on-going basis. Also, since last month, cabinet members have been taking turns to make presentations on budget execution in a special initiative to ensure delivery. The exercise will run until August this year.
There is also a peer review and support mechanism for the ministries to address generic issues among others.
Releases are now prioritized in favour of the completion of on-going projects, and indeed, the Federal Executive Council has endorsed timelines for the award of contracts and project completion.
As a result of these concerns and measures, MDAs' utilization of capital funds in April improved from an average of 20.68 percent in the first quarter to an average of 52.72 percent. It further improved last month.
But to me, as to many Nigerians, these would remain mere figures until clear bottom lines like regular power supply and improved transportation network are delivered. Electricity supply seems to have worsened and many people find it difficult to pardon government for the state of the Benin-Ore road. That is inspite of ongoing constraints like the quality of the public service and the level of bureaucracy and the fact that Nigeria is not benefitting much from the rising oil prices.
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