His Excellency Muhammadu Buhari presenting the 2021 budget to the National Assembly. Wikimedia Commons
His Excellency Muhammadu Buhari presenting the 2021 budget to the National Assembly. Wikimedia Commons

 

By Abel Akeni, Vahyala Kwaga, and Iniobong Usen, BudgIT, Nigeria

 

Every year, anticipation accompanies the Federal Government’s annual budget presentation to Nigeria’s National Assembly. The budget outlines the government’s promises and spending plans to improve citizens’ quality of life. There is much to be done. With a Human Development Index score of 0.539 in 2019, Nigeria is positioned in the low human development category, ranking 161 out of 189 countries. According to Nigeria’s National Development Plan (2021-2025), universal health coverage is only 5%, life expectancy is 53.4 years, about 10.5m children do not attend school, and 61% of Nigerians do not have access to basic sanitation services. In addition, an estimated 88.4m people live in extreme poverty.

 

In the 2021 budget, proposed as the country began to recover from economic shocks related to the COVID-19 pandemic, the Federal Government promised to invest N13.6trn in the “Budget of Economic Recovery”. This built on the N10.8trn investment promised in 2020 in the “Budget of Economic Resilience”, which included a N500bn spending plan for COVID-19 interventions.

 

The budget preparation and presentation is an annual ritual required by Nigeria’s constitution. However, to what extent do the appropriated funds positively impact the life of the average Nigerian? Have the successive annual budgets improved service delivery in critical social sectors like health, education, and WASH (water, sanitation, and hygiene)?

 

It isn’t all gloomy. The Nigerian government has made attempts in recent times to improve transparency and accountability of public resources. At the federal level, it launched a Financial Transparency Policy to improve governance and equip citizens with tools to track federal government expenditure and report financial wrongdoing. At the subnational level, it launched the States Fiscal Transparency Accountability and Sustainability Program for Results. Despite these laudable initiatives, conspicuous challenges remain.

 

For example, what happened to the N56.6bn budgetary allocations for the government’s famous “Jobs and Food for All” program launched in 2020? What about the N75bn Survival Fund for micro, small, and medium-scale enterprises launched in the same year to help entrepreneurs survive the COVID-19 crisis?

 

Nigeria federal budget breakdown

Source: BudgIT, 2022

 

Many Nigerians assume that the funds allocated in the annual budget will be spent; but this is not necessarily true. There is often a sizable gap between what the government’s annual budget promises on paper and the actual funds made available for spending; larger gaps mean weaker credibility and reliability of the budget.

 

Figure 1: Five-year budget expenditure trend

Figure 1: Five-year budget expenditure trend Nigeria

Source: BudgIT, 2022

 

The public discussion about government budgets in Nigeria focuses on corruption, for example the risks of embezzlement of public funds by civil and public servants, unscrupulous contractors, and other vested interests. These are valid concerns, and yet, weak budget credibility can also undermine service delivery. Underspending or overestimating budgets starves critical projects of much-needed funds, resulting in abandoned public projects, poor service delivery, and inadequate social infrastructure.

 

Why does a budget credibility chasm exist in Nigeria? When these challenges persist year after year, does this risk turning the annual budget into an empty promise on paper? Some of the reasons for why we see continued weak credibility can be found in what happens between the time the budget is approved, and funds are made available for project implementation. Prior to starting any project, the implementing ministries, departments, and agencies (MDAs) make requests for cash to be released in line with the budget approval. After approving the “cash release” for each project, the government provides funds in cash or an authority to incur expenditure (AIE) to embark on the project. Once an implementing agency has either the cash or AIE for a project, this starts the procurement process and, eventually, results in “utilization” or actual disbursed cash. Administrative, political, and technical bottlenecks during the stages of cash release and utilization can reduce the amount of funding that projects receive and, ultimately, lead to service delivery failures.

 

Budget data from 2021 for six sectors affected by the COVID-19 pandemic (see figure 2 below) shows that halfway through the year, the government was already falling behind on cash release and utilization.

 

Figure 2: Q2 2021 capital budget implementation, as a percentage of total capital budget allocation for 2021

Q2 2021 capital budget implementation, as a percentage of total capital budget allocation for 2021 Nigeria

Source: Page 39, Q2 2021 Budget Implementation Report

 

A well-researched cause for low cash releases to MDAs is that the government does not collect enough revenue each year to finance planned expenditures. Revenue targets are regularly missed because of over-ambitious and unrealistic revenue projections. Low revenues lead to low cash releases, undermining project and program implementation. As with previous years, the Federal Government is projecting to raise N10.7trn in revenues in 2022, despite never collecting more than N6trn in years past.

 

Figure 3: Five-year budget revenue trend

Five-year budget revenue trend Nigeria

Source: BudgIT, 2022

 

Even when funds are available, government agencies, including subnational governments, still cannot fully implement their budgets. For example, despite exceeding its 2020 revenue target by 0.07%, Anambra State underspent its budget to the tune of N4.64bn (4% of the budget) in the same year. Less is known about the causes of these bottlenecks at the federal and sub-national levels, and more work needs to be done to identify and address the causes of these deviations.

 

One step the Federal Government can take is to improve budget data availability and explain the low utilization of released public funds. Disaggregated information on the spending from the N500bn COVID-19 Intervention Fund is neither available on the Budget Office’s website nor in reports from the Office of the Accountant General or Open Treasury websites. Furthermore, the Open Treasury portal, which houses data on government expenditures, has experienced persistent downtime since November 2020 to date.

 

Audit institutions can also investigate and report on budget credibility issues. However, the COVID-19 Audit Report, promised as a condition for the $3.4bn loan from the IMF, has not been made public. An interim report on COVID-19 expenditure presented to the National Assembly in January 2021 has not been made public. Available information suggests that N288bn, representing 57.6% of the N500bn COVID-19 Intervention fund, was released.

 

To ensure value for money, the government needs to enforce existing laws on fiscal responsibility and discipline. Likewise, accountability actors, including citizens, civil society, and the media must continue to demand improved transparency and accountability from the government on the deployment of scarce public resources.