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BUDGET 2013: Motion Without Movement – By Nasir Ahmad El-Rufai

The first quarter of the fiscal year has practically ended, yet Nigeria and Nigerians are yet to know how the approximately $140 million dollars the country earns daily from crude oil sales alone are being spent and how much more is going to be borrowed in our name to provide for services that we can neither see, nor feel. This hefty amount does not include daily collections for royalties, petroleum profits taxes, sales of liquefied natural gas and other condensates, income taxes, value added tax and other “internally-generated” revenues.

For an annual ritual that started about six months ago, the questions are: why is it that the Presidency and the National Assembly have been unable to reach a common ground on the federal budget? Is government blind to the urgent need for infrastructure development, social services, poverty alleviation and job creation? Is the budget really for the Nigerian people, or simply a convoluted mechanism to further defraud long suffering citizens?

To answer these posers, we will continue with deeper analysis of the 2013 budget which, from all indications is not different from preceding Jonathan-era budgets in terms of absence of positive improvements. We will look at some major sectors of the Nigerian economy and their indicative budgetary allocations, attempt to correlate how the appropriations have been designed and determine whether they are structured to bring about meaningful development to our country. It would also be important to assess if there have been any improvements over the years, drawing comparisons with model countries and possibly identify solutions where government has veered off, in the hope that policy makers would be willing to make necessary changes.

The importance of sensible and prudent budgetary allocations cannot be overemphasized because the budget in itself is an expression of public policy. It is the vehicle through which the various programs and agendas of a government come to life. It is the major economic policy instrument which indicates a government’s priorities, and is also a tool to correct anomalies and inequities within the society.

An efficient budgetary system is critical to economic growth and developing sustainable fiscal policies. On the flip side, a poorly designed budget where attention to details are neglected and figures just altered from existing templates can only exacerbate social and economic problems within the country. The effect of faulty budget choices will inevitably be felt mostly by the ordinary citizens who are at the mercy of dysfunctional government policies and facilities. Sadly, in the Nigerian context, budgeting is still based on guess work as alluded to by the Accountant General of the Federation a couple of weeks ago.

In light of the fifth Brazil, Russia, India, China and South (BRICS) summit on emerging national economies currently taking place in South Africa, one cannot help but understand why Nigeria with all our numerous resources and potentials still does not qualify as a member. These countries have succeeded in managing their resources by effective prioritization of their budgets. They have also channeled adequate financial resources to those sectors which yield the highest return on investment for their economies. These nations have pulled hundreds of millions of their citizens out of poverty into middle class status while our leaders have pushed more and more citizens into poverty – from about 57% in 2007 to a disgraceful 72% of the population by the end of 2011!

Hitting closer to home is the fact that Nigeria and BRICS’ latest entrant, South Africa, are regarded as Africa’s economic power houses. In 2011, South Africa’s Gross Domestic Product (GDP) was estimated at $368 billion while Nigeria’s was $232 billion. South Africa’s revenue sources are diversified rather than totally dependent on mining income which used to be the mainstay of its economy. South Africa has also adopted participatory budgeting on some levels which allows citizens contribute directly in deciding how their budget priorities and figures are arrived at.

Disappointingly, in comparing Nigeria with other emerging economies, the federal budget has simply been one where the same things are done over and over again while expecting different results. Let us assess the electric power sector budget to see if it is geared towards revamping what every Nigerian would agree is the most debilitated sector of the economy.

The first electricity generating plant was built in Lagos around 1898. It was not until 1950 that the Federal government passed the Electricity Corporation of Nigeria Ordinance No. 15 which resulted in the Electricity Cooperation of Nigeria (ECN); the statutory body responsible for generation, transmission, distribution and sale of electricity in Nigeria. After independence in 1962, the Niger Dams Authority (NDA) was established, its primary responsibility was to construct and maintain dams in river Niger and other areas. Ten years later (1972), the National Electric Power Authority (NEPA) was formed by a merger of ECN and NDA. NEPA was mandated to “maintain and co-ordinate an efficient and economic system of electricity supply for all part of the federation”.

Forty-one years after formalizing the structure for power management and supply in the country, have there been significant improvements? With the continuous promises from the government about power outages becoming a thing of the past, how is it that the electricity supply situation has only gotten worse? What is happening to the continuous budgetary allocations to the power sector and the numerous projects undertaken by the federal government? How is it that smaller and more impoverished nations have been able to provide steady and improved power supply while Nigerians constantly hear fables?
Most adults who have spent a great portion of their lives in Nigeria have probably never experienced constant 24hours of government-supplied electricity without breaks between. This scenario only even exists for the urban dwellers in large cities that enjoy a fair amount of electricity per day. For those who live in many of the state capitals within Nigeria, the power supply is less reasonable and it gets worse for the rural dwellers. No one is immune to the power outages so much so that the Presidential Villa and Governor’s lodges are all powered by stand-by generators.

The horrendous power supply in Nigeria has become a source of national embarrassment to say the least. During the FIFA U-17 football championship hosted by Nigeria some years back, there was an electricity outage in Kano during the game between Spain and USA. An extra 14 minutes had to be added to compensate for the embarrassing moment. Upsetting power outages have also been experienced at our international airports several times.
The importance of reliable power supply in Nigeria cannot be overemphasized. For there to be a major boost in the economy and the diversification away from dependence on oil, the power sector must be given utmost priority in budgetary spending and implementation. The benefits of having steady power supply will impact tremendously on manufacturing, SMEs which create employment, attracting foreign investment and boosting business in general.
In the 2013 budget, total allocation to the power sector is N74.26bn, a measly 1.4% of the total budget. Capital expenditure for the power sector is pegged at N70bn (about 1% of the total budget, or 3% of the total capital budget) while recurrent expenditure is N4.26bn. For a sector in dire need of rehabilitation and resuscitation, these figures are not indicative of any sense of prioritization leading to improvements anytime soon. Could it also be that successive governments are simply uninterested in fixing the power sector as majority of the people think? Or could it be that truly, the power situation is beyond human capacity and is being manipulated by ‘ghosts, witches’ and ‘wizards’? It is disheartening that a nation with a population of nearly 170 million hardly generates 4000 megawatts steadily while South Africa which has less than a third of our population (about 50 million) generates ten times more electricity (about 45,000 MW). It is not difficult to understand why South Africa surpasses Nigeria on major development indicators in spite of the latter’s potentials.

Is the government relying wholly on the private sector to shoulder the short-term investments in the sector? For the power situation in Nigeria to be turned around, government would need to invest massively in the sector. The investments needed must include federal budgetary intervention to expand and modernize the nation’s transmission infrastructure, some investments in renewable generation capacity using wind and solar, and even some hydropower stations to be placed under private sector management or ownership as soon as they are commissioned. Unless the government pragmatically pursues a mix of public and private investment in the various segments of electricity supply industry using our ample gas, hydro, coal, wind and solar resources, our nation will remain in partial darkness for at least the next five years. South Africa on its own has recorded success in its power sector by harnessing their freely available natural resource (coal) and converting it to power. It did not go about importing natural resources which it already has, or relying solely on a private sector solution. Instead, it invested in making available resources usable to the public and private sectors.

Until this government or any other government for that matter is able to tackle the power supply problem in the country, it would not be taken seriously because this is one area where it is easiest to prove that a government is indeed working for the benefit of the people. Corruption and impunity which are the major culprits for the chaos in the sector must be dealt with. A good starting point – a massive national signal – would be for all federal government facilities (including the Presidential Villa, the National Assembly and Supreme Court) to stop forthwith the use of generators to supply electricity for their day to day activities both at work and home. Such a signal will not only compel the public electricity providers to sit up and get better, but will encourage policy makers to experience some of the pain that the ordinary Nigerian feels every day. Hopefully, this will engender change in official attitudes – and perhaps raise the budget for the power sector from the pathetic amount provided for in 2013!

In the meantime, as the executive and the legislative arms of government continue to bicker over who has the power to do what, or who has the mandate to award what contract, the whole budgetary process is becoming more and more like the famous axiom: All motion, no movement. Sadly, from economic development, poverty alleviation and job creation perspectives, that, exactly, is what the 2013 budget may be turning out to be.

 

Nasir Ahmad el-Rufai

March 2013.

About zebbook

Teacher, Writer, Social Evangelist

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