The National Assembly and the Presidency are bickering over what to include in the 2016 budget and limits over their powers of appropriation. The diatribe could have been avoided if the new government of President Muhammadu Buhari understood and followed an extant law called the Fiscal Responsibility Act. Ogbuagu explains how a Medium Term Expenditure Framework (MTEF), a feature of the Act, would have saved the day and brought the warring parties to an agreement long before the 2016 budget arrived the Assembly.
As originally published on my blog in 2016
There are three factors that account for the mess that Budget 2016 is turning out to be as the Presidency and the National Assembly bicker over it. The first culprit is late appointment of cabinet ministers and, in particular, those responsible for budget preparation – Finance and National Planning. Secondly, it is near impossible to obey the law on Fiscal Responsibility within the time-frame left for the new administration to prepare and present Budget 2016. Thirdly and finally, the President inexplicably gave both the National Planning and the Finance Ministryportfolios to inexperience persons which created room for creative “padding” by smart civil servants, the major reason for delay in passing the 2016 appropriation bill into law.
Of the three factors, the elephant in the room is government’s total disregard for the fiscal responsibility law.
If government had paid attention to this law, it would have considered it expedient to simply reproduce and adjust President Jonathan’s 2015 budget to align with its “change” agenda. Doing this would have allowed government to buy time and use it to properly prepare a mandatory 3-year medium term expenditure framework (MTEF) document that would have made the preparation and presentation of APC’s “change” budget a breeze for years 2017, 2018 and 2019. What is this medium term framework document and why is it so important?
MTEF is a 3-year revenue and spending plan of government coordinated and prepared by the Minister of Finance. The document has five sections – macro-economic projections, a fiscal strategy paper, an expenditure and revenue framework, a consolidated debt statement, and a statement on contingent liabilities. Let’s break it down.
MTEF is a three-year projection of how the Nigerian economy will look, based on an understanding of what is happening in the world, the global economic outlook. This understanding makes it possible for government to make intelligent assumptions and projections that will be used to analyse performance of its development plan over a three-year period. In preparing the document, government is forced to think about and determine its medium term financial objectives, such as policies that will govern revenue, recurrent and debt expenditure, borrowings and liabilities, and other socioeconomic development priorities.
To further break it down, MTEF preparation makes it possible for government to project what it will earn and what it will spend for the next three years. Government uses the exercise to also collate consolidated federal and state governments debts. Because the exercise exposes the total indebtedness of the nation, government is forced to consider the impact of the debts and proposes measures to contain or reduce them. The Framework also exposes an item that is always overlooked but which becomes an issue in the budgetary cycle everytime – the issue of contingencies and extra-official activities that are usually added and end up bloating government spending. Now, do we see why is this document important? Anyway, the major reason why the document is important is that, in the course of its preparation and approval, the executive and legislature are forced to come together and agree, before hand, on what should constitute a three-year development agenda for the nation. This will become clearer when we understand the process for its preparation.
The process for creating the MTEF begins when the Minister of Finance requests for spending and income projections from Ministries, departments and agencies (MDAs). The resulting MDA submissions are compiled and presented to the Federal Executive Council (FEC) for deliberation and endorsement. This FEC-endorsed copy is thereafter presented to the National Assembly. It is at this point that the National Assembly enters a series of discussions and negotiations with the executive on what can be added to or subtracted (including “constituency projects”) from the plan. Pork marking is allowed at this time and can be done seamlessly. Once the parties come to an agreement, the National Assembly gives a “final” stamp of approval to the MTEF plan document, which is then published in the government gazette strictly in accordance with legislative approval. No one, not even the President, is not allowed by law to adjust or alter the approval by the legislature. There are however two exceptions that allow the president to want to alter it: where there are manifest errors found in it; and where financial assumptions on which projections were based have changed and will make implementation impracticable.
The MTEF is therefore published as a joint executive-legislature development plan document that makes budgeting for the next three years very easy – since everything that will feature in the yearly appropriations over a three-year period are derived from it. The Fiscal Responsibility Act is a great piece of legislation that any responsible and forward-looking governments should be happy to adopt. It is a neat way to reduce, if not eliminate, constant bickering between executive and legislature over limits of their various powers of appropriation. MTEF not only makes it possible for government to determine aggregate expenditure ceiling but also limits the National Assembly on what it can add to appropriation estimates in any particular year; the Assembly will not be able to tamper with expenditure in the budget outside what has been provided for in the MTEF aggregate expenditure ceiling, plus what is presented as deficit.
I heard one of the spokespersons in the National Assembly say at one point during the blame-trading that both the MTEF and Budget 2016 appropriation bill arrived at the same time in the National Assembly. If this were true, it amounts to needless breach of the Fiscal Responsibility Act of 2007. It also shows how the new government is struggling to surmount the learning curve.
What to do? The mess is already here with us and the National Assembly being what it is, the heat of the ongoing diatribe will not abate unless one of the parties pull back. My suggestion is that the Presidency swallows its pride and does what it can to implement the 2016 budget while properly executing an MTEF document that will serve for the remaining three years of the Buhari Presidency – in accordance with the law. Should government fails to do this, the administration risks sustaining its contrived and self-inflicted controversies until the next budget cycle suddenly creeps in and guarantees further fumbling.
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