The low rate of budget implementation by the federal government of Nigeria over time has constrained the economic growth more than it has been a catalyst.
Over the first nine months of 2017, federal retained revenue surged to N3.2 trillion, which is 49.5 percent higher than actual revenue in 9M 16 (N2.1 trillion).
However, the improved revenue picture is not in tandem with the budget implementation as annualized budget implementation is at 74 percent.
The MD, Cowry Asset Management Limited, Johnson Chukwu, is of the opinion that the failure of the federal government to fully implement the national budget particularly the capital expenditure budget has been a limiting factor to Nigeria’s economic growth.
“The federal budget is supposed to serve as a stimulus by creating economic activities through public works. Government expenditure on capital projects avail contractors and other service providers cash with which they employ labour who upon getting paid wages and salaries demand for other goods and services thereby stimulating production and further employment,” Chukwu told BusinessDay by email.
According to data compiled from Budgit, a Nigerian civic startup, the budget implementation at the federal level of Africa most populous nation has commenced officially in January only four times in the past 18 years, from 2000 – 2017. The budget implementation circles were completed in 2001, 2007, 2009 and 2013.
Nigeria budget implementation rate declined for two consecutive years, reducing 15 percentage points from 94 percent in 2015 to 79 percent in 2016, and further slummed by 5 percentage points to 74 percent in 2017 compared to the previous year, According to ARM Securities Limited.
Meanwhile, Nigeria has been declining in its commitment to transparency, timely release and contents of budget documents, as compiled from a transparency index report by International Budget Partnership (IBP), released January 30, 2018.
Although, Africa’s largest exporter of crude oil recorded an increase in its revenue inflow, following its emergence from five consecutive contractions in the second quarter of 2017 due to the increase in oil prices and production, a major source of the nation’s revenue.
This led to increase in the nation’s foreign reserve to over $345million, as compiled from Trading Economics. The Investors’ and Exporters’ (I&E) FX window also recorded an all time high in the volume of transactions at approximately $26billion in 2017.
But the nation’s economic growth was recorded in the same period when the budget implementation rate reached one of its worse levels.
According to the budget transparency index report, Nigeria scored 20 out of 100 in 2006, in 2008 it scored 19 while in 2010, 2015 and 2017 it had a record score of 18, 24 and 17 respectively.
“Government capital budget if implemented would help the economy narrow the huge infrastructure deficit thereby making the economy more efficient and competitive. This in turn would encourage investment by the Private sector which contributes to economic growth,” Chukwu added.
Ayo Akinwumi Head of research FSDH said that “The major implication of a distortion in the Budget cycle process is that development will be slowed down because the capital expenditure will hardly be implemented and without the capital expenditure budget, you cannot improve the ease of doing business in the country and this will result in a low level of productivity as the economic environment won’t be attracting to investors as a result of shortage in infrastructure”.