As President Umaru Yar’Adua prepares to announce the 2008 budget, his government is hinting that it plans to spend existing departmental allocations more effectively, rather than to simply spend more money.

 

Nigerians are therefore likely to see a lot of cash that was unused in the 2007 federal budget being ploughed back into priority sectors of the economy next year.

 

This approach is one of several reforms that President Umaru Yar’Adua has introduced to the management of the nation’s finances.

 

His government has also hinted that it plans to spend Nigeria’s windfall income from record oil prices much more prudently and to reserve some of it for building up the nation’s vital infrastructure.

 

The Finance Ministry has already identified four critical sectors that are likely to receive more money in the 2008 federal budget: agriculture, education, power, and security.

 

According to Remi Babalola, the Minister of State for Finance, these four sectors will receive 60% of capital spending on new Federal Government projects next year.

 

Yar’Adua also identified three other priority sectors in his election campaign earlier this year: wealth creation and employment, land reform, and mass transportation.

 

Babalola said the government was likely to start by focusing initially in some of these key areas, rather than tackling all of them at once.

 

 “You cannot take the seven-point agenda at the same time. You have to prioritize. It does not mean you are not going to put money in the other sectors,” he told journalists recently.

 

Although the previous government of Olusegun Obasanjo made loud noises about the need to make Nigeria self-sufficient in food and put every Nigerian child through primary school, this rhetoric was not matched by heavy government investment in agriculture and education.

 

Figures from the Ministry of Finance indicate that during the period 2000-2005, agriculture received an average of two percent of capital expenditure, while education received five percent.

 

President Yar’Adua has said bluntly that allocations in previous budgets which are not utilized will be recycled and used in subsequent periods.

 

He applied this principle in the amended 2007 budget and supplementary budget for 2007, which were presented to the National Assembly in September.

 

Together, these two bills sliced capital expenditure in some areas, where the government was under-spent, and redirected the cash to some of Yar’Adua’s priority areas.

 

There was virtually no increase in overall government spending. The president simply mopped up puddles of unspent cash and slopped it into new buckets.

 

This new caution marked a radical departure from the free-spending habits of the Obasanjo administration. Year after year, the previous president took advantage of rising oil revenues to top up regular government spending with a supplementary budget towards the end of each year.

 

However, less attention was paid to ensuring that government money was spent properly on the purposes for which it was allocated.

 

Federal Government figures show that the level of budget implementation was as low as 36% in 2003.

 

“Under the previous government, we know that in some cases money budgeted was not released and when released it was not spent,” said Owei Lakemfa, spokesman for the Nigeria Labour Congress trade union movement.

 

Now, perhaps, there is a ray of hope that budget implementation will improve.

 

Nigeria’s inefficient budget management is traceable partly to the nation’s oil rapidly rising oil revenues that have swelled the public purse.

 

The international price of crude oil hit a low of US$11 per barrel shortly before Obasanjo came to power in 1999. But since then, it has leapt eight-fold to a record of US$90.

 

Obasanjo therefore found it easy to persuade the National Assembly to vote more and more money for government spending each year. And Nigerian lawmakers did not scrutinize too carefully where all this bonanza of cash was going.

 

Yar’Adua now appears to be putting the brakes on blind spending by government. At the same time, he is demanding that individual ministries prove that they have actually spent the money on the purpose for which it was intended.

 

However, the success of this attempt to improve the budget process will not just depend on the president.

 

The National Assembly, which is charged with the oversight of government spending as well as the making of new laws, will also have to play a strong role.

 

Eze Ajoku, a former senator of the ruling Peoples Democratic Party, says senators and members of the House of Representatives should devote more time and effort looking at how the government is spending the people’s money.

 

“They are familiar with what’s in the budgets, and if they are carrying out their oversight functions, they can review what has been implemented by the ministries under their control,” he said.

 

Ironically, squabbles in the House of Representatives over the ₦628 million spent by Speaker Patricia Etteh on questionable improvements to her official residence have delayed the presentation of the 2008 budget to the National Assembly.

 

Yar’Adua originally planned to present his new budget in October, but skirmishes between opponents of Etteh, who wanted her to step down, and her supporters, who said she had done nothing wrong, have delayed his presentation of the government’s plans for spending next year by several weeks. Etteh and her deputy, Babangida Nguroje, finally resigned October 30.

 

The House has hardly engaged in any legislative activity since it was inaugurated in June.

 

 

Given the president’s prudent approach to public spending, it will be interesting to see how he chooses to handle the windfall oil revenues accruing to the Federal Government’s Excess Crude Account over the coming year.

 

The Ministry of Finance has already announced that the government’s 2008 spending plans have been drawn up on the conservative assumption that international oil prices will average US$53 per barrel.

 

Any income above that level will automatically go into the Excess Crude Account – a sort of government reserve fund.

 

With oil prices hitting $90 recently and showing no signs of an early collapse, it is almost certain that Nigeria will rake in billions of dollars more revenue from oil exports than it has budgeted for.

 

In recent years, the state governors have put heavy pressure on Abuja to share out the booty in the Excess Crude Account. Under Obasanjo they nearly always had their way.

 

But the Central Bank of Nigeria has always raised a red flag to such demands. Earlier this year it warned publicly that if the government spent savings accumulated in the Excess Crude Account too quickly it would boost the money supply too quickly and send inflation surging higher.

 

To curb this, the government has said it would also enforce compliance by the states with the Fiscal Responsibility Act, which the federal government passed this year. The federal government has said it will not release funds from the excess crude account to any state that has not passed its own version of the Fiscal Responsibility Act. The states have up to the end of this year to comply with the directive.

 

The National Economic Council (NEC), which advises the president on economic policy, recently recommended a new formula for sharing out 1.4 trillion Naira that is currently sitting in the Excess Crude Account and handling future receipts more prudently.

 

The NEC is chaired by Vice-President Goodluck Jonathan and includes all the 36 state governors, the governor of the Central Bank of Nigeria and the Ministers of Finance and National Planning.

 

It recommended that one trillion naira be saved for the states and the federal government, but gave no details of when and how this will be spent. The balance would be used to settle foreign debts owed by states and the federal government, arising from the debt relief that Nigeria secured two years ago from the Paris Club.

 

Looking ahead, the NEC recommended that 20% of yearly excess crude revenue should be saved, while the remaining 80% should be shared in the following year. This means that the money will be made available to the governments with one-year lag, perhaps as part of efforts to curb its inflationary impact on the economy

 

The trade unions would like to see these funds spent on rebuilding Nigeria’s shaky infrastructure instead of handing it to state governors with a reputation of using public funds to buy executive jets and fund their own businesses.

 

 “When you have excess revenue, it means you have already met your revenue target, so it should be used for the development of the country instead of sharing it to the states,” Lakemfa, the NLC spokesman said.

 

He pointed out that it could, for instance, be deployed the educational sector, where expensive private schools have sprung up to fill the gap created by the falling standards of poorly equipped  government schools.

 

“We are interested in education so our children can go to school,” Lakemfa said.