Gov. Benedict Ayade And His Mysterious Budget Template

By Missang Oyama

I have to preface this piece with some clarifications on what a budget signifies in any given economy. In a nutshell, a budget is an expression of government financial role in the growth process of an economy. It is the most comprehensive financial document used within a given year to plan, co-ordinate and manage the economy. The budget addresses operational efficiency and performance indices of government on the basis of fiscal targets, formulated expenditure policies and strategic allocation of resources.

A state or public sector budget can be better appreciated as a portent short term economic planning instrument used to lay the background for the achievements of projected medium and long terms economic development goals. A public sector budget is also a tool for accountability and transparency in government revenue receipts and expenditure within a specified time period usually one year. Apparently, our local economy in Cross River State is largely bedeviled by an appalling misery index and failed infrastructure. It goes without saying therefore that with the inherent multiplying socio-economic contradictions stirring so starkly in our faces, a well articulated budget could form the framework to foster growth and development in the local economy going forward.

In our clime, before the end of every twelve calendar months, there is always the heightened expectation of annual budget presentation for the subsequent fiscal year to the parliament for consideration, approval and passage into law. In legislative parlance, the budget is a legal framework within which the government appropriate resources to enhance the growth and development of the economy. The budget as a fundamental money bill is also known as the annual Appropriation Act when passed into law by the parliament which is governed by the constitution and other extant laws.

For us in Cross River State, it has inadvertently become a yearly ritual of some sort for Gov Benedict Ayade to brandish a series of alluring plans that stirs the hope of an average Cross Riverian for a better standard of living and improved economic condition. Sadly, more than a large chunk, perhaps over 95% of these plans has often remained in the realm of unfulfilled, fanciful and flowery promises with the local economic indices getting rather dangerously adrift.

Our recent history has shown that the Cross River State budgeting system under Gov Benedict Ayade is built on quicksand with a self inflicted burden of perennial lack of appreciable implementation. It should be noted that Gov Benedict Ayade had his full scale fiscal year in 2016 where he announced a budget of N350B which he christened, “Budget of Deep Vision.” In the subsequent year (i.e. 2017), the Governor backtracked a bit by announcing a budget of N301B tagged, “Budget of Infinite Transposition”. However, a N700B expenditure framework was announced in the said year to run for three years upfront to 2019 on the back of the State’s Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP).

When Cross Riverians thought they have had enough of outrageous budget estimates without commensurate developmental strides, His Excellency, Senator (Prof) Benedict Ayade appeared like a bolt from the blue with another shocker. On Thursday 30th November, 2017 he stood in the hollowed chamber of the State House of Assembly and announced a mindboggling expansive budget of N1.3Trillion tagged, “Budget of Kinetic Crystallization” for the 2018 fiscal year. As expected, he made the headlines as the first governor in Nigeria’s budgetary history to hit the N1Trillion mark in budget estimates. Not even Lagos State adjudged as the sixth largest economy in Africa with a robust economic base could ever make such headlines at this time ahead of Cross River with very weak and almost nonexistent local economic structure. What a paradox! “Wonders”, they say, “shall never end”.

Apparently, the State runs the traditional incremental budget template but the questions economic and financial pundits find extremely galling are: What is the rational behind Governor Ayade’s unprecedented and humongous increase in the State’s budget estimates? Has the World Bank opened its vault to Senator Benedict Ayade without the knowledge of Cross Riverians? Could it be a mere obsession for figures or an inordinate knack for media hype on the situation of our badly stressed local economy? How does he arrive at his projections and forecasts? How well has he performed with respect to percentage implementation of the last two budgets? These are some salient questions that beg for answers and they are not farfetched judging from the well known dire financial strait of the state and the rudimentary level of our economy in spite of the bogus budget estimates we have seen in the last two years.

This is a State that can hardly raise N1Billion per month as its Internally Generated Revenue (IGR), in addition to the backlog of a huge debts profile mostly being serviced at source. Gov Ayade’s measure of expanded budget becomes more ridiculous and nauseating when considered from the perspective that most of the State’s bank loans are tied to Irrevocable Standing Payment Orders (ISPOs) duly registered with the Office of the Accountant General of the Federation (OAGF) with regards to direct deductions from the state’s monthly allocation from the Federation Account. These sums up to the fact that Cross River State has a highly depleted monthly revenue allocation from the Federation Account. Besides, in running a deficit budget there is a standard threshold of not more than 3% of GDP that should be applied according to the Fiscal Responsibility Act. Ostensibly, this Act has not been domesticated at the Cross River State level but it could serve as a guiding light in the State’s budgetary process.

I’ve read a few narratives from some of the Governor’s Aides that were capitalized in staunch endorsement of his “audacious” N1.3Trillion 2018 Budget of Kinetic Crystallization. What I find entirely strange in these narratives is the strenuous attempt to extrapolate that Senator Benedict Ayade is simply reinventing the wheels in our entire budgetary process and he is set to bring it up to speed with conventional budgeting system. This sounds laughable and constitutes a brazen display of crass ignorance of the principles of budgeting and public finance. A budget estimate of N1.3trillion is an indication that Cross River State is proposing to run about 98% deficit budget in 2018 fiscal year with an increase of over 300% from the last budget estimates. This should not be. It is amusing that such a “landmark” budget would be proposed in a pre-election year with all the distractions in governance that will ensue as a build up to the 2019 general elections. Obviously the Governor will be desperately angling for what many consider as an undeserved second term bid.

I’ve read some extracts from the Governor’s budget speech on the reasons for the expansive budget proposal where he alluded to expected inflows from foreign investors on his “Signature Projects”. This is a grave error and extremely hollow disposition of a man who should know better. Since when did investors fund become part of a State budget? This argument is not only speculative but also against the well known principles and practice of budgeting. Investors’ fund does not in any way constitute part of a state budget. This is alien to budgeting and public financial management.

At best, what should have been done was to capture the State’s counterpart funding in the projects in the event of a Public-Private Partnership (PPP) as the model of investment. The expected tax receipts from the investors and would-be employees’ taxes could be captured in the budget NOT the investors fund as proposed by the Governor. In any case, the idea of making provision for tax receipts from an investment outlay with an unpredictable maturation period as a line item in a budget with a one year life span amounts to a mere academic exercise which is not practicable. Again, for a budget that is constraint by a time lag of one year for its implementation, the financial contribution of the state to a project as a cost center in the proposed estimate should be restricted to one year and not the entire gestation period of the project which could be more than a year.

A key rule in budget presentation is a report on the performance and percentage implementation of the previous budget. How far has Gov Benedict Ayade implemented the last budget of N305Billion? The answer could serve as a prelude to his commitment or otherwise to the bogus budget of N1.3Trillion for the 2018 fiscal year. Drawing from the experience of the last two years, it appears Gov Ayade’s budget performance indicators are always shrouded in absolute secrecy. In the practice of public sector budgeting, openness is the norm. Government is a social contract and power is held in thrust for the people. To that extent, Gov Benedict Ayade is under obligation to tell Cross Riverians the source of the funds to execute the proposed unprecedented deficit budget; the tenor, terms and conditions of these funds should be in the public domain. Unfortunately, these fundamental principles in the practice of public sector budgeting are completely missing in the Cross River State budget template under the current administration.

Suffice it to say that the framework of a public sector budget is built on some fundamental assumptions and key benchmarks drawn from carefully articulated fiscal/financial policies of government, capital improvement plan and reasonable forecast. To that end, there is no gainsaying the fact that Gov Benedict Ayade’s budget template from inception has always defied all known parameters, principles and simple logic of public finance. The template is not only flawed and churning out absolutely unrealistic budget estimates, but it is also mysterious to budgeting, to say the least. Until a radical change is urgently effected in the current budget template, Cross River State will continue to buckle under the increasing weight of lackluster budgetary performance with a concomitant toll on the local economy.

Missang Oyama, an Economist and a Public Policy Analyst writes from Lagos, Nigeria.

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