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Published On: Thu, Mar 13th, 2014

Matters Arising: How is Nigerian parliament faring in a cash-strapped economy?

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NASSDuring the just-concluded 2014 Budget defense, various National Assembly committees advocated for more funds for the respective Ministries, Departments and Agencies (MDAs) under their watch, even in the face of the obvious cash crunch facing the economy. In this piece, our National Assembly correspondent, Ikechukwu Okaforadi, examines the place of our parliament in a cash-strapped economy.

It is common knowledge that the Nigerian economy is currently bedevilled by an acute shortage of cash supply. This has been severally blamed on the huge decline in the quantity of oil being sold by the nation, which is the second largest oil producer on the African continent.

While appearing before the Senate Committee on Finance to defend the alleged impossibility for the Federal Government to implement the 2013 budget last year, the Coordinating Minister of the Economy and the Minister Finance, Mrs. (Dr.) Ngozi Okonjo-Iweala, mentioned factors like oil theft, pipeline vandalism, as the major factors which have reduced the volume of oil being sold to the international market by Nigeria.

She also explained that this decline in the quantity of oil being sold by Nigeria has reduced the inflow of cash into Nigeria through oil sales. She said that this general cash crunch has negatively affected the ability of Federal Government to match up releases with appropriation; hence budget failure was arguably witnessed last year.

On the same note, she promised that in as much as government is leaving no stone unturned towards increasing the daily oil production capacity of Nigeria, the 2014 Budget would be much ‘tighter and stricter’ than the preceding years. This, she said, would help to check the continued non-performance of budgets in the country.

Key government officials, in the person of the Director-General, Budget Office of the Federation, Dr. Bright Okogwu and the Accountant-General of the Federation (AGF), Mr. Jonah Ogunniyi Otunlahad, in a meeting with a National Assembly’s Joint Committee last November, defended the position of Dr. Iweala on the state of the economy, asserting that Nigeria is officially cash-strapped, though not broke.

Okogwu and Otunla, who spoke at a deliberative meeting on the 2014-2016 Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) with federal revenue generating agencies, organised by the National Assembly Joint Committee on Finance and Appropriation, insisted that being cash-strapped does not mean being broke.

Otunla said that “Nigeria is not broke, but it is currently having cash flow problems. We may have cash flow problem, but we are not broke. Also Okogwu said though “the nation is currently experiencing cash flow problems from time to time, it does not suggest that it is broke. But countries like Greek and Spain are broke. They are now approaching their international neighbours for bail-out, but Nigeria has not done that and is nowhere near that situation.”

Curiously, Mrs. Sarah Alade,the then CBN deputy governor, who represented the now ousted governor, Sanusi Lamido Sanusi,at the joint sitting, in a conservative response said since the AGF and the DG of the Budget Office had said Nigeria was not broke, that was also the position of the CBN.

“As bankers of the Federal Government, it is not our duty to tell the nation whether it is broke or not. But we can tell the amount in accounts at anytime,” Alade said. “We are bankers to the government. There is money in the account. The relevant agencies have said we are not broke and we (CBN) agree with them.”

By virtue of their vantage positions, the trio should know better than many, on the state of the nation’s economy; however, Nigerians will ask, what is the difference? Not much given the realities on ground. Cash-strapped means short of money, having insufficient money. Being broke means bankrupt, lacking funds – not much difference, many will argue.

Assuring as the responses from the DG Budget Office, AGF and CBN may sound, feelers from Federal Government Ministries, Department and Agencies (MDAs) have pointed to the opposite direction. Many have complained of poor and epileptic fund release from the finance ministry; in essence, stalling capital projects execution among others.

During President Goodluck Jonathan’s administration, the budgeting system in Nigeria had been based on “envelope system”, probably a World Bank strategy for emerging economies, which was adopted by the Finance Minister.

Envelop is a system by which the ministry of finance, after considering the Internally Generated Revenue of the MDAs, and in compliance with the Fiscal Responsibly Act, allocates to them a lump-sum in the national budget to take care of their critical needs. Obviously, this system has its merits and demerits.Without prejudice to the technicalities involved in this strategy, the envelope system seeks to allocate less funds to MDAs of the government, than they would have ordinarily wish to spend.

Expectedly, based on the continued decline in the daily oil production capacity of Nigeria, especially in the face of the tighter 2014 budget promised by the finance minister, the 2014 budgetary allocations to MDAs have grossly reduced from what it used to be.

While allocations to some MDAs dropped by 30 percent, a lot others also dangle between 40 and 45 percent. This has therefore, created anxiety over the ability of the MDAs to achieve significant success in their capital projects this fiscal year.

Within the last two weeks, while the budget defense lasted in the National Assembly, the various committees that held budget defense for the MDAs took time to denounce and reject the funds which the envelop system had appropriated to the agencies they oversight.

Almost all the committees in the National Assembly called on the finance minister to allocate more funds to the MDAs they oversight, even making case for outright review of the envelope system.

This, they said, would enable the concerned MDAs to meet up with their developmental needs. Many of the committee chairmen even raised the alarm that their MDAs would not be able to pay salaries if something urgent is not done about the envelop system.

However, it is worrisome that the committees appeared to be crying more foul than the bereaved with regards to this issue of envelop system and need for more funds.

While the heads of the MDAs tried to explain that oil theft caused the decline in the size of the envelop, hence they are ready to make do with the content, the National Assembly committees suspiciously insisted that something urgent must be done to make more funds available to the MDAs.

Meanwhile, before the advent of the envelope system, there were rumours that some MDAs come to National Assembly every year with same list of items that was budgeted for in the previous years. This trend saw items like office tables, official cars, office computers, televisions, air conditioners, refrigerators, among others, being budgeted for every year.

It is known that most of the items listed above last well beyond five years, yet they are budgeted for every year. This, therefore, raises the issue of where the money appropriated for these items goes. It is clear that most MDAs do not purchase these items they list in their budget.

Analysts have endeavoured to sustain this issue on the front-burner, calling on the lawmakers to question where the funds appropriated annually for these items goes, or where the old items are kept, but it seems all the cries fell on deaf ears.

Based on the silence of the lawmakers to address this anomaly, speculations making round say the Directors and Heads of the concerned MDAs share the appropriation.

Other rumours have it that the concerned National Assembly committees and Heads of the respective government agencies sit tight on the funds. In fact, observers claim that why the National Assembly committees have lamented and condemned the envelop system was because it has come to reduce the amount of funds to be settled on by both the Committees and the Heads of MDAs.

Now that Nigeria’s economy is facing severe cash shortage due to oil theft and oil pipeline vandalism, our parliament is expected to play a critical role towards ensuring that a level of stability is maintained in the nation’s economy.

Based on the current situation, there is no doubt that the time calls for a more critical budgeting, whereby the lawmakers would thoroughly rejig the budget, such that allocations for tables and televisions earlier referred are diverted towards the completion of on-going priority projects of these MDAs.

This critical situation does not call for lawmakers to cry foul more than the bereaved by seeking increased allocations to agencies from nonexistent funds; it rather behooves on the lawmakers to look critically on the 2014 budget of MDAs and see how to make the best out of the already difficult situation.

This can only be achieved if Distinguished Senators and Honourable Members can shelve primordial motives and plug the many unnecessary leakages which abound in the budgets of these government agencies. By this, the 2014 budget can serve the interest of the common man, without sacrificing quality.

If our lawmakers, who should know more about the impact of the oil theft on the economy, are demanding for more funds in favour of their respective Ministries, Departments and Agencies, then a lot is to be suspected, with some observers saying that there is more to it than meets the eye. The logical question to ask is: Where would the funds come from? There is no justification for every committee to be demanding for more funds for the agencies they oversight.

It is disheartening that despite the explanations by the Finance Minister, yet every National Assembly committee chairman is clamouring for more funds for agencies that fall within their purview, even when it is clear that no MDA will admit to have enough funds as it desire.

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