Consultation and the MTEF 2020-2022

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The draft 2020-2022 Medium Term Expenditure Framework was presented last week by the Ministers of Finance, Budget and National Planning to a cross-section of stakeholders.

This is a continuation of the tradition established in the Fiscal Responsibility Act 2007 for the Minister of Finance to lead the process of the preparation of the pre-budget statement which consists of the macroeconomic framework, the fiscal strategy paper and the revenue and expenditure framework. It should also contain the consolidated debt statement setting out and describing the fiscal significance of the debt liability of the Federal Government and measures to reduce any such liability as well as a statement describing the nature and fiscal significance of contingent liabilities and quasi fiscal activities and measures to offset the crystallisation of such liabilities.

The FRA stipulates that the Minister of Finance, in the process of preparing the MTEF should hold public consultations. The idea of a public consultation is to garner inputs to enrich the draft MTEF before it is endorsed by the Executive Council of the Federation and approved by the National Assembly. There was a short notice to all stakeholders asking them to turn up for a consultation on Tuesday, September 9, 2019 and the supposed consultation held on that day at the main auditorium of the Ministry of Finance. The notice was terse and did not contain the draft MTEF or any document given the details of what the consultation would dwell on.  The draft MTEF was also dated Tuesday, September 9, 2019.

At the consultation, the minister presented slide shows of the key components of the MTEF and thereafter asked for questions, comments and clarifications. There were a total of 15 such interventions after which the minister responded and also called on some other government officials present, such as the chairman of the Federal Inland Revenue Service to provide clarifications. The National Anthem was sung and pronto, the purported consultation ended and everyone went home.

However, on Thursday September 11, the media reported that the Executive Council of the Federation had on Wednesday, September 10, 2019,  approved a proposed expenditure of N10.07tn for 2020 and this was supposed to have been drawn from the MTEF in accordance with Section 18 of the FRA, to the effect that the MTEF shall be the basis for the preparation of the estimates of revenue and expenditure required to be prepared and laid  before the National Assembly under Section 81 (1) of the Constitution.

From this sequence of events, of a consultation held on Tuesday and stakeholders were being informed of the contents of the MTEF and its endorsement by EXCON on Wednesday, it is clear that there was no consultation. What happened was the most perfunctory attempt to fulfil all righteousness in the name of consultation. Where and when was the opportunity for people to make inputs and at what time were the inputs considered before endorsement.

Essentially, the FRA was breached. The need for consultation and harnessing of popular inputs is grounded in the constitutional sovereignty of the people and this is accentuated by the fact that we are in a fiscal crisis that has defied the available strategies and knowledge of the key actors running the ministries of finance, budget and planning. Therefore, there is no special or high knowledge or information available to them to get Nigeria out of the crisis. The expectation is that the minister and her team would have reached out to Nigerians to clearly tell them the gravity of the fiscal challenge, seek their input, cooperation and collaboration and alternative ideas to run economic governance for the greater good of all Nigerians.

What is the nature of this economic and fiscal crisis? It is based on the fact that Nigeria is broke. The country in 2018 projected retained revenue in the sum of N7,165.87bn but only realised N3,963.67bn, a shortfall of N3,202.20bn, being -45% variance from projections. In the same 2018, the Federal Government incurred debt and non-debt recurrent expenditure of N5,256.25bn; this shows that our actual recurrent expenditure was N1,2929.58bn more than our retained revenue. This could have only been funded through the usual non-sustainable deficits of borrowing and Central Bank of Nigeria’s bailouts.

Again, in 2018, we repaid debt with 54% of our retained revenue. By the time, we add capital expenditure of N1,743bn for 2018 which brings the total expenditure to N7,455.76bn, it is clear that we are living and running our economy in the most reckless of manner. Further, the trajectory for the 2019 budget implementation is not showing any better results. We already have a 30% negative variance on the realisation of budgeted revenue for the first half of 2019. Available information in the last two weeks indicates that no kobo has been released for the implementation of the capital component of the 2019 federal budget.

Thus, there is nothing to be proud of in the management of the fiscal side of our economy. Nigeria needs all the available knowledge and competencies of her citizens to get out of this fiscal hole. Doing more of the same will only deepen the challenges and convert them into a tsunami situation that will totally cripple the country. Also, the fact that the Federal Government has now come out with a proposal to increase Value Added Tax, it would have been imperative for stakeholders to be consulted for their views, inputs and other policies that would have reduced the shocks that may arise from this increase. Again, there are other strategies to increase the revenue profile of the Federal Government, reduce leakages and ensure greater efficiency of governmental service delivery which has been missed through the denial of consultation.