With recurrent spending swallowing up the bulk of annual budget allocations, many fear that the execution of investment projects will continue to suffer for a long time; BENJAMIN UMUTEME looks at development.
For several decades Nigeria continued to suffer from an infrastructure shortage caused in part by declining income and mainly by a lack of a maintenance culture. And with governments preferring to spend more on recurrent spending than on repairing the country’s dilapidated infrastructure, authorities are forced to borrow from outside sources to finance projects.
A report released by Moody Investors Services indicated that Nigeria would need to spend $ 3 trillion per year over the next 30 years to close its infrastructure gap.
However, as Nigerians grapple with the challenge of basic infrastructure, there are concerns about the disparity in the proposed allocations for capital spending and recurrent spending in the country’s annual budget.
Recurring expenses are expenses for goods and services that do not lead to the creation or acquisition of fixed assets. Rather, it is mainly the expenses incurred for the day-to-day running of a business or public institutions that cover ministries, departments and agencies (MDAs) as they are called in Nigeria. To this extent, recurrent expenditure includes expenditure made for the payment of overheads, salaries, interest payments, grants, transfers, pensions and gratuities, among others.
From an estimated 2.13 billion naira in 2009, recurrent spending by the Nigerian government increased to 3.33 billion naira in 2012.
A review of budget forecasts and allocations showed that recurring funds have always had the upper hand over capital projects. Between 2016 and 2021, the figures collected by Master plan weekend showed that in 2016, in a budget of 8.06 trillion naira, 2.65 trillion naira became recurrent while the capital obtained 1.59 trillion naira. In addition, in 2017, the trend did not change because out of a total sum of 7.28 billion naira, the recurrent ones received 2.9 billion naira and 2.24 billion naira went to the capital.
Between 2018 and 2021, when total expenditure was 91 trillion naira, 8.92 trillion naira, 10.59 trillion naira and 13.08 billion naira respectively, recurrent expenditure was 2.99 billion respectively. billion naira, 3.5 trillion naira, 4.49 billion naira and 4 naira. 88 trillion. Juxtapose that with a capital allocation of 2.3 trillion naira, 2.8 trillion naira, 2.47 billion naira and 3.08 billion naira during the period under review and it will be obvious why Nigeria’s infrastructure is what it is.
Analysts continued to question the imbalance in allocations between capital spending and current spending. The imbalance was even worse under President Goodluck Jonathan’s previous administration.
They further noted that once said amounts are allocated, actual rejections become a challenge. This was further exacerbated by the drop in revenues caused by OPEC + production cuts, the theft of crude oil and Covid-19.
Further details gathered by this reporter showed that 3.1 trillion naira was spent on recurrent non-debt spending. Further examination would further reveal that of this amount, personnel costs swallowed up 2.09 trillion naira.
Further analysis showed that the sum of 197.77 billion naira was spent on pensions and gratuities between January and December 2018. Likewise, the sum of 218.8 billion naira was spent on overheads between January and December 2018, out of the budgeted amount of 246 naira. 49 billion, while the service-wide votes had a total expenditure of 237.6 billion naira allocated to this spending subtitle in 2018.
For the presidential amnesty program, the federal government has released 59.64 billion naira out of the budgeted sum of 65 billion naira, while a special intervention program and an electricity sector reform program have been released. had 271.79 billion naira and 27.62 billion naira out of the budgeted amount of 350 billion naira and 193.34 billion naira, respectively.
Question marks, expert advice
The recurrent government spending, which continues to rise, drew numerous complaints and criticisms from the population who argued that the government was a waste and that the money it was spending on servicing the components recurring government funds should have been allocated to investment projects.
Expressing concerns over the increase in recurrent spending, Federation Budget Office Director General Ben Akabuaze admitted that the cost of governance was becoming unsustainable.
âThe cost of governance has generally increased; MDA’s real current expenditure increased sharply from 3.61 trillion naira in 2015 to 5.26 trillion naira in 2018 and to 7.91 trillion naira in 2020.
âThis excludes the costs of public enterprises and transfers to the National Assembly, the National Assembly and the National Council of the Judiciary. Recurrent spending represented over 75 percent of MDA’s actual spending between 2011 and 2020, âhe said.
Interestingly, experts have repeatedly pointed out that high recurrent spending is responsible for the country’s current debt.
In a conversation with this reporter, political economist and development researcher Adefolarin Olamilekan said that the fact that the tax authorities had not made more arrangements for capital spending was at the root of the frenzy. current loans and borrowings from the administration of President Muhammadu Buhari.
He said: âIt is interesting to note that recurrent government spending in Nigeria is seen as a bigger obstacle to the realization of investment projects. The reason is that there is no match between what is on the ground right now and what is budgeted. Again, recurrent spending had not had a positive impact on economic growth in Nigeria as expected. Meanwhile, the efficiency of the public sector, especially compared to the private sector, cannot be overstated. In Nigeria, the public institution in Nigeria provides superfluous services, wasting personnel and capital, which could be directed to production that provides welfare and benefits to individuals in the economy.
âFundamentally, investment spending in infrastructure and productive activities should contribute positively to economic growth, while recurrent spending in our climates remains public consumption spending that retards the growth of infrastructure investment. As might be expected, the Nigerian government was supposed to control the economy using public capital spending. This instrument of government control promotes economic growth in the sense that it attracts public investment by contributing to economic growth and expansion of businesses that generate jobs, wealth and better opportunities and income for the government.
For economist Pat Utomi, the role of inflation and the devaluation of the Naira in raising current spending should not be underestimated.
âI think it’s important to keep in mind that the real value of our currency has gone down and inflation has been significant over the past two seasons.
âSo in reality if you look at that amount of money today compared to the actual value of the naira in 2016, it’s not the same amount. Basically, it takes more naira to do the same thing today. ‘hui than in 2016, âhe said.
Additionally, a senior lecturer in the Department of Economics, School of Management and Social Sciences, Pan-Atlantic University, Dr Olalekan Aworinde, has linked the development to rising wages and possibly the upcoming elections to huge recurrent spending.
He said: âThe increase may suggest that the government wants to employ more people and has to pay these people with these huge funds allocated to pay wages.
Break the circle
Olamilekan believes the way forward is for the government to reconsider the recommendations of the Oronsaye report on civil service reform in order to break the vicious circle.
He told the reporter that in order for the government to get a correct productivity matrix, it must look for a way “to allocate more funds for investment projects at this stage of our national life.”
âAs a vehicle that opens the door to increased infrastructure development that will fundamentally transform Nigeria’s well-being. To me, not having better funded our capital spending is the bane of the current excess lending and borrowing frenzy of the APC Buhari administration today.
He suggested that in order to achieve a balance, the government must “first focus on eliminating the functions of redundant and duplicate agencies through a merger.”
âSecond, we need to consider greatly the role of civil servants and civil servants in national development, and above all justify its structure, function, overheads, payroll and service delivery.
âThird, we need to define the role of state government and local governments in managing the national development process with respect to the investment project.
“Finally, it is imperative that the Buhari administration and future governments recognize the urgency of cleaning the Aegean stable from the scraps of our public service as a model for achieving an ineffective government trade mechanism.”