₦airaland Forum

How PMB’s September Cabinet is hurting the economy
By Chris UWADOKA

There are reasons to believe that the decision of President Muhammadu Buhari to constitute his Cabinet in September 2015 (i.e. four months after his swearing-in) is hurting Nigeria’s budget cycle on which macroeconomic management efforts are hinged.
A key milestone in Nigeria’s budget cycle is the presentation of the Medium Term Expenditure Framework (MTEF) to the Federal Executive Council by the Minister of Finance. The Fiscal Responsibility Act (FRA) 2007, in its Section 14, mandates the Minister of Finance to present this very important planning document to the Federal Executive Council before the end of the second quarter of each financial year – that is to say, this obligation came due for the Buhari administration on June 30, 2015 and, as at that date, there was no Minister of Finance in place to meet this important requirement of the Act.
In stipulating the June 30 deadline, the crafters of the Fiscal Responsibility Act had reckoned that it would give the Federal Executive Council ample time to “consider and endorse” the MTEF before the 31st of August - a deadline which Section 11(1)(b) of the Act stipulates for the Medium-Term Expenditure Framework for the next three financial years to have been laid before the National Assembly for their consideration. The Muhammadu Buhari administration has also missed this deadline given that it has failed to convey the 2016 – 2018 MTEF to the National Assembly for consideration and approval “with such modifications, if any, as the National Assembly finds appropriate by a resolution of each House of the National Assembly” [S.11(2), FRA 2007].

To understand the implications of these missed deadlines, one needs to understand that the MTEF is the platform on which the country’s annual budgets are constructed. Without a timeous 2016 – 2018 MTEF, there will be no timeous 2016 budget. The Act states as much in as lucid a language as legally possible when it states in Section 18 (1) that NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS ACT OR ANY OTHER LAW, the Medium-Term Expenditure Framework “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 Constitution”.

The MTEF gives perspective to the annual budget. FRA 2007 states bluntly in its Section 18 (2) that the “sectoral and compositional distribution of the estimates of the Expenditure” in the annual budget “shall be consistent with the medium term developmental priorities set out in the Medium Term Expenditure Framework”. Hence, if the budget is the tree, then MTEF is the forest. It is not a document to be taken lightly at all. Many socio-economic goals, projects, programs and policy inclinations take more than a year to complete and cannot be frozen in a single budget cycle. It is the MTEF that identifies those priority thoughts and spreads their presence and cost/revenue implications over a period that covers the next three years.

Someone reading this piece may find himself thinking, “Well, staff in the Ministry of Finance currently functioning under the Permanent Secretary have probably already produced a draft MTEF and all they are waiting for is for the Minister (who would soon be appointed) to convey it to the Federal Executive Council (FEC) and for FEC, in turn, to expeditiously consider the document and transmit its approved version to the National Assembly for passage”. Unfortunately, the process is not as simple as that. Because of the dire importance of the MTEF in the fiscal scheme, it cannot be conjured or abracadabraed into existence.

Section 13 of FRA 2007 spells out an elaborate procedure for producing an MTEF. The procedure includes “public consultation, on the Macro-economic framework, the fiscal Strategy Paper, the Revenue and Expenditure Framework, the strategic, economic, social and developmental priorities of government, and such other matters as the Minister (of Finance) deems necessary”. The expression, “as the Minister deems necessary” simply implies that it is the Minister and not the Ministry that bears the responsibility for MTEF preparation. Hence, no Minister of Finance, no MTEF preparation. A corollary of this is that the process will only commence after President Buhari appoints a Minister of Finance – even in Acting capacity. Till then, the fiscal planning is literally waiting in limbo.

The same Section 13 quoted above states that the Minister’s public consultation over the MTEF shall be “open to the public, the press and any citizens or authorized representatives of any organization, group of citizens, who may attend and be heard on any subject matter properly in view”. The meaning of this is that fiscal responsibility enthusiasts amongst our citizenry will know when the MTEF preparation process is in full gear. Even Section 11 of the FRA 2007 expressly requires that States of the Federation be carried along in the process. Hence, it is not something that will happen in the corner of a Minister’s office – or anybody else’s office for that matter.

When President Muhammadu Buhari eventually appoints his Ministers, as he has said he would, by the end of September 2015, the Minister of Finance, Minister of National Planning and other Members of the President’s Economic Management Team will need some time to consider and adopt the existing economic vision or to articulate a fresh vision for the administration. They will also need time to sell that vision to the country that they rule as well as to the international community. Then they will need yet more time to create implementation frameworks that work. If they settle for a three-year implementation framework in the first instance, the language and format of the framework may be adjusted to become the Minister of Finance’s MTEF dirty copy which consultation with States as well as with the important constituencies identified in Section 13 of FRA 2007 will help to clean up. And this is only a best-case scenario. It could be worse.

These things will not happen overnight. In fact one doubts that they will happen in good enough time in 2015 to be useful in the judgement calls of domestic businesses, foreign governments and foreign investment vehicles concerning FY 2016. With the volatility in the world economy, this could mean a sidelining of Nigeria in key considerations.

Since the promulgation of the Fiscal Responsibility Act 2007, President Muhammadu Buhari’s administration is the second that has inherited an MTEF, the first being the Goodluck Jonathan administration which in 2011 inherited not only President Yar’Adua’s MTEF 2011 – 2013, but the overarching Vision 20:2020 as well. The principle as well as the practice of rule-based fiscal responsibility management all over the world is for a new administration to adjust the existing MTEF in such a way that it accommodates the manifesto and outlook of the new administration while at the same time soft-landing the existing projects, programs and erstwhile priorities (with which it disagrees) in such a way as not to create an economic shock. In this regard, the MTEF is a veritable change management tool. Failing to make expeditious use of it will be an unnecessary loss to the Buhari administration and the country it governs.

Without a 2016 – 2018 MTEF, all fiscal pronouncements remain, at best, ad hoc and for a $568.5 billion GDP sub-sahara African country, the corollary is too embarrassing to contemplate.

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The Enugu-Bamenda highway gives Eastern Nigeria road access to international markets. Considering the trading capacities of Onisha, Enugu and Aba on the Nigerian side and the difficulty in travelling from Bamenda to other parts of Cameroon, we look forward to high integration in that area. The color of Bamenda will soon change. Though funded by the loan facilities by AfDB and World Bank, it's necessary that credit be given to the Goodluck Jonathan administration for providing cooperation/partnership and expertise through the Federal Ministries of Works and Transport.