Medium Term Expenditure Framework (MTEF) is a three – year rolling framework according to the Fiscal Responsibility Act (2007). DAVID AGBA writes on its processes and pinpoints other salient issues in the document.
The 2017 budget will be submitted to the National Assembly probably this week and a lot of work must have gone into its preparation as it is one document that sets the pace for either failure or success of the budget.
Lead Director of the Centre for Social Justice (CSJ), Barrister Eze Onyekpere observed that there was no evidence to show that this current MTEF was drawn from any Medium Term Sector Strategy (MTSS) arguing that the MTEF did not detail the process of its preparation. It is not clear whether the consultations with government agencies and states were held.
To ensure improvements, he explained that future MTEFs should be submitted to the NASS immediately after endorsement and this must be done by the Executive Council of the Federation (EXCoF) in June in line with the provisions of the Act.
According to him, “the MTEF should be sent to the NASS in July before the commencement of the mid-year legislative recess. This will enable the legislature sufficient time to analyse and approve the MTEF and for actual preparation of budgetary estimates to start on time.
“The MTSS should precede the preparation of the MTEF and all relevant stakeholders should be brought on board during the preparation process, it should be anchored on consultations with states and designated agencies of government. The Minister of Budget and National Planning should also open up the process for consultation with diverse stakeholders including the organized private sector and civil society. The process and fact of the consultation should be documented in the MTEF as provided in the Act,” he added.
Speaking at a recent function in Abuja, he said: “Nigeria needs a new overarching and fundamental economic policy document and vision to coordinate all sectoral activities and introduce coherence and convergence into sector policies.
“The MTEF should document how it arrived at the projections for economic growth and inflation rate as well as include projections for interest rate, external reserves and access to credit, etc as required by the Act. It should document the underlying assumptions, facts and logic in support of these projections.
“Its’ macroeconomic projections should be aligned to Vision 2020 and the Strategic Implementation Plan (SIP) or show reasons supporting that the targets in Vision 2020 cannot be met. The MTEF should contain an evaluation and analysis of the macroeconomic projections for the preceding three years.”
Considering the gravity of unemployment and underemployment, the MTEF should document the present situation; make projections for increased employment and decreased underemployment as well as strategies to attain the new projections.
Onyekpere stated that consistent poor capital budget implementation over the years demands the full enforcement of the Public Procurement Act, 2007 with an emphasis on renewed capacity building and sanctions for offenders.
Accruals to Excess Crude Account (ECA) and or the Sovereign Wealth Fund (SWF) should be articulated in the MTEF. Currently, there is nothing about ECA or SWF in the extant MTEF, he explained.
Continuing, the CSJ boss said in accordance with the FRA, the MTEF should show the link between stated priority interventions and the constitutional Fundamental Objectives and Directive Principles of State Policy.
“Government should reorder its spending priorities and ensure at least a 70 per cent to 30 per cent balance between recurrent and capital expenditure in 2017 and a gradual increase to 40 per cent capital expenditure in 2019. The recommendations of the Expenditure Review Committee and the Committee on the Restructuring and Rationalization of Federal Government Parastatals, Commissions and Agencies should be once again analysed and used in the rebalancing.
“Government should continue to plug the leaking pipes of corruption and waste that have led to the abuse of system. Automation cannot do it alone, there is need to send strong signals to offenders; individuals and companies found to have abused the system should face punitive criminal justice sanctions.
The NASS should prioritise the passage of the Petroleum Industry Bill in order to free up resources for investments in critical sectors. It is estimated that over N3 trillion will accrue to the Federation’s coffers from the implementation of the PIB. It will also free up resources tied up in Joint Venture Cash Calls, he said.
According to him, government should review policy implementation in key areas of automobiles, oil and gas, housing, transport, electricity and health to generate jobs, new income streams and thereby diversify the economy.
“Estimated oil production may be unrealistic if the challenge of militancy in the Niger Delta is not addressed. The oil price benchmark is realistic and should be retained.
“The assumptions and projections for non-oil revenue comprising of CIT, VAT and Customs Duty needs to be aligned with the mantra of diversification of the economy.
“The MTEF should contain the sectoral envelopes which will show government’s priorities and the reasons informing those priorities. The Strategic Implementation Plan (SIP) can serve as a guide.
Continuing, he pointed out that in the capital expenditure provisions, more emphasis should be placed on developmental capital as against administrative capital adding that for the private sector to play the role of providing funding to fill the finance gap for infrastructure and critical sectors, there is the need for government’s borrowing not to crowd out the private sector. Improved access to credit for the private sector through coordinated policy implementation by the CBN, DMO and the Finance Ministry is imperative.
“Giving the current situation of the country, there is the need for the 2017-2019 to have a clear path to activate the alternative funding sources of the Development Agenda as contained in Vision 20:2020. The Development Agenda identified alternative funding sources to complement budgetary and public funding of capital projects. They have been identified to include pension funds, Public-Private Partnership (PPP), long term Commercial Bonds, Export Credit Finance, oil for infrastructure, private equity and infrastructure bonds. It is high time the legislature in collaboration with the executive take steps to activate these alternative funding mechanisms instead of the current appetite for loans.
“The MTEF should include the nature and quantum of contingent liabilities and quasi fiscal activities of government.
“Considering the quantum of current contingent liabilities as indicated in the DSA and the projection that it will grow in the medium term (2017-2019), it is imperative to implement the recommendations of the DSA to guarantee value for money in this area
“In undertaking new PPP projects which will increase the quantum of contingent liabilities, FGN should carefully select and appraise and involve the expertise of the Infrastructure Concession and Regulatory Commission in arriving at the specific projects. Indeed the enabling law for PPPs in Nigeria is overdue for reform.
“FGN interventions qualifying as quasi fiscal activities and their implications for public finances, macroeconomic stability should be carefully appraised before embarking on them. They should be fully documented in future MTEFs, he said
