Since last week, the media has been awash with reports of budget padding and this set the Ministry of Finance, Budget and National Planning and the Ministry of Humanitarian Affairs, Disaster Management and Social Development, with the latter’s minister, Sadiya Umar Farouq, lamenting that the finance ministry inserted N206 billion into her ministry’s 2023 appropriation bill. In this report, PAUL OKAH takes a look at the scenario.
On November 21, this year, the Minister of Humanitarian Affairs, Disaster Management and Social Development, Sadiya Umar Farouq, presented the ministry’s 2023 budget estimates to the Senate Committee on Special Duties at the National Assembly.
The minister, during the budget defence, said the total sum of N35, 595,233,430.00 was allocated to the ministry’s headquarters in the 2022 Appropriation Act, adding that the budget comprises a total recurrent expenditure of N1,073,705,755.00 and a total capital allocation of N34,510,760,413.00.
On the performance of the 2022 budget, the minister disclosed that the total sum of N291, 652,083.36 or 58.3% of the total overhead expenditure was released as of 30th September, 2022, while the sum of NI, 810,565,093.45 or 48.00% was released for capital expenditure for the same period.
She disclosed further that that the total sum of N288,041,185.32 million, or 98.76% of the total amount released for overhead cost was utilised and committed, while 99% of the total capital releases or the sum of N1,799,286,437.81 was utilised and committed to finance capital projects of the ministry.
The ministry’s 2023 overhead ceilings was increased from the sum of N499,975,000 in 2022 to the sum of N512,474,375 in 2023, representing a seven per cent increase over that of 2022, to cushion the effects of inflation.
According to Farouq, it is pertinent to note that the 7% increase in the overhead ceiling is not commensurate to the 20.77% inflationary rate in the economy, “conversely, the capital budget ceiling was reduced from the sum of N3,749,510,414.00 to N1,083,017,733, which represents 71% reduction in the 2022 capital budget.”
She said, “It is pertinent to note that the 71% reduction in Capital and seven per cent paltry increase in Overhead is grossly inadequate to run the ministry’s day-to-day operation. For the Ministry to have seamless operations and accomplish its mandate, which is very critical to overall national development, the ministry is requesting for an increase/upward review of its capital and overhead.”
The contentious N206bn
While defending the budget before the Senate Committee on Special Duties, one of the Committee members, Senator Elisha Abbo (APC, Adamawa North), fired the first salvo at Farouq when he asked her to explain the N206 billion in her ministry’s budget.
He had asked, “In 2023, you intend to borrow N206 billion for a project. What are the projects to be implemented and is it captured in the medium-term expenditure framework? If it is, what are the specific projects location and activities attached to this?”
Farouq, however, distanced herself from the mentioned N206 billion in her Ministry’s 2023 Appropriation Bill, saying that the Ministry requested for some projects for the North East Development Commission (NEDC) and the National Social Safety Net Project in the 2022 budget, which were not released. She added that the Ministry was surprised that the money inserted by the Ministry of Finance, Budget and National Planning was now ten times of the 2023 proposed budget of the ministry.
“Yes, we made mention of the projects for 2022 which were not released and part of it was part for the NEDC. The money was not released and now we have seen it recurring by almost 10 folds and we are also going to clarify from the Ministry of Finance to know why this increase, despite the fact that the previous year, the money was not even released for the project. So, we will get the details then send it to you on that.
“On up-scaling of the National Social Safety Net Project, these projects are under the National Social Safety Net, including the Condition Cash Transfer, the updating of the National Social Register and the Rapid Response Register as well to cushion the effect of inflation. This is all I can say for this. I cannot really give full details of how this amount is going to be utilised because it is something that was negotiated between the Ministry of Finance and World Bank,” she said.
Abbo, who was shocked by the minister’s response, said the country would not continue to borrow money and be plunged into debts, lamenting how the committee had to summon the Minister of Finance, Zainab Ahmed, days ago when the lawmakers considered the budget of the ministry of health and primary health care.
He regretted that similar issues have come up with the Humanitarian Affairs ministry, wondering if the N206 billion was captured in Medium Term Expenditure Frameworks (MTEFs).
“We observed that N301 billion was inserted in the budget of 2023, which will be funded through multilateral and bilateral loans. We asked the minister to give us the details of the activities and projects that will be implemented with this money and he said he wasn’t the one but that it was the Ministry of Finance. This is serious. We cannot continue to borrow money and plunge this country into debt for our children to come and pay without investing in what they will see,” he said.
Farouq’s letter to finance minister
On November 23, Farouq wrote a letter to the Ministry of Finance, Budget and National Planning, seeking clarification on the N206 billion inserted into the Humanitarian Affairs ministry’s 2023 Appropriation Bill, insisting that she knew nothing about how the controversial figure was inserted into the budget.
Worried at the development, after a meeting with top management staff of the ministry, Farouq, in a letter dated November 23, 2022, dispatched to the Ministry of Finance, requested the cooperation of her finance counterpart in clarifying how the amount came into the budget, given that the 2023 budget proposal her ministry released to the Budget Office did not contain the figure.
A source in the Finance and Accounts Department of the Ministry of Humanitarian Affairs, who spoke on the condition of anonymity because of the sensitive nature of the issue, said the letter was immediately drafted and sent to the finance ministry after the management meeting.
“As a ministry, we have just sent a letter today to the Federal Ministry of Finance, requesting clarification on the additional figure inserted into our ministry’s budget in the 2023 fiscal year. Going by the content, we expect a response from the Ministry of Finance between now and Friday after which we will reach out to the National Assembly on our position. We are disturbed and the minister is not leaving anything to chance. We want a quick clarification of the inserted figure in our ministry’s 2023 budget proposal,” the source said.
Also speaking on the issue, a top policy maker in the ministry, who didn’t want his name in print for obvious reasons, said Farouq was embarrassed when she was asked about the amount by members of the Senate Committee on Special Duties when she appeared before the committee to defend her ministry’s 2023 budget proposal at the National Assembly.
“I was there, the Senate Committee asked the minister how she came about the additional money outside the initial proposal submitted to the Budget Office and the minister responded that she didn’t know. Truly, as a ministry, we didn’t know how the N206 billion found its way into the ministry‘s budget proposal. Everything about that money, the minister actually does not know anything about it. And like I said, as a ministry, we don’t know. We just saw it there,” the policy maker said.
Budget expert speaks
In an exclusive interview with Blueprint Weekend, an expert in budgeting and Board chairman of Amaka Chiwuike-Uba Foundation (ACUF), Dr. Chiwuike Uba, said accusations of budget padding by the Ministry of Finance (MoF) are as a result of a seeming lack of transparency and communication.
He said: “It is good that the Ministry of Finance (MoF) has responded to the accusations of budget padding by providing clarifications on the additional budget sum inserted in some MDAs budget. Unfortunately, because of the seeming lack of transparency and communication on those insertions, the MDAs concerned tagged it ‘budget padding’. Nevertheless, the MoF’s response or rather defence still begs for more questions and answers.
“First, it is unacceptable to insert a huge sum of N206 billion to an agency’s budget without informing the agency in the first place. The argument on the distinction between budget envelopes and project tied loans does not vitiate the fact of the error by the MoF. If the proper thing was done, the embarrassment the action is causing Nigeria would have been avoided. It is important to confirm if the inserted budget items were captured in the approved MTEF by the National Assembly.
“Second, it is also laughable to read the claim by the MoF on the wrong description and/or classification of the budget line item. The implication of such a defence is that there is no real quality control/assurance in Nigeria’s budget process. Does it mean that certain line items and/or figures could be inserted in the MDAs budgets without such items/figures being detected? That’s very worrisome. Is the referenced project-tied loans not captured as part of the revenue/funding for the 2023 budget? If it is, why didn’t the MoF inform/direct the responsible MDAs to directly include the respective projects’ budgets in their 2023 budget?
“Third, the revelations have also brought to fore the confusions in MDAs mandates. Evidently, from the Minister’s response, the 206 billion is not an isolated case, because similar stories are around the Ministry of Power and Ministry of Defence budgets. I will encourage the National Assembly to properly scrutinize the 2023 budget to weed out fictitious and frivolous budget items that may have been inserted in the budget by MDAs.”
Finance minister clears air
On November 26, in one breath, the ministry of finance responded to allegations of budget padding by different ministries, particularly blaming the insertion of N206 billion in the Humanitarian Affairs ministry’s proposed budget on “wrong code and wrong description of project.”
In a press release she personally signed and sent to media houses, entitled: ‘Where the allegation goes wrong in Project NSSNP-SU Budget|Re: Finance Ministry on the spot over N424bn ‘padding,’ Zainab Ahmed said “the story in a national daily alleging budget padding is fabricated and misleading, because the said insertions allocated to the said items and sources in the budget proposal is also unfounded.”
The statement read in part, “The attention of the Federal Ministry of Finance, Budget and National Planning and its Minister has been drawn to the story making the rounds in the media in respect of the budget for ‘Project: National Social Safety Nets Project – Scale Up (NSSNP-SU) – N206,242,395,000.’
“The story in a national daily alleging budget padding entitled, Finance Ministry on the spot over N424 billion ‘padding’ is fabricated and misleading, because the said insertions allocated to the said items and sources in the budget proposal is also unfounded.
“We hereby wish to respond by putting the record straight: The project so referred to is domiciled in the Ministry of Humanitarian Affairs, Disaster Management and Social Development headquarters.
“The World Bank is the funding source for the National Social Safety Net-Scale Up project to the tune of $473,500,000 which is equivalent to N206, 242,395,000, using the N435.57/USD exchange rate.
“The project was correctly described in the submission from the International Economic Relations Department (IERD) for the 2023 budget. But, unfortunately, a wrong code was selected from the drop down menu, which resulted in a wrong description of the project which resulted in it being captured as ‘Purchase of Security Equipment’ in the Government Integrated Financial Management Information (GIFMIS) Budget Preparation System (BPS).
“Please, note that the BPS has a limited range of encoded programme/project descriptions. Also note that the multilateral loans are usually project’s tied, and have specific codes in the budget system. The multilateral loans are different from the envelopes usually given to ministries, departments and agencies (MDAs).”
It added, “The funds are drawn by the beneficiary Ministries under the terms of the agreements, and the financial institutions disburse directly to service providers. There were ample opportunities to review details for observations by Ministries and corrections made by the Budget Office of the Federation (BOF).
“The proposed 2023 budget for each Ministry was circulated for review and feedback, then the Federal Executive Council (FEC) reviewed it before it was submitted to NASS by President Muhammadu Buhari.
“You may recall that the federal government for a very long while has made significant progress in its budgeting process; just a few months ago, Nigeria at the Open Budget Survey (OBS) improved by 24 points to record its best budget performance.
“This administration has undeniably been highly committed to budget transparency, having undertaken various reforms in the public finance management space which have culminated in the significant recorded improvements. Therefore, the amount of N206, 242,395,000 is correct. The error in description is regretted, and will be corrected through the Appropriations Committee.
“In response to the allegation of some line items being inserted into the fiscal estimates for Ministry of Defence and Ministry of Power, the 2023 Appropriation Bill as presented has the following for the above-mentioned ministries and the agencies: Ministry of Humanitarian Affairs, Disaster Management and Social Development, Project: National Social Safety Nets Project – Scale Up (NSSNP-SU) – N206,242,395,000.”