National Economic Council Meeting

My question therefore is will adopting and implementing the Zero-Based Budgeting as suggested by the Vice President not be taking us backward? I believe it will and this will contradict the aspirations as enshrined and outlined in Vision 2020:20. The second challenge with the Vice President’s comment is that it contradicts and runs foul of the Fiscal Responsibility Act 2007.

This little bag “bougette” inherited from the French is one word that means a lot to the existence of a people. This word gave birth to what we refer to as the “budget”. The budget remains the single most important document of a nation after the constitution. Bearing this in mind, the system and process for which the budget is made therefore should be as important as the document itself.

A budget is a statement of expected income and expenditure of a household, organisation or government within a specific period of time, which is referred to as a Fiscal Year. Public budgeting involves the selection of end and the selection of means to reach those ends (Robert Lee & Ronald Johnson, 2004). But relating the budget to our daily lives, Alexander Hamilton, described it as “much more than a collection of numbers. A budget is a reflection of a nation’s priorities, its needs, and its promise”.

It was recently reported in the media that while playing host to the Nigeria Economic Summit Group (NESG) in his office, Nigeria’s Vice President Yemi Osinbajo, said Nigeria will implement a Zero–Based Budget (ZBB) system, starting from 2016.

Understandably the Vice President recognises that there are several budgeting systems and frameworks which could be adopted to improve the budgeting process in the country. I, however, try to fathom the choice of Zero-Based Budgeting at this time of our existence when we had started implementing Performance Based Budgeting with the Obasanjo administration, but which was suspended by the Jonathan administration even though this was not officially communicated.

Zero-Based Budgeting is a budgeting process that starts from a base of zero, with no reference to the prior period’s budget or actual performance (i.e. the 2016 budget in this case without any recourse to that of 2015). All of the budget functions and headings literally start with a balance of zero at every fiscal year.

I don’t want to imagine that the Vice President believes that the Federal Government prior to May 29, 2015 was still implementing incremental budgeting even though that wasn’t the case on paper, yet whatever system we were implementing simply still abhorred 90 percent of the incremental system of budgeting changing figures every year with projects never completed or removed from the budget. The Zero-Based Budget framework has its advantages and tries to achieve an optimum allocation of resources to activities or areas perceived to be most important and needed. It forces Chief Executives in this case to justify every activity in their department as they know that, until they do this, the budget for their department is zero.

The Zero based budgeting in its design aims to achieve effectiveness, efficiency, and balanced workload for each decision unit. The implementation of this is however not as easy as it is on paper, requiring too much time to review all the components and functions of government from zero on an annual basis. The other challenge with the Zero-Based Budgeting is its failure to be able measure impact, outcomes and objectives of government expenditure in the respective ministries, departments and agencies (MDAs) and its connection with the wider government vision over a long term. This will also pose a serious challenge with implementing the Sustainable Development Goals which will require medium and long term plans connected to a national development or strategic plan.

A typical example that ZBB is not the best idea where a medium and long term project is to be implemented is the implementation of the Independent Power Plants (IPP) project which started from Obasanjo through Yar’Adua to Jonathan and Buhari implementing the last phase of ensuring gas gets to the turbine. This means that for medium and long term projects, the challenges of ZBB will be overwhelming and could affect the time needed to review from zero.

What is consistent within the FRA 2007 is the use of Medium Term and next three financial years which clearly shows that the Vice President’s statement of Zero-Based Budgeting is a nullity in itself without first repelling the Fiscal Responsibility Act 2007.

My question therefore is will adopting and implementing the Zero-Based Budgeting as suggested by the Vice President not be taking us backward? I believe it will and this will contradict the aspirations as enshrined and outlined in Vision 2020:20. The second challenge with the Vice President’s comment is that it contradicts and runs foul of the Fiscal Responsibility Act 2007. The Act provides for prudent management of the nation’s resources, ensuring Long-Term Macro-Economic stability of the National Economy, securing greater accountability and transparency in Fiscal operations within the Medium Term Fiscal Policy Framework, and so forth. Thus, the Act specifically provides for Medium-Term Expenditure Framework to last for three financial years.

These positions, as contained in the Fiscal Responsibility Act, already puts a big question to the Vice President’s statement. Drawing further on the FRA 2007, Section 11 (3) further went on to state that the Medium Term Expenditure Framework shall contain

a. Macroeconomic Framework setting out the macroeconomic projections, for the next three financial years, the underlying assumptions for those projections and an evaluation and analysis of the macroeconomic projections for the preceding three financial years, as well as a Fiscal Strategy Paper.

The Fiscal Strategy Paper is meant to set out the medium-term financial objectives; the policies of the Federal Government for the medium-term relating to taxation, recurrent (non-debt) expenditure, debt expenditure, capital expenditure, expenditure, borrowings and other liabilities, lending and investment and the strategic, economic, social and developmental priorities of the Federal Government for the next three financial years. The Act also expects that an Expenditure and Revenue Framework will be developed to capture estimates of aggregate revenues and expenditure for the Federation for each financial year in the next three financial years.

What is consistent within the FRA 2007 is the use of Medium Term and next three financial years which clearly shows that the Vice President’s statement of Zero-Based Budgeting is a nullity in itself without first repelling the Fiscal Responsibility Act 2007.

So my questions again is are we going backward with our budgeting systems and processes or is there the need for Government to seek support to ensure a robust budgeting process in the country? What we need at this point is to facilitate a more robust and people centered budget process that ensures citizens and citizens groups participate in the entire budget cycle and processes.

David Inaku Adama is Coordinator Public Financing for Agriculture at ActionAid International and has worked on Public Finance Management and the budget process for the last 12 years both at the State and Federal levels in Nigeria, with additional and experiences in East Africa. alpharojajunior@yahoo.com