BUDGET 2012 – BROKE COUNTRY, EXPENSIVE LEADERS By: Nasir Ahmad El-Rufai
Published:20 Jan, 2012
The attempt by President Jonathan to withdraw the ‘fuel subsidy’ largely to raise revenues for a wasteful government united Nigerians across ethnic, religious and social strata for over a week. One of the unintended consequences of the administration’s unilateral action was bringing to the front-burner questions about the size of government, the excessive cost of governance, and the fraud and corruption in the oil sector. Nigerians now know that their president would rather impose an overnight tax on them than undertake an orderly deregulation of the petroleum sector. They also know the difference between an isolated fuel price hike (for immediate revenue) and the policy review-legislation-independent regulation-competitive markets path that was implemented in the telecoms sector deregulation between 2000 and 2001. Nigeria will be the better for it, as we are now unanimous on seeing that some of the spending items like the near N1 billion for food in the Villa are justified and put in context.
For this reason, over the ensuing weeks, this column will undertake a detailed sectoral analysis of the 2012 budget proposal submitted by the President to the National Assembly in December 2011. Our objective is to enlighten all stakeholders on the provisions contained in the budget and suggest areas to reduce waste, question spending priorities and cut out what appears dysfunctional. Our hope is that the National Assembly will in the end make the budget work for the people of Nigeria. Today, we will look at the revenues profile for 2012 and issues arising there-from, and then throw a searchlight on the much-headlined expenditure for the security sector. Details of the budget are available online on http://budgetoffice.gov.ng/2012_budget_proposal.html or if for any reason unavailable, http://el-rufai.org/2012/01/full-access-to-2012-budget-proposal/
The federation expects to generate about N9.4 trillion in revenues in 2012, consisting of about N6.4 trillion from oil and gas, N2.7 trillion from personal income and company taxes, custom duties, and value-added tax. Another N250 billion is expected from special levies and taxes like the Education Tax. Out of this total, the Federal Government share amounts to about N3.6 trillion. This is because the FGN gets about 48.5% of the oil and non-oil revenues and taxes, about 14% of VAT and gets to keep all of its independent revenue. Omitted from the budget is an additional 7.5% of the total – special funds that include the ecological fund, the Federal Capital Territory and mineral resources fund. Also omitted is how much is deducted from the gross oil revenue as our contribution to the Joint Venture Cash Calls. All these need to be detailed out for the National Assembly to do its constitutional duty and ensure accountability, but they are missing from both the Budget and the Medium Term Expenditure Framework for 2012-2015.
Starting with projected revenue of about N3.6 trillion, the budget envisages a total spend of N4.7 trillion, meaning that we intend to spend about N1.1 trillion more than we expect to earn this year. Where is the extra cash coming from? It is not from ‘fuel subsidy’. The 2012 budget already assumed that not a penny will be deducted to subsidize petrol. The FGN hopes to finance the deficit by borrowing some N794 billion this year, and get some windfall from privatization (N10 billion), signature bonus (N75 billion) and the now-depleted excess crude account (N225 billion). No provision has been made in the Budget to transfer any amounts to the Sovereign Wealth Fund. Once again, these are items that need to be detailed for us as citizens to know, and for the National Assembly to decide upon.
What are the implications of these pieces of information? How does the plan to borrow an additional N794 billion sit with the administration’s desire to “reduce” our borrowing from the current levels nearing 20% of GDP? What does the projected medium term expenditure framework reveal about our revenue and spending patterns? Are these consistent with the desire of Nigerians to see a smaller, less expensive and more efficient federal government? We ask our readers to bear these in mind as they reflect on the numbers presented herein.
We should also note that with the ‘fuel subsidy’ not fully gone, the FGN’s assumption of zero-subsidy-deduction is off the table, and the hole in the budget will increase by at least half of the ‘expected N400+ billion’ to N1.3 trillion, so further borrowing is necessary to fund this gap. And as I wrote last week, there is not a single kobo anywhere for the so-called SURE-P programme unless the National Assembly raises the benchmark price of crude oil by at least another $20 with the risks attendant to that.
Looking closely at the spending proposals, commendable efforts have been made to reduce the level of statutory transfers to INEC, UBEC, NDDC and the National Judicial Council. Sadly, the transfer to the National Assembly remains at the 2011 level of N150 billion. Unless this is reduced, we will spend an average of N320 million per legislator in 2012 at a time when Nigerians are clearly disgusted at the very high quarterly allowances they draw, over and above what the Revenue Mobilization Allocation and Fiscal Commission has approved for them. The National Assembly should listen to the voice of Nigerians and reduce this provision substantially. The provision for the salaries and allowances of public servants has risen by about N150 billion from the 2011 levels to N1.655 trillion. This increase cannot be due to the usual annual salary increment. There is something more and it contradicts the stated goal of the administration to reduce the cost of governance. The National Assembly should scrutinize this more closely with a very sharp knife!
Other items of expenditure that need closer review are the overheads – the N11 billion for international travel, more than N30 billion for “research and development”, maintenance of vehicles, furniture, etc., over N20 billion, stationery, magazines and newspapers at over N5 billion, and nearly N17 billion (more than $110 million) to purchase yet another plane for the president, at a time when we are being asked to sacrifice and pay more for petrol, transportation, food and rent. There are other items we will highlight in each sector but these broad areas are indicative for the time being of the need for close scrutiny by the citizens and the National Assembly.
We will now briefly look at the provisions for the security sector. The president announced that the sector got allocated some N922 billion for 2011. This number is the sum of the budgetary allocations of the ministries of defence, police affairs, and Interior plus Police Commands and Formations and the Intelligence Community (NSA’s office). The president forgot to add the following – (1) Amnesty Programme (N74 billion), (2) Military Pensions N60 billion, (3) Army Internal Operations (N17 billion), (5) Police Service Commission (N2.5bn), (6) Customs, Immigration & Pensions (N8.6bn), (7) SSS/NIA Pensions (N11.2bn), (9) Death Benefits – Army & Police (N5.4bn), (10) Federal Road Safety Commission (N28.9bn), (11) Maritime Security (N4bn) and Police Reform Fund (N15bn). Adding all these up brings the total of our spending on the security sector to N1.145 trillion, not the N922bn highlighted. The equivalent tally for 2011 was N1.174 trillion, about N30 billion higher than this year.
We will begin the analysis of the security sector with the budget of the Intelligence Community – the office of the NSA, the SSS (Internal Security), the National Intelligence Agency (External Counter-Intelligence) and the Presidential Air Fleet (PAF). The budget of the Defence Intelligence Agency and Directorate of Military Intelligence are under the Ministry of Defence, and are therefore excluded.
It is worth noting that the NSA is one of the 20 special advisers approved by the National Assembly for the president, but he sits in the Federal Executive Council as a member. His office is an advisory office and his main job is coordinating the activities of the security agencies, with staff strength of about 100. Each agency is independent of the NSA and routinely reports directly to the president. It is therefore difficult to explain how the NSA has the highest budget of all in the intelligence community- higher than that of the SSS with about 15,000 staff and the smaller but far more effective, NIA. The NSA’s budget consists of N212 million for personnel cost, N3.64 billion for overheads and a whopping N33 billion for capital projects! The respective proposals for the SSS are N17bn, N5bn and a paltry N1.8bn! No wonder the SSS is handicapped in dealing with security threats within our borders! The NIA is not much better with N19.7bn for staff costs, N3.9bn for overheads and N2.6bn for cap[ital projects.
A cursory look at the NSA’s capital projects is even more revealing. Over N1.1bn will be spent on satellite communications, over N3.5bn on something called “data signal centre/equipment” and N717 million for Iridium/Thuraya Communication platform. I thought that Iridium went out of business nearly a decade ago, and Thuraya is an insecure form of communication used mainly by global companies to connect far-flung personnel. Are our agencies using this for secure communications in the 21st century? I wondered about that until I saw the provision of N78 million for a presidential communications network and N27bn for the establishment of a “strategic operations centre”. We all hope that the most advanced technologies will be adopted in deploying these – and certainly not low-earth orbit satellite systems like the defunct Iridium!
The Presidential Air Fleet is under the NSA’s office. Apart from modest provisions of N15.6 million for personnel costs, N969 million for overheads (spares, checks, and aviation fuel can be expensive!), there is a provision of N16.8bn ($110 million) for a brand new plane for the presidency. This is quite an expensive plane because a fully-equipped high-end Gulfstream 5 can be acquired brand new for between $40-50 million. The plane type and specifications were not mentioned in the budget, and these should interest the citizens of Nigeria and the National Assembly.
Within the budget of the State House is a proposal to buy two brand new, bullet-proof Mercedes Benz 600E cars for the presidency at about $1 million each. I guess since our two topmen are getting new cars, it makes sense for them to have an additional new aircraft as well – but in a year in which we are living above our means, spending at least N1.1 trillion we do not have, and borrowing N794 billion to make ends meet? We are broke as a nation, we now know. We will collapse if the fuel subsidy is not withdrawn, according to our president. Are our leaders not too expensive? Are they sensitive to our cries for improved electricity, affordable transportation and jobs for our youths? The ball is in the court of the National Assembly to restructure this budget.`
Nasir Ahmad El-Rufai