Nigeria’s growth outlook is seen lower in coming quarters due to government bureaucracy in procurement and implementation of capital component of the 2018 Appropriation Act.
For close to two months after the 2018 budget was signed into law, the capital component is yet to be implemented. Kemi Adeosun, minister of finance has said the ministry will soon begin disbursement of funds for 2018 budget implementation.
But analysts are calling for a sense of urgency in 2018 budget implementation, sounding warning on the impact of the delay on the economy.
“Government’s contracting and procurement processes are extremely bureaucratic and cumbersome, which often take months to complete,” Taiwo Oyedele, head, tax and regulatory services, PWC, said.
Responding to BusinessDay questions, Oyedele said, “I imagine some of the processes for awarding the capital projects only started after the budget was approved hence the delay in implementation. Given the dire need for infrastructure in the country, there should be a sense of urgency to implement capital projects without compromising due process otherwise the lost time would mean lost growth opportunity.”
President Muhammadu Buhari, in June signed into law the 2018 budget where the Federal Government plans to spend N9.1 trillion for the fiscal year.
“The issue of delay in budget implementation especially as it relates to the capital component of the budget will continue to remain a challenge in the country’s government budgeting process until the procurement law is amended to remove the encumbrances which delay the implementation of capital projects,” Uche Uwaleke, professor/head, banking and finance, department, Nasarawa State University Keffi, said in an emailed response.
Uwaleke said while the problem is not usually associated with recurrent spending as government appears to prioritize the payment of salaries and overheads, avoidable delays in capital projects implementation especially in the area of critical infrastructure such as power and roads retard economic growth.
Commercial banks risk loan defaults from Contractors who borrow from banks to execute projects in anticipation of refunds that are delayed. The way forward requires amendment of the procurement Act, timely passage of the Appropriation Bill and timely release of funds.
A recent analysis by BudgIT shows that approximately 6, 529 new projects valued at N579.08bn was inserted into the 2018 budget by the National Assembly. Out of the 6529 new projects entered into the budget, 90.6 percent or 5918 items have a unit value below N200m.
Johnson Chukwu, managing director/CEO, Cowry Management Limited who spoke with BusinessDay by phone admitted that there has been no formal report on the implementation of capital expenditure.
He said such weekly reports should be disclosed so that the public can scrutinize same. Chukwu opined that there should be a change in narratives to put pressure on the Federal Executive Council to carry out its executive responsibility.
“If the Appropriation Act is ready by January in line with the provisions of the Constitution, execution of capital projects can commence before the start of the rainy season such that substantial progress could be made before the fiscal year ends. But when the budget proposal is not passed and assented to till the middle of the year when the rains set in, it becomes difficult to implement significantly the capital component of the budget even when it is rolled over into the following year,” Uwaleke said.
He said this situation is made worse by the fact that implementation of annual budgets often doesn’t commence in good time due to avoidable delays in both the preparatory and the legislative stages.
Hope Moses-Ashike
