Tuesday, 29 May 2018

Fighting Nigerian Corruption Might Be Dangerous, But Preparing A Nigerian Budget Is Hell!

On Nov.7, Nigeria’s president Buhari presented a 2018 budget of 8.6 trillion naira ($24 billion) to the National Assembly for approval. More than six months later on May 16—a record delay—the lawmakers returned it to the president, approved and ready for his signature.


The approved budget had, of course, grown by 500 billion naira to 9.12 trillion. Whatever work was done on the budget in the intervening period between submission by the president and passage by the lawmakers was between inconsequential and non-existent. The budget became a political football and was taken hostage several times for various reasons—not least their own pork barrel.

And even if the lawmakers approached their oversight exercise in good faith, there are structural reasons why they are simply unable to do their jobs, chief of which is the very high attrition rate of legislators in Nigeria. Only three lawmakers remain from the set who entered the assembly with the return of democracy in 1999 and every four years a significant majority of them lose their seats.

Okonjo-Iweala’s book, “Fighting Corruption is Dangerous”, is for anyone curious on Nigerian graft and even national budget planning While some countries like the United States have the opposite problem of entrenched long-term congress members, Nigeria’s young democracy finds there is simply no lawmaking experience retained in the assembly. Also, there’s no incentive for any lawmaker to acquire this experience given the low political returns. Nigeria’s budgeting process is thus no better than a sham with the final document inevitably riddled with errors and unfunded spending. And that’s when it has not been “padded” by mysterious civil servants.
Fighting Nigerian Corruption Might Be Dangerous, But Preparing A Nigerian Budget Is Hell!
All this might make the casual observer ask how then were the lawmakers able to raise the budget size by more than 5% without any discussion about the taxes or revenues to fund it? The simple answer is the “budget benchmark” rate. Nothing shows up Nigeria as a petro-state more than this annual exercise of moving around the rate on which the budget is based. So while president Buhari submitted his budget proposal based on a “benchmark” of $45 per barrel of oil, the lawmakers raised it to $51 per barrel (with one eye on the recent rally in oil prices) and proceeded to allocate the increased spending power to their favored projects.

These days, the finance minister, Kemi Adeosun, no longer holds the budget and planning portfolio as part of her office following the decision by Buhari to split the role between two different ministers. But when Ngozi Okonjo-Iweala was finance minister, she was also responsible for preparing the budget. She has also been Nigeria’s finance minister under presidents Obasanjo and Goodluck Jonathan.

Okonjo-Iweala’s new book, Fighting Corruption is Dangerous: The Story Behind The Headlines, could not have appeared at a better time for anyone curious about this particular bit of Nigerian sausage-making. The former World Bank managing director says she wrote the book to tell her side of the story after being, unfairly in her view, maligned by the local press for her role in the previous, widely discredited government of president Jonathan.

Much of the book covers well-covered ground that is no less painful to read. The harrowing experience of her 83-year old mother being taken hostage by kidnappers for a week in December 2012 was clearly written with a lot of pain and anger. The kidnappers had ostensibly demanded her resignation because she had taken on some oil marketers in Nigeria’s notorious petrol subsidy scam, though it’s worth noting kidnapping relatives of high-profile individuals was rampant at the time.

Okonjo-Iweala describes several threats of violence against her, including a meeting where putting her in a wheelchair was discussed. Okonjo-Iweala also describes several threats of violence against her, including one meeting where the participants concluded that putting her in a wheelchair by permanently depriving her of the use of her legs was an acceptable way to get one’s point across. A sitting governor nearly got physical with her over the issue of sharing money to the states while a more polite governor simply took to the papers with a smear campaign when she refused him approval for his state to take on debt that would have pushed it to insolvency.

The general theme of the book is that corruption is so widespread and pervasive in Nigeria that it is difficult to impossible to bring it down with any measure of significance never mind actually ending. A report by PwC in 2016 estimated that Nigeria’s 2014 GDP could have been 22% higher if the country had managed to reduce corruption to Ghanaian levels. But one cannot read the book without concluding that even this reduced ambition is anything but a very tall or perhaps impossible order. Quite literally everyone—from politicians to civil servants—is hard at it.

But buried in between the stories of harassment, kidnappings, rampant theft and various other shenanigans, is perhaps the book’s best and most illuminating chapter. Titled “A Twisted Budget Process”, the book’s fourth chapter explains the process by which Nigeria produces its budget every year in a way that is both upsetting and embarrassing to read.

It is bad enough that almost all Nigeria’s 36 states are completely dependent on handouts (‘allocations’ in the local jargon) to carry out their most basic functions and are unable to raise any form of independent revenues. Worse is how this dysfunctional behavior has meant that the country is simply unable to put any funds away no matter how much it earns from oil sales—such funds quickly become a target of the governors demanding that it be distributed. Yet the volatility of oil prices, on which the entire allocation edifice is constructed, guarantees the country will always lurch from boom to bust every few years. There is no need to save for a rainy day, the governors would always argue, because the rain is currently pouring down. This argument is used whether the oil price is $100 or $20 per barrel.

And then there are the lawmakers who view the budget benchmark as a tap which can be opened up whenever they need more money. She describes the annual unedifying back and forth between the executive and the legislature over the budget as the underbelly of the process. Back then, every additional dollar on the benchmark rate in the budget meant an extra N50 billion to spend (given that an extra $6 per barrel yielded an additional 500 billion naira of spending in this year’s iteration, we might conclude that this now works out at just over 80 billion naira) as far as the legislators were concerned so they simply worked backwards from whatever amount they needed for their pet projects and allowances for themselves and raised the benchmark accordingly.

The former minister documents how this played out in the 2013 budget process. She, working with the budget office, had opened the bidding at $72 per barrel for the budget in the second half of 2012 while oil was trading at $92 per barrel on the international market. The first set of consultations with the leaders of the national assembly concluded by raising it to $75 per barrel and she went away to finalize the budget. But the members of the lower house were having none of that and announced they were going to $80 per barrel. The usual arguments ensued, including the old favorite: “how do you save money when you are hungry?”

In the end, Okonjo-Iweala was forced to accept a price of $79 per barrel. This meant an extra $4 per barrel or 200 billion naira on the earlier agreed amount. Shockingly, or perhaps not, the legislators took 100 billion naira of the increase and allocated it to themselves for “completely new projects that were yet to be designed” as she writes.

During the preparation of the 2015 budget in late 2014, oil prices had begun to fall. What followed was a comical reversal of what had happened in the previous go-go years—the benchmark started at $78 then went down to $73 and then to $65 per barrel in hot pursuit of the actual price of oil which was in free fall on the international markets. In the end this was not enough as oil prices ended the year at $58 per barrel. Going into an election year, the lawmakers were thus faced with reduced spending to which they reacted by throwing predictable tantrums.

It might sound as if this is ancient history being narrated and but it was merely a couple of years ago. Yet the lawmakers are back messing around with the budget benchmark (elections are less than a year away) and filling the budget with the usual dubious projects as oil prices inch up. Does the country ever learn? Well, for one, as stated earlier, it is to all intents and purposes a completely different set of people in the national assembly from the one she describes in her book but the pattern of behavior remains exactly the same. This is where the book is most useful—shining a light on how a critical process in any country’s governance has been reduced to fighting over an arbitrary price over which Nigeria has little control. If this sparks a debate about the budgeting process, then she would have performed national service in writing it.

On less solid ground are other aspects of the book. It is often written as if she is speaking exclusively to the international community where she retains a very good standing and continues to earn her pay. Addressing Nigerians seem an afterthought for the better part of the book. There is no self-criticism to be found in the book even though she held the purse strings in a notoriously spend thrift government under whom billions of dollars simply vanished. Instead she offers instances of where she prevented some money being stolen as evidence that she did her best.
Okonjo-Iweala presents herself as someone with no case to answer for whatever crimes were committed on her watch. She may have a point, the current government has been most incompetent in prosecuting cases of corruption that it is hard to tell who is genuinely being prosecuted for their crimes and who is simply being witch-hunted to grab the headlines. She paints a picture of herself as someone who was and remains under attack simply for doing her job and no more. One is sympathetic to a point.

But she has a right to her story and it is an important one. Nigeria remains very dysfunctional in the way it carries out the normal business of government. To hear it from someone who very recently went by the title of ‘Coordinating Minister of the Economy’ is about as loudly as this fact can be stated. It is also another important step away from the notorious self censorship of Nigeria’s elite who hardly ever speak about the problems in government when they are out of it (for fear that they may never be invited back). It is not yet a flood, but a trickle of books can now be found by people who served at the highest levels of government stating what they saw and experienced, however economical with the truth such telling might be.

In these books, Nigerians can now begin to see their government laid bare in all its dysfunctional messiness. And then maybe they can begin to do something about it. Quartz Africa
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