Recently, President Muhammadu Buhari signed into law the Appropriation Bill for 2020 effectively returning the budgeting cycle from January to December. The predictable cycle is in conformity with the provisions of Sections 80, 81 and 82 of the Constitution which maintain that budget cycle should commence from January to December.
This puts in context the difference between a fiscal year and calendar year of budget spending. What has been the common practice in Nigeria over the years is what could be described as calendar year of spending an income. Fiscal year is appropriately defined with specific goals for each quarter of that year. With the 2020 Appropriation,there will be 12 months financial year, and that translates to a fiscal year.
In the past 20 years, the December-January budget cycle has only been achieved twice namely in 2001 and 2007 respectively. The passage of the 2020 Appropriation enjoyed the collaboration between the executive and the legislature amidst the crystallising perception of the National Assembly as a rubber stamp.
What is at play here is the political will and general consensusby both arms of government in terms of serving national interest as reflected in the quick passage of the budget tagged “The Budget of Sustaining Growth and Job Creation.” This is an attempt at boosting job creation and diversifying the economy by strengthening non-oil sectors including agriculture, solid minerals, manufacturing, among others. These are areas that will boost activities of the Small and Medium Enterprises (SMEs).A recent report from SMEDAN classifies SMEs as the engine room of any nation as they generate about 80%-90% of all the employments in the country.
The 2020 budget is not a document on its own. For effectiveness, it is operating with other documents. Enabling environment seems to have beencreated to fast-track the amendment of these bills to allow for smooth running of the budget. It is one thing to have a budget, it is another to garner the revenue needed to fund it. What can be loosely referred to as complementary bills that will run concurrently with the budget are the Finance Bill and the Public Procurement Act. There are relevant aspects of the Finance Bill that can contribute in financing the budget.
The Finance Bill appears to sustain the critical sector of the country’s business enterprises by giving them the necessary support to be up and running. This suggests government’s readiness to look at alternative means of income beyond oil and gas because non-oil exports will boost the country’s revenue.
In the Finance Bill, agricultural production and processing which before now enjoyed about five years tax holiday, has received an increase of ten years. The objective is to encourage secondary production and value addition.
Arecent report by the National Bureau of Statistics (NBS) on merchandise trading is another diversification exercise to shore up revenue. Figures show that in 2018, the bulk of exports from Nigeria to Ghana was a significant quarterly N900 billion value of exports from floating production platforms.This means that even beyond agriculture, Nigeria is positioning itself as a major reference point in producing floating platforms. The local content policy was responsible for building this capacity. It shows the unlocking of another potential.
There is a provision in the Finance Bill for a rebate for SMEs. Companies with less than N25m turnover have been exempted from paying tax. Going by statistics, there are about 22 million registered SMEs in Nigeria. That translates into more retained earnings or spending in the marketplace that expands the GDP base. Companies that have run their businesses at such threshold will also be reinvesting. That means businessexpansion. Medium level companies with turnover of between N25m and N100m also have their nominal 30% company income tax reduced to 20%.
Another component of the Finance Bill is the Value Added Tax (VAT) whose percentage has been increased from 5% to 7.5% even in the face of complaints of possible inflationary pressure. In the meantime, the federal government gets 15% of the receipts from VAT.
Some MDAs are complaining about how issues surrounding procurement have been a major hindrance to the execution of projects. Public Procurement Act reform will correct some of thelapses in procurement. Part of the Procurement Act stipulates thatall contract considerations should be completed within three weeks. That’s a major departure from the three months’ timeline that is being observed now.
This is particularly fundamental because mobilisation fee for contractors will witness less bureaucracy.The end result is available funds in the hands of the contractor who is able to employ more people at take-off. What this entails is quick delivery of service with its impact on the bottom line for the company alongside increase in productivity which is a basis for GDP measurement.
With the lifespan of the Economic Recovery and Growth Plan (ERGP) coming to an end by 2020, advocacy for a new national development plan for 2020 Appropriation has heightened despite indications that an organic budget billwill be forwarded to the National Assembly tolegitimise the budget cycle. When the bill becomes an Act, it will make provision for a permanent template of relationship between the National Assembly and the executive. Planning becomes easy as each budget cycle willitemise processes, functions, activities and targets. Besides, it will give the executive the leeway to plan a four-year budget cycle, and how to activate it in each fiscal year.
However, the objective of this budgeting system will not be fully realised if revenue-generating agencies are not sanitised and strengthened to operate efficiently.The National Assembly should strengthen their oversight instruments to make sure that revenue-earning agencies perform well in actualising their revenue targets.
It is important to evaluate the capacity of revenue agencies in shoring up revenue. Tax agencies in the states should connect with the federal level through the Joint Tax Board even though analogue process has made tax evasion easy. And even when tax collected is remitted, a portion is retained by the agencies. E-taxation system and unbundling the complex nature of conspiracy within the taxation system, should be encouraged.
Available records show that in 2018, the Customs Service generated over N1.32trn but it is doubtful whether this can be sustained given lack of adequate facilities. There is a need for seaports to be covered by non-altruistic equipment that will ensure 100% examination, as against physical examination which is largely in operation at the moment. Other seaports in the country including those in Calabar, Port Harcourt, Warri, among others, should be opened up. It is discouraging to know that it takes about 30 days for goods within Tin Can Port to be moved out of the facility. Developing these ports, means more revenues will be generated.
What follows is monitoring and coordinationto implement the contents of the budget to make it a robust fiscal year. The publicity given to budget presentation should also be granted to budget evaluation. This will raise certain concerns about budget performance of the previous year and lessons learnt.
The Fiscal Responsibility Act of 2007 mandates the Minister of Finance through the Budget Office to monitor and report on the attainment of the implementation of the budget and report back to the Fiscal Responsibility Commission and the Joint Committee on Finance of the National Assembly, on quarterly basis.
The purpose of the report is to have an assessment in ensuringthat the budget trickles down for the benefit of Nigerians. One of the ways to achieve this goal is to make certain that the sub-nationalsalign with the federal government in implementing this budget cycle. What this portends is a consolidation of fiscal activities at these levels with the potential of impacting both the public sector and the private sector.
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