Budget 2012 – Broke Country, Expensive Leaders
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 here.
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.`
Nice critique. Unfortunately the majority of Nigerians will not read this article and will therefore remain ignorant of the excesses of governemnt in Nigeria.
One thing I’d like to suggest is that people like you with access to data and information around the world could do a pier analysis of key projects the governments (Federal, State, and Local) embark upon in this country.
For instance, if the government says it will take 2years and 200million naira to build a 1km road, it would really be nice to know how long it takes, and how much it costs other countries with similar climate and terrain to build the same 1km road.
I find it rather intriguing that this governemnt is telling Nigerians that it will take 2years to complete the repairs of the refineries, when other countries use the same 2years to build bigger brand new refineries. This governement apparently is yet to grasp the urgency of current times.
Let me reassure you, the people are reading your articles in the backpage of ThisDay. In fact, whenever we don’t see it, we get worried.
Will carry out a surgical analysis of your write-up and send you a prognosis later.
You are definitely keeping the decision makers on their toes.
Thanks Mallam.
Mallam,
Wonderful analysis. But my fear as expressed above is : how many Nigerians will read this?
One thing I will never forgive Nigerians RULERS for is the bastardisation of our education system system.
Our graduates and lecturers will rather argue about Man U, Arsenal, Chelsea, Real Madrid etc than argue and critically analyse the budget that directly concern them!
Jefrey Sachs, Consultant to UN sec Gen rightly noted in a recent twitter post during the occupynigeria protest that the academic community voice has been criminally silent.
Just Imagine what a future beckon with this generation!
To govern a state, educate her citizens. To Enslave a nation, make the citizens illiterate!!!
We need 1000 more NER!!!
Sad, very sad indeed !
Dear Sir,
I just read your thought provoking piece on the above subject matter in
Thisday newspaper today and I must say thank you for taking the time to do
this for a nation that really need a reawakening. Many people out there
are simply asleep, including those that are charged with the
responsibility of seeing these things. unfortunately, the unwieldy way the
budget is written does not help matter for many- the many lines of
repetitive items is distracting.
However, allow me to point out that the information you provided on the
proposed purchase of N16.8b new aircraft does not seem to be anywhere in
the Presidential Fleet budget (here attached).
I am however open to know if this copy i sent is incorrect cost it the
same as I downloaded earlier and now from the budget office website.
Or rather maybe I am not looking in the right place.
Thank you and kindly respond.
–
Adebayo Nurudeen DURODOLA, Msc
Economic & Investment Strategist
P: +234 1 9568984
M: +234 7025 144 567, 8028 914 249
E: adebayo.durodola@adebayodurodola.com
W:www.adebayodurodola.com
Sir, first, I must thank you for your consistent commitment to the cause of our land despite perhaps justifiable reasons to relent. Secondly, I have reason to believe people are getting increasingly aware, hence the need to keep feeding us with vital information such as this which will help – at least the middle class – see the issues for what they actually are. People will tweet, post & re-post on facebook, etc, and we can never tell what ripples impact that could have. My concern, however, is for the masses. Entertainment has proven to be an effective tool of enlightenment & we saw sporadic significant success during the fuel subsidy protests at a place like the Ojota park. I however feel the progressives may need to become more intentional in using it to open the eyes of the masses to issues like this, and their implications.
I will personally print this article and distribute it to people to read. Not it may be out in the papers but there are many more who cannot afford the newspapers. I will do my part to get it to as many people as I can.
add a facebook link to your site so that we can share it and people can know about all these things.
Thanks mallam, this ȋ̝̊̅§ a nice piece! I know all d fools in power will not stop there corruption but soonest they shall all be consumed by their greed!!!
Thank you for the information mallam. Please I want to ask is there any difference in the way Nigeria is being run now to what it was in the previous government. We need a total re appraisal on our government in this country. CORRUPTION is the problem.
Sir ofcourse we our persident as no dream for this good country we pray that one day our leaders we impeach by death one day by the creator of hevean
Sir nasir you have no right to speak on this matters! You are even mor corrupt than GEJ you were a part of a wasteful Government under the obj regime…you equally benefitted from the fat allowances and over budgets as minister of fct…I only wonder why suddenly you have changed your thinking..as director of BPE (bureau for public enterprise) you made a mess of the privatisation scheme so many shady and fraudulent deals that the yar adua administration had to turn back many! As minister of fct you seized a lot of properties turned around and allocated them to your associates!!! You are a part of the corrupt system and I think it is an insult that you are one of the people at the fore front of fighting corruption! Sir you were the major sponsor of CPC the last elecctions where did you get the monney!!! I strongly believe those who live in glass houses shouldn’t throw stones! You are a part of a corrupt system and if given a chance I can reveal certain information……Nigerians let’s fight corruption proper! Long live Nigeria
Mallam, dis is splendid. All these analysis are critical matters dat affect d development of this country. Of paramount importance is d fact that all these budgetary provisions are just for d pocket of few. It is just to enrich some few Nigerians. Looking back at d time we’ve been having gargatuan budgetary provisions, dis nation wld have considered some projects a far completed thing if the money appropriated and released were utilised for their intended purposes. But wat happens, a reoccurence of budgetary provisions for wat was mentioned in most cases for same previously-budgeted projects. D calls for checks to d senators will not & cannot help only if u realise dat agitation for legislative position didn’t come wit d intention to serve d masses, but for self enrichment. As much as protest to counter the spending menance in government wld av been easily tackled, the system of governance that allow people to be assaulted at any slighted attempt to cry out makes it worrisome. Dat was just reflected yesterday when d elderly were tear-gassed. Are they also hoodlums. Oh! My nation. Why, why why. So Mallam, wat do we do now.
This write up is on point, but like u said, we need d nationaal assembly(thee legislature) 2 stand up 2 d Executive! But this is unlikely since they are both corrupt! The senate president gets 600million a year! This is legal but unnecessary! Are they willing to cut thiers 2?
it is a nice revelation. But i want to knw if you have forgotten about all you did as fct minister. You collected my uncle’s land and gave to your relative. Not just my uncle you did it to many people, now you are a good man. You will be punished just like the thiefs in power now.
@ kelvin that happened to you too!!! He took our house too…..and not mention the personal vandetta he caried out against many others…plus the scam he headed as BPE boss
Mallam Nasir El Rufai,welcome done for the great write up and challenge before the legislatures. The president need to wake up to task.
sir, the state of this nation is pathetic. the government are the problem of this nation . God help us
well done. Sir, All that criticise are doing just for justice that you have done. Imagine a person cause you have seized his uncle plot,which i know got it from the corrupt way. Up Up Up malam.
Great analysis mallam. This is revealing and also very sad. It seems to me that its either we do not have a thinking leadership or they are outrightly not very smart crop of people.
Thank you sir, we appreciate your effort on this budget, my prayer is that God almighty will reward you sir.firstly since 1999 that Naija is in democracy no citizen have seen these anlysis before except those who are in government, but now that the truth is coming out from someone like you what we need to do is to ensure this corrupt government is VOTE out of power before the sell the whole nation to themselve by let everybody aware that this PDP is part that does not cares about their people whose vote them power . I will be very happy if the subquent one is forward to my mail thank.
P D P or blood sucker
Its a nice one but i dont think u r d ryt person 2 say, wat did u do 2 stop this while in govt. Birds of d same feather.
E-l rufai are you trying to cover your evil with other peoples fault, think about the harbok you cause other Nigerians when you are the minister of the FCT.
Malam,
I think we have to start the move in making this great country of ours a better place for all. You are doing a wonderfull job, Keep it up and God bless.
Thank you malam,we need more patriotic citizens like you,dont mind the critics keep it up. Long live Elrufai.
Mallam;
Don’t mind the block heads who can not understand the issues of the moment.
They turn to sentiments OUT OF SHAME of the performance of their kith and kins.
See how they post embarrassing jargon.
Keep up with the good work (your past if at all, not withstanding).
We,re tired of your constant criticism of everything and every decision by government since u left as a Minister. Pls get a life like Ribadu did or focus on yourself for a change. Let,s see how better u fare
I am not a fan of reading at all talkless of reading articles written by people. But I must confess this is a very brilliant article Mallam.. I really appreciate your effort and I hope people will try as much as possible to read all the artcles written by a noble person like you so that they can clearly understand what this country is going through. Kudos to you Mallam Elrufa’I. May Allah SWT reward you for all your good deeds.