Recurrent expenditure gulps 59% of 2011 budget

The trend of disproportionately high rate of recurrent expenditure that has characterised Nigeria's annual budget estimates has persisted, as it will gulp 59 percent of the 2011 budget.

Figure from the N4.226 trillion budget that was presented to the National Assembly by President Goodluck Jonathan on Wednesday proposes N2.481 trillion for recurrent expenditures. This is contrary to government's earlier plan to cut recurrent expenses.

The Finance Minister,Olusegun Aganga, had the penultimate week, in a public hearing organised by the House of Representatives Joint Committee on Finance and Aids, Loans and Debt management in Abuja said that he was working on changing the trend in the country's supplementary expenditure which was suffocating capital expenditure.

Mr. Aganga's view was corroborated by the Senate President, David Mark who told Mr Jonathan on Wednesday, during the budget presentation ceremony in the National Assembly, that disproportionate ratio of recurrent and overhead expenditure to capital expenditure is unacceptable and unsustainable.

"No nation desirous of meaningful development can afford such a disproportionate allocation of its financial resources between consumption and investment towards its own future development," the Senate President told the President. "This means that the cost of running government has been increasing at an unsustainable rate. We must all rise together and address it."

Cutting it

He added that the National Assembly will henceforth re-evaluate budget aggregates and other major macroeconomic variables across the board for all Government(Ministries Departments and Agencies) MDAs and other arms of government to lower the personnel and overhead expenditures, and improve the level of appropriations for capital expenditures." we must drastically cut down the cost of running government vertically and horizontally in the three arms of government as well as the three tiers of our federating unit," the Senate President said. "In this regard, the National Assembly will lead the crusade. We will make the required sacrifice and review our recurrent expenditure. We expect others to make similar sacrifice."

Mr Jonathan, however, said the government is mindful of the unsustainable trend in recurrent expenditures and is implementing a wide range public financial management reforms which will boost fiscal prudence and increase quality and efficiency of spending.

"To ensure that this trend does not result in the crowding out of the critical capital investments required to achieve our development goals, a high powered Expenditure Review Committee was established to suggest practical measures to rationalise recurrent expenditure without compromising the quality of service delivery," the president said.

He added that the government has already saved N12 billion in personnel cost by introducing an integrated payroll and personnel information system in 16 MDAs.

Auditing NNPC

The president also added that the government intends to block all revenue leakages in the system by conducting audits for all revenue generating agencies including the Nigerian National Petroleum Corporation.

He also said the government will strengthen the pre-shipment inspection for crude oil and gases, fast track the implementation of key reforms by the Federal Inland Revenue Service and the Nigerian Custom Service.

The 2011 budget estimates is 18% less than what was budgeted last year. It comprises N196.12 billion for statutory transfers, N542.38 billion for debt service, N2.481 trillion for recurrent (non-debt) expenditure, and N1.005 trillion for capital expenditure.

The 2011 budget is predicated on assumptions that reflect the outlook for 2011 and "our expectations for improvements in domestic oil production, stability in the international oil markets and sustained economic growth," the president said.

The assumptions include: oil production of 2.3 million barrels per day, benchmark oil price of $65 per barrel, exchange rate of N150 per US dollar, joint venture cash calls of $4.5 billion, and projected growth rate of 7%.