Nigeria’s Government Agencies Bear Burden Of Government’s Cash Crunch

The Federal Government of Nigeria is finding it difficult to raise money to fund its operations and its various ministries, departments and agencies (MDAs) are beginning to feel the pain.

Sources have confirmed to Nigeria’s heavily circulated English-language business paper Business Day, that most federal government agencies are currently operating on shoe-string budgets, struggling to pay salaries and have not accessed more than 10 percent of their budgeted capital expenditure for the year.

The precarious state of the government agencies piles pressures on an economy still recovering from a recession.

Nigeria’s economy is forecast to expand by only 2 percent in 2018, below an average population growth rate of about 3 percent.

“The public sector is a catalyst for business activity in Nigeria, so when the agencies are hampered by lack of funds in performing their critical functions, it affects business and the private sector and rubs off negatively on the economy,” said Taiwo Oyedele, a partner and head of tax and regulatory services at Price Waterhouse Coopers (PWC).

One of the critical agencies struggling for funds is the National Bureau of Statistics (NBS), which has not been able to release unemployment numbers since the last quarter of 2017 because it has not received enough funding to collate the data. As seen in its data release calendar, the agency was scheduled to release the Q4, 2017 labor force report on January 19, 2018, but has not even commenced the survey due to lack of funds.

A paucity of the NBS reports will make it difficult for evidence-based decisions that guide policy implementation and evaluation as well as business decisions by investors. Sources at the statistics office said only 25 percent of their funds have been released to the statistics office for this year’s CAPEX, while overheads have not been paid for about five months now.“It is not an NBS issue alone, it is across the agencies, but we hope that things will be sorted out soon by government,” one source explained to Business Day.

As of October, total releases for capital expenditure stood at just N486 billion, as against the budgeted N2.86 trillion. This figure represents a mere 17 percent outturn, as low revenue means the government lacks the cash to implement its budget.  The third-quarter economic report of the Central Bank of Nigeria (CBN) shows the federal government is experiencing a significant shortfall in revenues, which has been compounded by the fact that it is spending more money paying its creditors than running the government. Total federal government revenues for the first nine months of 2018 stood at N2.75 trillion, just about half of the projected revenue.

The federal government’s expenditure for the same period stood at N3.7 trillion, which also represented a 27 percent shortfall (N1.34 trillion) compared to the N5.04 trillion that should have been spent within the period, as the government cut back on its expenditure because it is not able to raise enough revenues.

A further breakdown of the federal government’s expenditure for the period shows that 82.4 percent of the total expenditure was recurrent, while 12.5 percent went into statutory transfers. Only 5.1 percent of government expenditure for the period went into capital expenditure, the data from CBN shows.

In addition, of the 82.4 percent of recurrent expenditure incurred by the federal government in the third quarter, more than half, 59.1 percent went into debt service payments, leaving only 40.9 percent for non-debt recurrent expenditure, a situation which explains why many government agencies, including the military, are now complaining of lack of funds to run their operations effectively.

The third-quarter trend is not a one-off, considering that in the first half of 2018, debt servicing accounted for 58 percent of recurrent expenditure, which was higher than budgeted and was the single largest item the government was spending on.

At N1.24 trillion, debt service or interest payments were 12 percent higher than the proportionate budget estimate of N1.1 trillion and gulped 68.9 percent of the Federal government’s retained revenue.

Of this amount, N1.18 trillion (95.2 percent) was expended on domestic debt service, while the balance of N58.93 billion (4.8 percent) was for external debt service.

Non-debt recurrent expenditure, which comprises allocations to government MDAs, paid part of the price for lower than planned revenues and higher cost of borrowing, as it was below the proportionate budget estimate by 63.6 percent, a pointer that the MDAs are operating on shoe-string budgets. Mojisola Adeyeye, the Director-General of the National Agency for Food and Drug Administration and Control (NAFDAC) recently disclosed that the agency is facing significant funding challenges. Adeyeye was quoted to have said on November 19 that 80 percent of the NAFDAC equipment can no longer function due to a lack of funds to fix them and even to recruit more staff.

Even the military is feeling the pain of poor funding, a September 19 report by Reuters News Agency disclosed. The Reuters report claimed that soldiers have been left with “too little equipment, and many vehicles are broken and gathering rust” as soldiers complain of poor funding for their operations.

In recent weeks, there have been reports of hundreds of Nigerian soldiers being killed in their fight with Boko Haram insurgents in the Northeast. This has been largely blamed on the fact that the army has been poorly equipped to fight the insurgents who look to be better armed and more motivated.

Ken Goodluck, an Abuja based political economist, who spoke to Business Day Nigeria confirmed the challenging environment within which agencies operate presently, further disclosing that even contractors are not being paid for jobs already completed, while new contracts cannot be funded.

President Muhammadu Buhari, who seeks a second term at next year’s polls, signed off on a N9.120 trillion 2018 budget in June, after six months of appropriation delays by the National Assembly.

The budget has a deficit slightly in excess of N2 trillion and the federal government plans to borrow N1.643 trillion to fund the deficit and equally hopes to raise N306 billion from privatization and another N5 billion from the sale of government property in order to finance the deficit.

Apart from borrowings, questions are being raised on how the government is deploying billions of naira it claims to have recovered from looters, collections from revenue-generating agencies, as well as oil earnings especially as crude prices, have well exceeded the $51 budget benchmark for much of the year.

The Nigeria Custom service, for instance, said it has already made N784. 88 billion between January and August 2018 and hopes to exceed its N1.3 trillion target for the year. The Federal Inland Revenue Service (FIRS), announced it recorded N4.3 trillion between January and October, which translates to 64.2 percent of its N6.7 trillion targeted for the 2018 fiscal year and is the largest amount raised by the Nigerian equivalent of the US IRS in four years, according to data compiled by Business Day Nigeria.

The 2018 appropriation bill, the largest in the nation’s history, was premised on key revenue assumptions of oil price benchmark of $51 and 2.3 million barrels per day. Although average oil output for the year has not reached the target, average oil price at over $70 per barrel so far in the year has well exceeded the $51 benchmark.