Skip to main content

Fiscal responsibility: Kaduna State's debt burden and unrealistic budgeting


By YUSUF ISHAKU GOJE

The budget is said to be the second most important document outside the constitution, without which even the constitution cannot fully function. It enables governments to turn campaign promises articulated as policies into concrete public services that seek to improve the overall living standard of the people. That is why it remains the most critical socio-economic policy tool that outlines the government's priorities in financial terms.

The extent to which the government's proposed spending sticks to what it has projected as realistic revenue makes a budget credible. Therefore, it also becomes a measurement of government's sincerity and capacity to deliver on campaign promises. More importantly, the credibility of any budget depends on its realism, as you cannot spend what you cannot get. That means for a budget to be realistic it has to be substantially achievable.

However, politicians are always under pressure to spend more, most times overshooting projections made in the Medium Term Expenditure Framework (MTEF). They do this by including revenue sources that they know are not realizable by the end of the fiscal year. Ideally, the MTEF ensures that the government's expenditure does not exceed the total sum of projected total revenue.

Kaduna state has since 2014 embraced the culture of medium term planning through the MTEF. This has improved the quality of the annual budget as a result of the technical and evidence-based approach therein. Consequently, it has also thrown up the debate on budget realism. The trend since 2016 to 2020, have shown that the government had not adhered to the MTEF recommended budget size. This is worrisome.

The actual performance within the same period, the exception being 2019 as a result of a supplementary budget passed, has been closer to the MTEF recommendations than to the final approved budgets. For instance, in 2016 the MTEF recommended N94 billion but was inflated to N172 billion in the approved budget; while the actual performance was N80 billion. Similarly, in 2020 the actual performance was N190 billion, even though slightly higher, is closer to the MTEF recommendation of N178 billion, than the approved budget of N259 billion.

Commendably, the external debt service versus total revenue, total debt service versus total revenue, and domestic debt service versus IGR are all below the threshold. However, the fact that we all must come to terms with is that the debt profile of the state is high. This is evident as the total public debt for Kaduna state was N284,398,612,174 as at 31st December, 2020. This is broken down into domestic debt, which is N68,754,361,084; while external debt stands at N215,644,251,090.

More importantly, our focus should be on the ratio between total domestic debt versus total recurrent revenue which is 64%, above the 50% threshold; total domestic debt versus IGR is 156%, above the 150% threshold; total external debt versus total revenue is 201%, above the 50% threshold; total public debt versus total revenue is 265%, above the 100% threshold. This should give us sleepless nights particularly because the 2022-2024 MTEF also shows that in 2021 about N71,687,054,660 and in 2020 about N30,475,012,034 are earmarked as loans.

Even though we are still within the debt service threshold, which might look convenient in the short term, the worry is our capacity to sustain this in the future. This is if we consider the large chunk of the debt, made up of the World Bank P4R loan, with a moratorium of ten years before we start paying back. Granted that the state government's investment and revenue drive should be commended, a closer look leaves one with some concern.

The questions to be answered about our repayment capacity. Would insecurity allow for inflow of massive investments and boosting of agriculture's contribution to the Gross Domestic Product (GDP)? How many micro and small businesses is the government supporting, considering that the Urban Renewal projects' (Market Component) has displaced many of them? Is the upward IGR spike sustainable considering that the Federal government refund and and other recoveries will end one day? What happens if that ends? Also, is the statutory 10% and revenue collected on behalf of the local government part of what is being declared? What happens if the local governments are granted autonomy in the future?

The reality is that there is no better option than for the government to strictly adhere to realistic budgeting now. Thankfully, at the recent MTEF Stakeholder's Engagement, the Planning & Budget Commission has made a commitment to adhere to the recommended 2022-2024 MTEF budget size. The total budget size for the year 2022 is put at N197,563,002,078. This is realistic and if it is adhered to it will make the budget more credible with improved prioritization.

Finally, we call on the government to always base its annual budgets on realistic projections of all sources of revenue. This will not only ensure credibility but also close the trust gap with the citizens. It will also ensure that we move closer to addressing our socio-economic challenges as a state.

Goje, is a good governance advocate and writes from Kaduna-Nigeria

Comments

Post a Comment

Popular posts from this blog

Why States may be unable to pay new minimum wage -Commissioner

Citizens listening with rapt attention  By YUSUF GOJE C ommissioner, Planning and Budget Commission Kaduna state, Mohammed  Sani Dattijo has queried the rationale behind the proposed upward review  of the minimum wage, which he said compels even states that are not  viable to play ball. Making the assertion at the  recently concluded Citizens' Consultation forum on Medium Term Expenditure Framework 2019-2021  held in Kaduna, Dattijo said:"The minimum wage should be moved from the  exclusive to the concurrent list, even though Kaduna state is  healthier than most states, there are states that cannot afford the  increase in minimum wage. If this is not done, the increase in minimum wage will only be on paper but difficult to implement by many states, resulting in labor disputes". He stressed that the exclusiveness of this piece of  legislation which empowers only the Federal government to de...
Post a Comment
Read more

Yearning for sound Fiscal Responsibility

Fundamentals for good governance G overnment and Citizens' Groups in Kaduna state have teamed up to engender effective budget tracking and implementation to create the enabling environment for increased internally generated revenue (IGR), in accordance with International Public Sector Accounting Standards (IPSAS). This was the fallout of a three-day eye opening event, facilitated by Partnership to Engage, Reform and Learn (PERL-ECP), in collaboration with the Kaduna state government. The engagement touched on the urgent need to conduct budget trend analysis across key sectors - Economics, Social, Law/Justice as well as Administration, including audit report, all aimed ultimately at putting Kaduna state in good stead for sustained economic growth. Addressing participants drawn from government and citizens' groups, Mr Timothy Effiong, a Public Financial Management Consultant, maintained that even in Kaduna a state that is very policy-driven, there exist gaps in g...
Post a Comment
Read more

Coalition urges COP-27 to fast track advocacy against Climate Change

  Participants in a group photograph after the event in Kaduna By EDDY OCHIGBO,  A  coalition  of environmental organizations in Kaduna, under the aegis Extinction Rebellion (XR) - a global movement which seeks to persuade governments to act justly on climate change and ecological emergency - has hosted a pre-COP27, in partnership with Bridge-that-Gap Initiative, to galvanize the campaign against climate change, as the   the 27th Conference of Parties slated for Sharm El-Sheikh, Egypt kicks off. In an exclusive interview with NATIONAL ACCORD, one the coordinators of the event in Kaduna metropolis, Mr Zinta Akpoko, revealed that  COP27, Egypt could become a turning point of the campaign, given that forerunners of the conference have since pledged to relentlessly push to prioritize climate financing for developing nations.  "The effect of climate change is very evident and we need to be very frank  by telling the truth about the inherent dangers tha...
Post a Comment
Read more

TRIBUTE: Dr Bala Takaya 1930 - 2018

  Bala John Takaya (2nd Left) at a function recently By Nasiru Jagaba Again, with rude shock, death has come upon us in the early hours of Sunday, 27th May, 2018. It is with deepest regret that the Middle Belt Youth Wing of Middle Belt Forum mourns the death of our President, Father, Mentor, and a tireless advocate of equity, fairness and justice, Dr Bala John Takaya, the President of Middle Belt Forum has silently closed the door of life and departed from us, never to return.  68 years old Takaya, an unparalleled University Senior Lecturer, a distinct politician who served as the  Secretary to State Government of the old Gongola State, a member of the 1987 Political Bureau. On the fight to restore democratic system of governance, he worked hand in hand with Chief Solomon Lar. Also, in 1999 he was the governorship candidate of the All People’s Party, APP later ANPP.  He is much esteemed in the community of Middle Belt and generally recognized as on...
Post a Comment
Read more