Nigeria’s budget reforms: Lessons from U.S. Congressional Budget Office

Nigeria’s Acting President, Yemi Osinbajo signed the nation’s Appropriations Bill into Law on June 12, 2017, well over five months into the 2017 financial year. What this means is that for over five months, the government was spending funds that were not appropriated.

While this misnomer is not new to Nigerians, it runs contrary to the dynamics of modern development which weighs heavily on effective planning and management of resources in the attainment of development objectives. In developed nations, a situation where Appropriation Acts are enacted months into the fiscal year is now a thing of the past.

In most countries, the time span from the start of the preparation of budget proposals by Ministries, Departments and Agencies (MDAs) to the enactment of the Appropriations Act before the beginning of the financial year takes at least 12 months and there are defined time limits for each of the milestones in the budget process. This is currently not the case in Nigeria.

In the United States of America, government agencies begin to prepare their budget proposals about 24 months before the start of any given financial year and submit their proposals to the Office of Management and Budget (Nigeria’s equivalent of Budget Office) about 12 months before the start of the financial year. That is, the agencies spend 12 months between (October and September of the penultimate year) to prepare their proposals and then consolidate them into the President’s Budget Proposal. As required by the law, the President submits his budget proposal to congress by the first Monday of February for the financial year beginning on October 1. The Congress thus has about eight months (February to September) to review the President’s budget proposals, call for hearings and defence by the various agencies, make necessary adjustments and reconcile any differences with the president. The budget is signed into law by the President by the end of September, before the beginning of the financial year starting October 1.

However, in all these, one agency that ensures that the budgeting process is adequately sequenced and timed to ensure that the budget for the financial year is approved and signed into law by the President before the start of the financial year is the Congressional Budget Office (CBO), a federal agency within the legislative branch of the United States Government that provides budget and economic information to Congress. The CBO manages the federal budget in a strictly non-partisan fashion. There is a consensus among economists in the U.S. that the “CBO has historically issued credible forecasts of the effects of both Democratic and Republican legislative proposals.

Section 202e of the U.S. Budget Act requires the CBO to submit periodic reports about fiscal policy to the House and Senate budget committees to provide baseline projections of the federal budget. This is currently done by the preparation of an annual Economic and Budget Outlook plus a mid-year update. The agency also each year issues an analysis of the President’s Budgetary Proposals for the upcoming fiscal year per a standing request of the Senate Committee on Appropriations. And because this is not the situation in Nigeria, there is an urgent need for reform of the federal budgeting process in order to improve effectiveness, efficiency, transparency and accountability in public spending.

First and foremost, the National Assembly Budget and Research Office (NABRO), Nigeria’s version of the Congressional Budget Office isn’t well equipped to perform like its U.S. counterpart, a situation which has left the entire budgeting system at the mercy of the Appropriations Committees of the Senate and House of Representatives who almost always have to contend with allegations of partisanship in the consideration of federal budget figures.

So, perhaps the biggest lesson that Nigeria should learn from the U.S. is for the Nigerian government to initiate the budget reform process by strengthening NABRO to enable it handle issues pertaining to national budget in a non-partisan fashion.

 

An active National Assembly Budget and Research Office will reduce the tension between the Executive and the Legislature over the right figure that should go to the second arm of government. With a NASS Budget Office in place, the agency will prepare the budget proposals for the NASS and submit same to the Federal Ministry of Budget and Planning for inclusion in the President’s Budget. Like other MDAs, the NASS Budget Office will also have to defend the budget of the NASS. It would also put a stop to the insertion or smuggling of projects into the President’s Budget by members of the NASS during the review/amendment process. A situation where members of the legislature, especially the Chairmen of the Appropriation Committees and other leaders of the legislature can unilaterally replace projects in President’s Budget with their own projects often times for their constituencies and insert new projects is seen in the U.S. as an abuse of legislative power for private gain. In the U.S. budgeting process, insertions into proposal submitted by the president are called “pork barrel” projects or simply called “porks”. A pork barrel project is the appropriation of government spending for localized projects secured primarily to bring money to a representative’s district or constituency. Although it is the practice in some countries for legislators to insert projects in the budgets submitted by the executive to the legislature, many countries have either stopped this practice or introduced strict guidelines to regulate it.

Civil society groups, leaders of the private businesses and ordinary citizens also have a voice at both the budget preparation and budget review/amendment stages. Ministries, Departments and Agencies are tasked to partner with appropriate CSO, businesses and other citizens/stakeholders when preparing their agency budget proposals by calling for memoranda/suggestions from the public and holding at least one town hall. It is heart-warming to note that Nigeria’s National Assembly under the leadership of Bukola Saraki is already toeing this line. During the consideration of 2017 budget by the legislature, the Appropriation Committees of the Senate and the House of Representatives for the first time had special sessions for CSO, business leaders and other citizens/stakeholders to comment and offer their suggestions on the President’s Budget. This was done to ensure that the budget reflects the voice and views of a wider cross-section of the Nigerian society.

Lobbyists also play a role in the legislative process by seeking to be allowed to work closely with the bill sponsor and staff attorneys so as to draft the bill in appropriate legal language and give it a descriptive title. They manage bills through committee and floor votes and make sure that bills are veto-proof when they are passed to the United States President for assent.

Unlike in the case of Nigeria’s NABRO, each year, the CBO provides the Congress with several hundreds of formal cost estimates that analyse the likely effect of proposed legislation on the federal budget.

The estimates are posted on the CBO’s website in a chronological order, and are searchable by bill number, title, committee, programme area; each includes a description of the legislation, a statement about its estimated budgetary impact, and an explanation of the basis of the estimate. This procedure is popularly known as scoring.

The importance of scoring in the budget process cannot be overemphasized. For instance, CBO’s estimates are tools that the Congress can use to implement its budget enforcement procedures and Congressional rules and statutory procedures related to budget enforcement recognize the fundamental distinction between the two types of spending. Legislation that affects mandatory spending –unlike that for discretionary spending is subject to Senate and House points of order (parliamentary objections that legislation violates a certain rule.

 

But it is usually the responsibility of the House and Senate Appropriations Committee that take the total aggregate spending allocations from the Budget Resolution and divide the amount into thirteen “sub allocations”. Quite literally, they take the total discretionary “money pie” and cut it in to thirteen pieces. Each slice of the discretionary “pie” funds a different government function as follows: Agriculture, Rural Development, Food and Drug Administration, and related agencies; Departments of Commerce, Justice, and State, the Judiciary, and related agencies; Department of Defense; Operations of the government of the District of Columbia; Energy and water resources development and Foreign operations, export financing, and related programs

Others include Department of the Interior and related agencies; Departments of Labor, Health and Human Services, Education and related agencies; Legislative Branch; Military construction, family housing, and base realignment and closure for the Department of Defense and Department of Transportation and related agencies.

The Treasury Department, the United States Postal Service, the Executive Office of the President, and certain Independent Agencies; Veterans Affairs and Housing and Urban Development, and for sundry independent agencies also have monies allocated to them in the budget.

The Congress has an investigative arm known as the Government Accountability Office (GAO) which conducts financial and program audits and evaluations of executive activities, operations, and programs. For example, in one study, GAO reported “that 19 of 24 Federal agencies … could not fully explain how they had spent taxpayer money appropriated by Congress.” The head of GAO is the Comptroller General (CG), who is nominated by the President (following a recommendation process involving the bipartisan leaders of the House and Senate) and subject to the advice and consent of the Senate for a non-renewable 15-year term.

The GAO conducts field investigations of administrative activities and programs, prescribes accounting standards for the executive branch, prepares policy analyses, adjudicates bid protests, makes recommendations for legislative action, evaluates programs, and provides legal opinions on government actions and activities. The office submits hundreds of reports to Congress annually, describing ways to root out waste and mismanagement in executive branch programs and to promote program performance. One of its traditional reports to Congress is on government programs and activities that are “high risk,” that is, they require significant improvements in their operations and performance.

If and when the budget process goes as planned, all 13 spending bills have been signed by the President and have become Public Laws by October 1, the start of the new Fiscal Year. Most years, this happens, but not always. If the budget process is not completed by the October 1 deadline, a “Continuing Resolution” to extend current funding for government operations must be passed and signed by the President to avoid a government shutdown.

All said, there is a need for the executive arm of government in Nigeria to work closely with the legislature to amend certain aspects of the constitution which would make the process more efficient. For instance, Section 81 the Constitution must be amended to compel the President to present his Budget to the NASS not later than four months (by September 1) before the beginning of the financial year, and the NASS must submit its amended Budget to the President for assent not later than 6 weeks (by November 15) before the beginning of the financial year starting January 1. This will give enough room for reconciliation in case there is a disagreement between the executive and the legislature.

Furthermore, the Fiscal Responsibility Act (FRA) of 2007 that guides the budgeting process is unwieldy and clumsy to say the least. The 24-page document needs to be amended to remove ambiguities, redundancies, ensure clarity and give adequate time for budget preparation, review and approval. For instance, FRA is not clear on when the MTEF should be submitted to the NASS for review/approval and by what date it has to be approved by the NASS. In other words, the President can submit the MTEF at any time before the commencement of the financial year and the NASS can approve the MTEF at any time. Furthermore, if the MTEF is supposed to be the basis for the preparation of the Annual Budget as implied in sections 18 and 19 of the Act, then the MTEF should first be approved before the budget can be prepared. However, section 21(2) indicates that the Agencies are required to submit their budget proposals derived from estimates of the MTEF to the minister (of budget) by the end of August, i.e., four months before the commencement of the financial year which is the same time the President is required to “cause the MTEP to be prepared” before it is submitted to NASS.

To ensure proper sequencing and adequate timing for the various activities in the budgeting process, the following sequence and timing for Budget of the financial year should be adopted.

  • Jan- Feb of year: Preparation/update of MTEF by the Ministry of Budget & National Planning (FMBP). Submission of MTEF by the President to the NASS on or before Feb. 28.
  • March: Review/amendment of MTEF by NASS. Reconciliation of differences. Reconciled MTEF jointly approved by the NASS and President on or before March 31.
  • April – May: Issuance of Budget Call and Guidelines to all MDAs by April 5. Preparation and submission of agencies’ budget proposals by MDAs to FMBP (Budget Office) by May 31.
  • June-July: Defence of budget proposals by MDAs and consolidation of Budget into Draft President’s Budget by July 31.
  • August: Review/Approval of President’s Budget Proposal (Appropriation Bill) by the President and his Team of Economic Advisers and Federal Executive Council. Submission of Appropriation Bill to NASS by August 31.
  • Sept 1 – Nov 15: Review of Appropriation Bill by NASS, Defense by MDAs and Public Hearings. Submission of Revised/Amended Budget to President for his assent/signature
  • Nov 16- Dec 30: Review of Amended Budget, Reconciliation of differences and signing into law by President on or before December 30.

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