The Dummies’ Guide to how budgets are passed in Nigeria

If there was any good to come out of the mess that the 2016 budget turned out to be, it is the increased interest that many Nigerians – both the elite and the masses – now have in the budget process. Between the Dogara-Jibrin allegation-trading party and the padding scandal – whether or not that is a thing in legal terms – and then the missing budget, Nigerians the world over have been left feeling a sense of embarrassment for our dear country as we became the butt of jokes all around the universe.

If you are like 120 million (or so) other Nigerians, there is a very high chance that through it all, you actually did not understand what was going on. Sure, you had a general idea but what exactly gets a budget from conception to law; who passes what? and how many people have to agree with it before it gets passed? Or even, what exactly is the budget?

Today, you are in luck. You don’t fall in that category? Okay then. Still, below, you’ll find a break down of the processes involved in passing a budget in Nigeria. Right in time for you to properly follow the process this year.

Let’s start with what the budget really is …

It’s essentially a plan. A monetary plan of what the government wants to spend, what it wants to spend it on (expenditure), how it intends to derive the funds (called revenue), if it will borrow any monies or save any excesses. The budget is not limited to the Federal Government, even though the Federal government’s budget sometimes includes expenditures to be benefited by States through specific projects done within those States and their local government areas. The States and Local Governments also have their respective budgets prepared on an annual basis.

What makes the budget a big deal is that the legislature needs to approve of this government spending plan before the monies requested to fund it can be disbursed.

For the purpose of this guide, we’ll focus on the procedure that applies to the Federal budget.

How is the budget prepared?

Ideally, a budget is prepared and passed into law before the year when the funds are to be used. It is drafted by the executive arm (the Presidency in this case). Before the budget is drafted, it is preceded by the preparation of a Medium Term Expenditure Framework (MTEF) which roughly plans and predicts government expenditure/spending framework for the next three years i.e the year of the budget to be prepared and two years after that. That means the 2017 budget was preceded by an MTEF for 2018 and 2019.

The last MTEF was presented to the Senate in November 2016 by the Minister of Budget and National Planning, Senator Udoma Udo Udoma. Although a revised copy of the document was presented on the 13th of December, the Senators had begun considerations of the document in the upper chambers before referring it to the Senate Committee on Finance and Appropriations to begin a more informed consideration. The Committee had the document from the 23rd of November, 2016 when they began deliberations. It is expected that the document would have been tidied up for legislative approval by the Committee and that the Senate will pass the MTEF today, Thursday, 12th January 2017.

The logic behind this is that it allows the government make rough assumptions and estimates upon which they can build each year’s budget while keeping in mind the goals of governmental revenue and expenditure in the coming years. The Senate deliberation over the MTEF ideally should allow for easy passage of the actual budget because it then means that they already agree with the parameters upon which the budget is based and see the future the same way the executive does.

If the MTEF is passed today, then the Senate can truly begin deliberations on the 2017 budget itself next week. The 2017 budget was read and then laid before the Senators by the President on the 14th of December, 2016 and that is the tradition. Also, constitutionally, Section 80 of the Nigerian Constitution mandates the President to submit proposals of the countries annual budget to the National Assembly for consideration.

The President goes before the Senate on a pre-agreed date and reads the breakdown of the budget to be reviewed to the Senators at a televised joint session. The laying down of the budget is an almost ceremonial process at the end of the reading by the President where he places the budget document before the Senate for consideration and eventual passage.

From this point, the passing of the budget becomes a legislative process. The end game is to pass an Appropriation Act which essentially authorises the government to spend as stipulated in the budget document. Without this appropriation act, the executive has no legal standing to spend anything from the government coffers.

Before we go on to break down the legislative bit of the budgeting process, here’s a pictorial analysis of the proposed budget for 2017:

Infographic chart showing 2017 budget (BudgIT)

This already shows that the Federal government doesn’t have enough revenue to fund its budget and this is what is referred to as the budget deficit. Just like any individual or corporate account, when the expenses are more than the income, there is said to be a deficit.

The Federal government has various ways of funding a budget deficit and this year, the NGN 2.358 trillion budget deficit is expected to be funded through borrowing: NGN 1.252 trillion domestically and NGN 1.067 trillion externally.

Now, the legislative stage:

The budget (now “Appropriation Bill”) is read a second time on the floor of the National Assembly at plenary. Usually, a motion is brought by the Senate leader that the bill be read a second time.

After this session, the bill is then sent to the Appropriations Committee of the two Chambers of the National Assembly: the House of Representatives and the Senate Committee on Appropriations.

Let’s pause here …What is the Appropriations Committee?

In a Presidential System of government, whenever a National Assembly is set up at the beginning of every democratic term, that National Assembly sets up Standing Committees. These committees have oversight responsibilities over various Ministries, Departments and Agencies of the executive arm of government or particular issues that the National Assembly will have to deal with and this is reflected in the names of each Committee. So you have the Senate or House of Representatives Committee on Appropriations, Anti-corruption, Agriculture, Health and so on. There are also joint committees made up of members of both Chambers. The applicable joint committee for the purpose of passing budgets is the Joint Committee on Finance, Appropriation and Electoral Matters but each Chamber has a Standing Committee on Appropriations; headed by Senator Mohammed Danjuma Goje in the Senate and Honourable Mustapha Bala at the House of Representatives.

Once the Appropriations bill has been discussed at plenary, it moves on to the Committee Stage; i.e Appropriations Committees in each chamber consider the bill.

At the Committee Stage

The bill is essentially considered in a more critical light. The members of the Committee are deemed to be extensively knowledgeable in economic and financial matters. They will examine the bill in its entirety and suggest revisions to the different sections of the budget. The process here is very long and arduous because the legislators will need to call for legislative ministerial defence where Ministers are called to defend the allocations made to the various departments, agencies, parastatals which they head. It is the stage where the compromises are made between the executive and legislature. Stakeholders and civil society groups may sometimes get involved at this stage too. The parameters used to draft the budget are considered throughout the stakeholder discussions

Issues such as appropriate oil price benchmark (i.e the price the government believes crude oil will be bought), and reimbursement for the fiscal year and the internal allocation of resources. Also, padding and Constituency projects.

A legislator during the process may identify a lapse in the budgetary allocation for his constituents and then finds how to include it in the proposed bill. The relevant ministry’s allocation is then increased based on this new allocation so that it can execute that project for the benefit of the identified constituency. As can be imagined, it is at this stage that things get shady. Several legislators may try to add or remove from the bill based on what served their own interests best.

The Committee on Appropriations will also usually send out bits off the bill concerning specific sectors to other standing Committees as it directly affects them. Hence, the budgetary allocation for a health project may be sent to the Standing Committee on health to critically examine the budget on its merits. For this purpose, that Committee acts as a subcommittee of the Appropriations Committee.

The committee on appropriations will eventually make recommendations which will be reviewed and organised and then hashed out between the two Chambers to weed out inconsistencies. Final recommendations are put forward by each House, views are exchanged on how they each propose to pass the Appropriation Bill.

After the Committee has concluded its work, it will report back to the Whole House/Senate in plenary with or without amendments. It must beforehand ask the House Rules and Business Committee/Senate Committee on Rules and Procedure to put the bill on the House/Senate Calendar (i.e. fix a date and time for the hearing of the committee’s report).
A clean copy of the bill is then prepared by the Clerk of each Chamber for passage in each house. Once passed in each Chamber, the bills are exchanged between them for concurrent passage.If there are differences in their final figures of the expenditure votes, the Senate and the House of Reps would meet and iron out their differences. Once they are matched, the final Bill is delivered to the President for his assent.
That is how the proposed budget becomes the Appropriation Act which guides government spending for that financial year. A financial year in Nigeria starts on the 1st of January and ends December 31st. This means we are already behind schedule for 2017’s spending.

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