The Role of Legislature in Budget Process in Nigeria

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This paper, presented to the senior management staff of Ogun State House of Assembly, discusses the budgeting process in Nigeria with a focus on the legislative roles. It covers the definition of a budget, stages in budgeting, stakeholders involved, and sources of revenue including oil and non-oil sources. The roles of the Executive, Parliament, NGOs, the public, and other key stakeholders in the budgeting process are highlighted.

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BUDGET PROCESS IN NIGERIA: THE ROLE OF LEGISLATURE A PAPER PRESENTED TO THE STAFF OF THE SENIOR MANAGEMENT STAFF OF OGUN STATE HOUSE OF ASSEMBLY BY HEZEKIAH OLU. OLUTOYE B.Sc. Econs (Ife); M B A, Finance, (Ilorin); CPA Pioneer Administrative Head, National Assembly Budget and Research Office (NABRO) MAY, 2013 1 Budgeting Process: Legislative Roles

WHAT IS BUDGET? Budget is the Planned use of Revenue accruing to a Government to meet the expenditure needs of that Government in such a manner that is approved by its parliament, to enable the provision of goods and amenities for the citizenry and fulfill the political aspirations of the ruling party. Simply put, it is the use of Government revenue to meet its expenditure plans. 2 Budgeting Process: Legislative Roles

STAGES IN BUDGETING Budget review: this process involves the review of the budget for the current year and to see whether it meets the planned programmes and projects of the government. This will help in shaping the forthcoming budget Budget formulation: this is done by various MDAs by putting together the anticipated needs of their agencies for the coming year. Budget implementation: is the actual practice of using funds in the manner approved to execute programmes and projects by the MDAs Monitoring and Control: this is the assessment of execution to ensure it conforms with planned visions of Government 1. 2. 3. 4. 3 Budgeting Process: Legislative Roles

STAKEHOLDERS IN BUDGETING The Executive arm of Government through its MDAs The Parliament who scrutinize the proposal of the executive and pass this into law. The Executive who implement the budget in the manner it is passed into law. Both Executive and Parliament who monitors, , oversight and control the implementation to ensure compliance NGOs, general public and the press who compliment in oversight and monitoring. The public who are the beneficiary 4 Budgeting Process: Legislative Roles

SOURCES OF REVENUE 1 A. OIL SOURCES Crude Oil Sales, Royalties, Oil and Gas Petroleum Profit Tax, Gas Sales, Rent, Gas flared penalty and Other Oil revenue B. NON OIL SOURCES Custom, Excise, Import, Fees, Special Levies, Company Tax and Corporate Tax Budgeting Process: Legislative Roles 5

NON OIL SOURCES (CONTD) Stamp Duties, Capital Gain, Value Added Tax, C. FGN Independent revenue, MDAs, Operating Surplus Dividends, Consolidated Revenue (PIT), Memorandum Items and Borrowings Items A and B above are paid into Federation Account while Item C plus FGN share from the Federation Account is paid to FGN Consolidated Revenue Fund. 6 Budgeting Process: Legislative Roles

AGENTS RESPONSIBLE FOR COLLECTION Nigerian National Petroleum Company (NNPC) Federal Inland Revenue Service (FJRS) Nigeria Customs Service (NCS) Bureau of Public Enterprises (BPE) 5. (Allow participants to mention Revenue Collecting agencies of the State s IGR) The Share of a State from the Federation Account is merged with its IGR to form its own Consolidated Fund. 1. 2. 3. 4. 7 Budgeting Process: Legislative Roles

FEDERATION ACCOUNTS SHARING FORMULA S/ 2012 (Nb) SHARING FORMULA 2013 ( Nb) TOTAL FEDERATION ACCOUNTS 1 6,243.96 6,751.04 2FGN share of FAAC 48.5% 3,028.32 3,274.26 3State share of FAAC 26.72% 1,668.39 1,803.88 4LGs share of FAAC 20.60% 5Special Funds 4.18% 1,286.26 260.997 1,755.27 282.194 8 Budgeting Process: Legislative Roles

FEDERAL GOVERNMENT EXPENDITURE HEADS STATUTORY TRANSFERS DEBT SERVICE RECCURRENT EXPENDITURE CAPITAL EXPENDITURE SERVICE WIDE VOTE CAPITAL SUPPLEMENTATION 7. (Allow participants to mention Expenditure Sub Heads of the) 1. 2. 3. 4. 5. 6. 9 Budgeting Process: Legislative Roles

HOW IS BUDGET MADE? Budget is made through the submission by MDAs of their financial needs to the Budget Office of the Federation (at the Federal level) or the State Ministry of Finance at the State levels. Such submissions are defended; scrutinized and pruned to be in line with the available funds within the government concerned by the Budget Office/Ministry of Finance. Some States/Federal Government may even choose to give envelopes for MDAs to prepare their Budget.. HOW IS BUDGET MADE? 1. 2. 3. 10 Budgeting Process: Legislative Roles

HOW IS BUDGET MADE HOW IS BUDGET MADE? 2 ? 2 4. It is the responsibility of the Budget Office/ Ministry of Finance to collate, prune and submit the final draft to the State or Federal Executive for final verification before the official presentation to the Parliament. 5. The summary of the detail proposed budget is referred to as the Appropriation Bill, while the details is referred to as compendium. 11 Budgeting Process: Legislative Roles

PRESENTATION TO PARLIAMENT The Governor or President (at the Federal Level) is mandated by Constitution to lay before the Parliament estimates of revenues (Revenue Profile) and expenditure (the Bill and the Conpedium0 for the next financial year. (Section 81 of the 1999 Constitution ) This must be presented in form of a bill known as Appropriation Bill section 82. The Government can present a Supplementary Bill if the need arise during the year. The Bill must be accompanied with the Revenue Profile or in the alternative a Money Bill. PRESENTATION TO PARLIAMENT 12 Budgeting Process: Legislative Roles

PRESENTATION TO In addition, the Governor or the President must prepare a speech stating the policy framework on which the budget is based. The framework must consist of : review of the last year s budget performance. The premise on which the coming one is based Policies that will guide the budget - Fiscal, Monetary, etc. Projected revenue and expenditure Constraint and other factors that might affect the actualization of the proposed budget. PRESENTATION TO PARLIAMENT 2 PARLIAMENT 2 13 Budgeting Process: Legislative Roles

PRESENTATION TO PARLIAMENT the presentation must be done in standing because the governor/ President is not a member of the parliament He will only read the speech and lay the bill and the Compendium on the Maze Table and then take a bow. This presentation is regarded as the first reading in the legislative process of the Money Bill consideration PRESENTATION TO PARLIAMENT 3 3 14 Budgeting Process: Legislative Roles

ROLE OF MDAS IN BUDGETING 1 Each MDA collects its departmental needs as well as the total personnel emoluments of all its staff and intended recruitment to come up with its budget for the coming year. II. This is often coordinated by the Budget Division of the Department of Finance in line with the call circular III. The collated submission of all units and department are subjected to scrutiny by the management of the MDA to ensure that the vision of the agency is captured in the budget I. 15 Budgeting Process: Legislative Roles

ROLE OF MDAS IN BUDGETING 2 Where the MDA is given an envelope, they will prune the collated submission in line with the envelope given by the Budget Office The MDAs implement the approved Budget III. In relation to the parliament, MDAs are supposed to prepare the implementation report of the ongoing financial year for submission to their relevant Committees in the Parliament. IV. They are also expected to submit their proposed budget for next year to the committees. I. II. 16 Budgeting Process: Legislative Roles

ROLE OF MDAS IN BUDGETING 3 Often MDAs submit higher estimates to the parliament than what they were given by the Budget Office II. They defend their submission with their relevant Committees III. . At the National Assembly, they may have to defend their budget with more than one Committee due to the bicameral nature of the parliament. IV. . During oversight the MDAs by Committees, MDAs are to receive the committees and conduct them round the various projects of the MDA as well as give report on the funding and implementation I. 17 Budgeting Process: Legislative Roles

THE ROLE OF PARLIAMENT IN BUDGETING It is the legislature/parliament that must approve the budget in form of Appropriation Act, based on the draft proposal submitted to it by the President of the Country (or the Governor of a state) Appropriation is another word for budget in a democratic dispensation. The major roles in budgeting especially in a democratic governance by the Parliament is authorization, oversight and monitoring of the Budget 18 Budgeting Process: Legislative Roles

THE ROLE OF PARLIAMENT IN BUDGETING 2 After the presentation to the Parliament by the Governor/President, there will be a general debate of the Appropriation/Money Bill on the floor of the House. The debate must center on the policy thrust of the speech presented by the Governor/President as well as other issues contained therein but not on the Compendium. After the conclusion of the debate, the Clerk is made to read the bill the second time and the Speaker will commit the bill to the Appropriation Committee. At this point all other Standing Committees become sub Committees of the Appropriation Committee. 19 Budgeting Process: Legislative Roles

THE ROLE OF PARLIAMENT IN BUDGETING 3 Appropriation Committee distributes the Compendium among the committees and allocates time for the consideration of the budget. Committees scrutinise and consider for approval the draft budget and make recommendation to the Appropriation Committee. Appropriation Committee in conjunction with Finance related Committees consider the revenue profile in order to get the actual revenue that will be used to finance the budget Appropriation Committee also collates reports from all committees for all MDAs and then allocate to them as they deem fit 20 Budgeting Process: Legislative Roles

THE ROLE OF PARLIAMENT IN BUDGETING 4 The report of the Appropriation Committee is laid in the Chamber for consideration by the whole House When the two Chambers are done with their consideration, harmonisation is done to have one budget. At the State where we have mono-camera legislature, after the third reading, a clean Copy is sent by the Clerk to the Governor for assent At the Federal level, the harmonised budget is sent to the President who will assent to the bill to make it a law. The Governor/President can sign or veto the Bill by withholding his assent on part or the whole bill. This can be upturned by 2/3 majority of the whole house after the representation of the bill in the house after 30 working days 21 Budgeting Process: Legislative Roles

OVERSIGHT BY THE LEGISLATURE Oversight and monitoring of the implementation of the budget law is to ensure it is implemented in the manner it is passed. Oversight is to be carried out by each Standing Committee on their relevant MDAs. Parliament can equally be assisted in oversight function by its Legislative Budget Office through collection and analysis of implementation reports, revenue data and other related information that will throw light in the budget process. The Office can also map the approved budget to enable each Member have all the projects in his/her constituency at their disposal and thereby making it easier for them to monitor their implementation. 22 Budgeting Process: Legislative Roles

PROBLEMS CONFRONTING BUDGET PROCESS IN NIGERIA Problem of political intrusion into budgeting Discord between statement and actions e.g. the government wants a private sector driven economy yet it approves deficit budget thereby pushing interest rate beyond the reach of the private sectors. Disconnect between Planning, Budget, Accounting and Audit. Variance between budget approvals and spending patterns. 23 Budgeting Process: Legislative Roles

PROBLEMS CONFRONTING BUDGET PROCESS IN NIGERIA (CONTD) All earnings must be disclosed and used or kept as directed in the budget. Uncompleted Capital projects must be rolled over until they are fully implemented so as to avoid abandoned or incomplete projects. Financing projects that are not in the budget through illegal virement or internal re- ordering should be discouraged and done away with. Extra Budgetary spending must be seriously frowned at. 24 Budgeting Process: Legislative Roles

RECIPE FOR GOOD BUDGETING SYSTEM For budget to serve its purpose, it must be transparent in all its ramifications. Revenue forecast must be close to the actual There must be full disclosure of all revenues and intended expenditures. There must be fiscal transparency 1. 2. 3. 25 Budgeting Process: Legislative Roles

THE WAY FORWARD All stakeholders should put the nation first in the discharge of their duties MDAs should not inflate the cost of projects or their overheads /personnel costs The Ministry of Finance (including Budget Office, Accountant General s Office and the CBN should be fair to all MDAs and should not release disproportionately to them MDAs should comply with the provision of the budget in their implementation 26 Budgeting Process: Legislative Roles

THE WAY FORWARD 2 NASS should pass the budget with the interest of the nation rather than for personal gains Those that are involved in monitoring should be above board. Where they are not expert, they should employ the services of experts in doing what they need do. They should not compromise with those implementing the budget 27 Budgeting Process: Legislative Roles

THE WAY FORWARD 3 Budget conception must focus its targets and must be in line with the overall plan of the Government. i.e. Budget must be synchronised with the state plan Budget passage must be timely. Budget must be implemented as passed without variation of any sort. There must be no extra budgetary release or spending. budget discipline 28 Budgeting Process: Legislative Roles

CONCLUSION Budget in Nigeria has failed to achieve its set goals in recent years due to the fact that all stakeholders have failed to play their roles as expected and as demanded in best practice. This include the MDAs, the Legislature, and the other stakeholders. Budget circle must be reviewed in line with best practice to ensure early presentation , passage and prompt implementation of budget in order to make budget meaningful and of benefit to all and sundry. 29 Budgeting Process: Legislative Roles