- Udoma: Recurrent Burden, Dwindling Revenue Make Full Implementation of Capital Budget Impossible
The Minister of Budget and National Planning, Udoma Udo Udoma has explained that the federal government had been unable to achieve full implementation of the 30 per cent capital components of the 2016 and 2017 budgets because of high recurrent burden and dwindling revenue.
In an interview, Udoma said when the Buhari administration emerged in 2015, it inherited a budget with a capital component of 16 per cent from the previous government.
Udoma said, “We committed to take it up to 30 per cent, and so in 2016, it was 30 per cent and in 2017, it was 30 per cent. It has not been easy to achieve that 30 per cent because recurrent is very high. The major part of it is salary and some overheads. We can’t cut down the overheads – salaries and pensions; that’s the reason.
“The only way we can bring it down, which we will like to do, is to take up revenues. Then, what will happen is as a percentage of the budget, you can now have a much higher percentage in terms of capital. That is why revenue is so important because we don’t think it is right to embark on retrenchment.”
Reminded that the Oronsaye panel had recommended the rationalisation of some agencies and departments of the federal government as a cost-cutting measure, Udoma said: “In the short-term, the government does not believe that we should retrench. So, I believe that when the economy begins to improve, we will be able to look at some of those issues, and I think the president is very concerned about that.
“He’s not the type of person who can, after advocating for employment at the federal level, now throw people out. So, he believes that we should try and weed out any fake claims but any real claims should be paid. When we are growing at 7, 10 per cent, then there will be expansion of the economy, there will be so many opportunities for the people.”
On the delay in the release of funds for capital projects in the 2017 Budget, the minister explained that the delay arose because a major chunk of the capital vote was to be funded by borrowing, with some of that to be sourced internationally.
He noted that the approval of the National Assembly had to be sought, adding that until the approval was secured recently, borrowing could not commence.
Udoma said it was after the approval that government officials embarked on a road show abroad to float a Eurobond for the funds.
He pointed out that in spite of these challenges, the current administration had done well in terms of capital projects, as over N1 trillion was released in the 2016, a record he said, previous administrations could not achieve.
Udoma said: “We are working closely with the National Assembly. For instance, in the start of 2016, we released over N1 trillion capital vote. So, we have actually done very well compared to the previous administrations in terms of the amount released. So, this year, the budget year started in the middle of June. For a budget that has not run for six months (the budget that was passed is valid for one year) and to achieve that level of implementation on the capital and the recurrent is good.
So far, the federal government has released N450 billion of the capital vote in the 2017 Budget with another N750 billion to be released, bringing the total released to N1.2 trillion.