Rising governance cost, recession, others raise FG spending by 183%

Rising governance cost, economic recessions necessitating higher government spending may have combined with other factors to raise Federal Government spending by 183 per cent in seven years, it has been learnt.

The Federal Government increased projected expenditure in its annual budget by about 185 per cent between 2016 and 2022, according to reports analysed by our correspondent.

According to data from the Budget Office, the Federal Government budgeted to spend N6.06tn for the 2016 fiscal year

However, in the recently passed 2022 budget, the projected aggregate expenditure was pegged at N17.12tn, almost thrice the amount budgeted in 2016.

The President, Major General Muhammadu Buhari (retd.) had, in October 2021, proposed a budget of N16.39tn for the 2022 fiscal year to the National Assembly.

The N16.39tn proposed budget was, however, reviewed upward by the House of Representatives to N17.12tn, when it was passed in December 2021.

Despite raising concerns about “worrisome changes” made by NASS, the President signed the 2022 budget into law on the last day of 2021.

This indicates that government spending rose by N11.1tn or 183 per cent during the period under review.

A cursory look at the Federal Government budget reveals that the expenditure component consists of three major items, namely recurrent (non-debt), debt servicing and capital expenditure.

An analysis by our correspondent on Sunday showed that government expenditure recorded significant increases almost every year during the period under the review.

It was also observed that recurrent expenditure got the largest budget allocations during the period.

In 2016, the Federal Government passed a budget of N6.06tn consisting of a recurrent expenditure of N2.65tn, capital expenditure of N1.59tn, and debt servicing of N1.48tn.

Projected revenue for the 2016 fiscal year stood at N5.72tn, creating a fiscal deficit of N340bn.

In 2017, total expenditure rose to N7.44tn as against a revenue projection of N5.08tn resulting in a deficit of N2.36tn.

Recurrent expenditure in the 2017 budget was N2.99tn; capital expenditure was N2.18tn while money budgeted for debt servicing was N1.66tn.

Total expenditure ballooned to N9.12tn in the 2018 budget, comprising recurrent expenditure of N3.51tn, capital expenditure of N2.87tn, and debt servicing of N2.01tn.

With a revenue projection of N7.16tn, fiscal deficit in 2018 stood at N1.96tn.

The following year, the government departed from the trend by reducing total expenditure to N8.91tn. This sum was an aggregate of recurrent expenditure of N4.05tn, capital expenditure of N2.09tn and N2.25tn for debt servicing.

With a revenue projection of N6.99tn, there was a fiscal deficit of N1.92tn.

However, in 2020, the government reverted to reviewing its expenditure upward. With recurrent expenditure of N4.84tn, capital expenditure of N2.47tn, and N2.7tn budgeted for debt servicing, total expenditure rose to N10.59tn in 2020.

In 2021, government spending continued to soar as N13.59tn was budgeted as total expenditure. Out of this sum, N5.64tn was set aside for recurrent expenditure, capital expenditure stood at N4.13tn; while money budgeted for debt servicing was N3.32tn.

With revenue projection of N7.91tn, there was a fiscal deficit of N5.68tn.

In the 2022 budget, the government’s N17.12tn projected expenditure consists of N6.9tn recurrent expenditure, N5.9tn capital expenditure and N3.9tn earmarked for debt servicing.

With a revenue target of N10.13tn, the government projects a budget deficit of N6.99tn in 2022, which it said would be financed by new foreign loans.

The government has on several occasions justified its increasing expenditure by stating that the country isn’t spending as much as other African countries.

Some economic and financial experts have, however, expressed concerns over what they described as significant increase in government expenditure, saying it is worrisome because a large chunk of government revenue has been allocated to recurrent expenditure instead of capital projects that drive economic growth.

A professor of Economics and Public Policy at the University of Uyo, Akpan Ekpo narrowed the reasons for the significant increase in government spending to rising cost of governance, increased expenditure during past recessions and larger budgets for security and defence.

He said, “You have to consider the fact that in 2016 and 2020, the country was in a recession. So when a country is in a recession, the government will have to spend more to take the country out of recession.

“Like in 2020, the recession was caused by the COVID-19 and the crash in the price of oil; so to pull the country out of this situation, the government had to implement a recovery plan which required a lot of money to execute.

“Also, for some years, we have been having security challenges across the country which has cost us a lot. In a bid to tackle this challenge, the government has increased its expenditure on defence.”

Also, a professor of Economics at the Olabisi Onabanjo University, Sherrffdeen Tella, expressed concerns over the country’s borrowing rate as a result of rising fiscal deficit.

As such, he advised the government to ensure that its expenditure aligns with its revenue capacity, in order to reduce the budget deficit.

“When you are looking at government expenditure you have to differentiate between recurrent expenditure and capital expenditure. Capital expenditure will stimulate growth such as spending on infrastructure. But over the years, capital expenditure hasn’t seen much increase; it continues to be 30 per cent of total expenditure.”

“The recurrent part is that of overhead and personnel cost, that has been increasing because the cost of governance is too high, they can reduce the cost of governance. So basically the government needs to cut down on the cost of governance.

“The government should also ensure that officials spend on the items outlined in the budget, there should be no diversion of public funds to private pockets. I would also advise on monitoring and evaluation of those expenditures.

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