Integral Development of Communities for a World Without Poverty.

Analysis of the 2011 Budget of Edo State

 

Edo State is one of the six states in the South-South Region also called the Niger-Delta Region of Nigeria. It has a total landmass of approximately 17,802 sq km and a population of 3,497,502 (2006 National Population and Housing Census). The state was created in 1991 along with Delta State when the defunct Bendel State was dissolved. Edo State is bounded in the North and East by Kogi State, in the West by Ondo, and in the South by Delta State respectively. It has vegetation comprising of fresh water swamps, rain forest and rocky hills to the north introducing the guinea savanna high lands of northern Nigeria. Administratively the State is divided into eighteen Local Government Areas, its administrative headquarters being Benin-City.

Comments from one of the participants at the Edo State Budget Monitoring analysis report presentation

Edo is one of the oil producing states in Nigeria and by virtue of that fact, benefits from a special allocation of 13% based on the quantity of crude derived from its territory. Consequent upon this, Edo State has a fiscal edge over other non oil producing states in the country. However, this edge does not stand it out from other states of the federation in terms of infrastructure, human development and capital base. On key indices, the state fares the same or even worse than other less endowed states.

Access to Budget, Fiscal Data and Citizens’ Participation

As at the middle of the year, Edo State had a copy of it annual budget as well as the Governors Budget Speech available on its website. This indicates an openness with budget documents that is rare in Nigeria. However, the same cannot be said about the availability of other vital fiscal documents.

Edo State like other states covered by the Platform’s intervention in the Niger Delta, does not have any significant mechanism for seeking citizens’ input in the policy direction of the state and its expenditure preferences. From the point of formulating the budget up to when the projects and programmes are implemented and audit is carried out, citizens’ have very negligible or no roles at all. This neglect which is widespread in the Niger Delta States, has the disadvantage of alienating citizens from a process which ordinarily should be informed by their development priorities and galvanize their collective participation at all stages. In Edo State as in many Niger Delta states, this had led to government policies that do not reflect the aspirations of the vast majority.

Edo State and Fiscal Management Mechanisms

 

The Fiscal Responsibility Act and Public Procurement Act enacted by Nigeria’s National Legislature are mechanisms designed to provide for the prudent management of the nation’s resources, ensure long term stability of the economy and ensure that accountability and transparency are observed as core ingredients in the management of public resources. Having been passed at the national level, Nigeria’s federal constitution requires that the same law be domesticated at the state levels. This domestication translates that the State legislature passes similar laws to pursue the same objectives howbeit within their domains. It is also required that the state governments take steps to establish fiscal responsibility and public procurement agencies which will guarantee the smooth implementation of the mechanism and strict compliance with its provisions.

Edo State has neither a Public Procurement Law or a Fiscal Responsibility Law, however components of both fiscal mechanisms are currently before the State House of Assembly for their consideration. The absence of these Laws in the fiscal management processes in Edo State translates that best practices in contracts award and financial management are not strictly followed. The consequence of this could be the emergence of avenues for leakages, patronage and fiscal fiat, all of which are detrimental to the State.

 

Policy Thrust

 

In his speech made while presenting the 2011 budget to the Edo State House of Assembly, the State Governor gives the policy objectives of the state thus:

Mr. Speaker, the 2011 Budget strategically reinforces our Administration’s overall objectives of infrastructural renewal, human welfare, employment and wealth creation as well as the deepening of popular participation in governance and development.

From the foregoing, it is manifest that the state government seeks to pursue infrastructural renewal, while ensuring human welfare (which include education and healthcare amongst others), creating employment opportunities, and ensuring the participation of citizens in the development and governance of the state. A quick reflection on the aspect of ‘deepening popular participation in governance and development’ vis a vis what is obtainable in the state indicates that this aspect is either none existent or is still at a very negligible state. As mentioned earlier, there are no institutional structures or conventions in the state to achieve this level of participation.

Budget 2011

 

In 2011, the Edo State Government presented a total budget of N105.9billion. After its deliberations, the House of Assembly eventually passed an amended budget of N112.7billion.  Of this amount, N43.9billion is earmarked for recurrent expenditure while N68.8billion is for capital expenditure.

This represents a budget share of 39% for recurrent expenditure and 61% for capital expenditure. This distribution is considered fair given the huge infrastructural development needs of the State. The 2011 budget also represents an N11.7billion nominal increase when compared to the 2010 figure which was N101billion.

2011 Revenue Streams

The Chart above shows the various sources the Edo State Government proposes to finance its 2011 budget from. Statutory Allocation is the highest source with 40% expected. 13% derivation is expected to also provide 4% of the budgetary funds. These two sources which amount to 44% of needed funds for the budget, are both dependent on transfers from the federation account. These transfers on the other hand are not stable as they depend of the health of the international oil market. The danger in predicating such overwhelming portion of the state budget on these sources is that the state exercises no control over its flows. It is therefore difficult for the state to be definite on what it will actually receive from these sources making it hard for planning in the medium and long term. It also accounts for sharp rises and declines in budget performance. For instance, while the 2010 budget expected to generate N44.5billion from the federation account, it had only received N30.5billion as at September.

Internally Generated Revenue on the other hand represents that source of revenue which the state has some measure of control over, and which has the potential of making the fiscal fortunes of the state stable and allow for greater planning. This source of revenue accounts for just 16% of the 2011 budget. In 2010, IGR was expected to provide N18billion, but as at September 2011, only N9.2billion had been realized.

In nominal figures however, Internally Generated Revenue contribution to the State’s Annual Budget has steadily improved over the last three years with a monthly average generation rising from N300m to N800m as revealed by the Governor in his 2010 Budget presentation speech. But the IGR ratio in the total annual budgetary estimates has been in steady decline from 30.2% in 2009 down to 29% in 2010 and further down to 24% in 2011.

The 2011 revenue projections also leans largely on loans and grants. External Loans are expected to provide 8%, Internal Loans 7% and Grants 11%. Cumulatively, the government is out sourcing 26% of its 2011 budget. This trend is dangerous in the sense that it could bequeath a debt repayment burden on the state. The more proper and prudent direction of the government will be to develop internal sources of revenue generation including taxes, and predicate its budget on benchmarks it is sure of achieving. From the information given in the budget, this was not the case in 2010 and certainly not the case in 2011.

2010 Budget Performance

 

The 2010 budget performance data provided in the budget leaves very little to be desired. In his 2011 budget speech, the state Governor also admits the dismal performance of the 2010 budget. For instance in the area of revenue, while expected recurrent accrual in 2010 was N69.1billion, actual accrual as at end of the third quarter was just N44.5billion, representing only 64%. Also, total expected capital receipt was N32.8billion in 2010, what was actually received as at September 2010 was just N4.2billion. This shows a performance of just 13%. Predictably, this shortfalls impacted negatively on the overall budget performance for 2010. Out of a total capital expenditure budget of N62.3billion, actual expenditure as at September 2010 was just N13.8billion, indicating a dismal performance of just 22%.

 

 

 

Education

 

In the 2011 budget, the Education sector is given a capital allocation of N7.5billion. In 2010, it was allocated N7.2billion. This represents a nominal rise of N300million. However, in real terms using an annual inflation figure of 9%, the value stands at N6.8 billion indicating a decline of N400million.

The allocation to education amounts to 11% share of the overall capital budget. While this does not meet up to the 26% recommendation to the education sector, it nonetheless shows a reasonable commitment to the government’s policy direction, especially when viewed alongside other allocations in the budget. It is however recommended that such allocation be increased progressively to tackle the education challenges in the state.

On the other hand, the performance of the 2010 education capital budget raises concerns as to the level of impact the 2011 allocations will have. While N7.2billion was allocated in 2010, as at September of the same year, just N1.4billion had been utilized. This indicates a performance of just 19%. It is doubtful if the full allocation could have been expended with just three months left in the fiscal year. Going by this reasoning, questions arise as to the actual commitment of the government in pursuing transformation in the education sector.

 

Health

 

In the 2011 budget, health is allocated N2.7billion. In 2010, the allocation was N1.7billion, showing that the allocation has increased nominally by N1billion or 63%. This figure represents a 3.9 share of the overall capital outlay.

While the increased allocation in 2011 is commendable, it however does not show any commitment on the part of the government in the area of health care. As a percentage of the total capital budget the allocation falls short of indicating the government is truly committed to pursuing a policy of health care for its citizens. In per capita terms, the government is only budgeting to spend N772 on the health of each of its 3,497,502 population.

It gets worse when expenditure of the 2010 allocation is considered. While N1.7billion was allocated, as at September 2010, only a meager N149million had been used. This reflects only 9% utilization of the allocation. If this fiscal scenario is repeated in 2011 and in subsequent years, it will further alienate the citizens of Edo State from proper and affordable health care.

 

As very critical sectors in realizing the objectives of the administration, the low attention accorded these sectors by the Edo State Government is worrying. This argument is made on the backdrop of that the fact that during the same period, allocations for Overhead Cost for the vague items Department of Government House & Protocols (Head 412A), Office of the Governor (Head 412B) and Office of the Deputy Governor (Head 412C) which was N2.5billion had a performance of 75%, surpassing performance for Education, and performance in Health.

Conclusion

 

It is worthy to note that in comparison some other Niger Delta States, Edo State has proven outstanding in the availability of its budget document, and has also been the first to abandon the contentious practice of allocating money for ‘security vote’. While this is commendable, it should also be noted that the capital budget still allocates substantial funds to items such as ‘government house and protocol’ and to the State House of Assembly.

It will seem from the budget that the Edo State Government is fixated on urban renewal and construction of roads (though good in themselves), at the expense of other vital sectors of the economy. It is advised that a balance is created that will ensure even and all round development of all the sectors.

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