Meeting the backlogs of the 2016 budget and inability to access foreign loans are major impediments to funding of capital projects in the 2017 budget, the Finance Minister, Kemi Adeosun, has said.
Mrs. Adeosun said this while appearing before the Senate’ Joint Committee on Finance and Appropriation.
The Senate had on September 26 summoned the minister to explain the reasons for inadequate release of funds for capital projects in the 2017 budget.
Giving statistics of spending in the 2017 budget so far, Mrs. Adeosun said that her ministry has released N1.5 trillion as cumulative personnel cost, N128.8 billion as statutory transfer and N37.6 billion as redemption fund for pensions.
She further stated that the ministry has released N92.5 billion for overhead expenses, N223.6 billion for service expenses and N340.9 for capital projects.
Mrs. Adeosun noted that the projects in 2016 budget rolled over to 2017 and thus, the federal government had to prioritise by spending on projects that are nearing completion.
She emphasised that the roll over from the 2016 budget and the inability to get approval from the Senate for foreign borrowing has delayed implementation of the 2017 budget.
She said: “The cost of domestic borrowing is extremely high and our interest rates are high, this compounds our debt servicing problems. How we plan to resolve this is to borrow more from the international market because we get longer tenures and lower interest rates.
“We successfully completed the Sukuk last week and we were able to raise N100 billion which is to be released this week. But re-positioning of the economy is going to take some time so we need long and patient borrowing. So borrowing from the short term market or the Treasury bill at 18 per cent interest rate will be a disservice to our economy. It will compound the debt servicing.
Mrs. Adeosun sought the support of the lawmakers in accessing foreign loans and in curbing direct submission of budget by heads of commissions and agencies.
“We need the support of the Senate to ensure that government agencies do not directly take their budgets to the National Assembly because by doing that, they by-pass the scrutiny of the budget office.
“It is in the budget office that we sit down, look at their budget projections and cut it down but when they come directly, they have bypassed the scrutiny and this allows for over-bloated budget,” she said.
Explaining why some agencies couldn’t pay staff’ salaries despite funding of the recurrent expenditure, Mrs. Adeosun noted that the salary expenditure of such agencies increased mostly due to illegal recruitment.
“The Federal Executive Council asked for a committee to be set up on this which I chair. Some of the issues we have identified with agencies that are paying part salaries is that in some cases, agencies went ahead to recruit without approval from relevant agencies. In some cases, the budget was short and we are trying to investigate the reasons for this.
“We also found out that the issue of replacement contributes. For example, somebody who is on Grade level 14 retires and you bring in 6 people from a lower level, and then you now promote someone to that level 14, all-in-all, you have increased your salary budget.”
On luxury taxes, she said that the federal government has drafted a proposal waiting for approval to increase taxes on cigarette, beer, first class flights, private jets and others.