Of Visions, Plans and Budgets
We have seen how not to prepare a budget, so what is the best way to prepare a budget?
In managing organizations to deliver a budget, there is a process. The process starts from articulating a Vision to a Strategic Plan and then then an Annual budget, the budget as you see is the end of the process.
So it’s vision, a plan then a budget.
Nigeria follows this process, we have a Vision, the Vision 20:2020, we have a 3-year strategic plan the Medium Term Expenditure Framework MTEF, then we have annual budget, this is the process by law. According the Fiscal Responsibility Act, the Executive MUST submit a MTEF. It makes sense, that to achieve anything, you start with a Vision. As at today, the vision of Nigeria remains the Vision 20:2020, it’s on the Ministry of Budget and Planning website.
However, there is a little problem, the Vision 20:2020 has three Medium Tern Development Plans, the first is from 2010-2013, then the 2014 to 2017. Clearly the first development plan has expired and there is no 2014 to 2017 plan, thus the 2017 budget rest on no strategic vision…. its “floating”. The 2016 budget’s lack of strategic linkage to any long term plan is worrisome. Remember that saying, he that fails to plans to plans to fail? Let me demonstrate it with 3 stories.
First story, in 1980, the Federal Government decided a local car will be built. in their wisdom they choose four organizations to build the car i.e. Kwara State Polytechnic Ilorin, Ahmadu Bello University, Zaria, PRODA in Enugu and ADDIS Engineering Company. in Lagos. Kwara State Polytechnic was to design and construct the chassis and the body of the vehicle, Ahmadu Bello University, was to design the engine and PRODA and ADDIS engineering were to assembly the car. Kwara State Polytechnic not only designed and constructed the chassis and body of a 3-wheel vehicle but when on to assembly and test drive the 3-wheeeler. No… not a typo…we got a Keke Maruwa! (true).
Why did we get a Keke Maruwa when we wanted a car?
Well we never planned for a car, we just had a vision for a car. A new government came in and of course, the car vision was abandoned…. So in this regard, the administration had a vision, it had no strategic plan, no budget.
What is the effect? As at 2015, we had a $6b bill for car imports…had we devised a plan to continue to funding the Nigeria car vision from the 1980, maybe we would have created a local Keke by now, as at today, the Keke are imported.
Story 2, In 2011, I watched the CBN Governor Sanusi Lamido Sanusi and the Coordinating Minister of the Economy, Ngozi Okonjo Iweala attempt to make the simple mathematics case that subsidizing imports was draining our reserves. Nigerians disagreed in 2012, and ‘occupied”. In 2016, Nigerians now agree to the man, that subsidy on imported fuels should go….in effect from 2012 to 2015, the billions of dollars spent on subsidizing imported petrol was a waste….
However, let’s examine this closely, the first Medium Tern Development Plan of the Vision 20:2020, i.e. from 2010-2013, called for the removal of fuel subsidy. Citing the need for continued fiscal reforms by reordering and re-prioritizing expenditure, fuel subsidy was proposed to be removed, Nigeria was to save over the plan an estimated N1.50trillion. (using highest 2009 exchange rate of N177 that’s almost $9b savings!)
So in this regard, the administration had a vision, it has strategic plan which clearly recommended removal of subsidy, but it did not implement fully. so the budget did not receive the planned revenue. Thus the removal of subsidy was a carefully thought out plan, was partially implemented. Today non-payment of petroleum subsidy is saving Nigeria $5b annually as stated by the Vice President Osibanjo, this is the saving that would have been retained by Federal and State Governments since 2012 if the subsidy was removed.
Now the 3rd story, as at 2007, perhaps only two car manufacturing plants in Nigeria were alive, but on life support, the PAN in Kaduna and Anamco in Enugu. Most new cars in Nigeria were fully imported.
In 2009, The Vision 20:2020 recommended that the federal government should intervene and revamp the automobile manufacturing sub-sector by among other measures Reducing payment of customs duties and other charges on raw materials for local content to 0%. Ensuring customs duty differential on fully-built units (FBUs) between manufacturing and non-manufacturing importers favor manufacturing importers. This Vision 20:2020 recommendation were inputted in the “The automotive policy as part of the Nigeria Industrial Revolution Plan (NIRP) in 2014. This auto policy slashed import duties for completely knocked down parts (CKD) and semi-knocked down parts (SKD) as recommended.
Then in the 2014 budget, we see key earmarks, a N7m to support “buy made-in Nigeria products” and another N16m to support backward integration to support the NIRP, and an N16m to develop a 4 stroke 800 cc local engine, these appropriations are tied to the NIRP, the NIRP tied to the Vision 20:2020.
Clearly, the administration had a vision, it has strategic plan, and then funds were appropriated in the budget to develop the plan again…. vision…plan…budget…
What was the effect?
According to the Director, Policy and Planning at the National Automotive Development and Design Council (NADDC), Mr. Luqman Mamudu, Nigeria’s automotive industry has attracted investment worth up to $128 million and an estimate $50 million has been committed on land space and infrastructure from 2013 till date. Car manufacturers such as Ford, Nissan, Peugeot, VW, Hyundai Kia Tata etc, have all come to Nigeria to set up assembly plants.
This is why vision and planning are so important…and why strategic planning must be linked to annual budgets. The budget only exists funds the plan, the budget cannot as a document “float”. President Buhari has been very clear on his “vision”, he wants to create jobs…he has gone further to say he will create jobs in Agriculture and Mining to diversify the economy away from crude oil.
Brilliant!
But there is currently no plan to do this…. there is a budget however, so let’s look at the budget…
What’s the total allocation to Mines and Steel Development? N18b Lets compare this to the allocation to say Information…at N44b…..if the strategic plan is to create jobs via Mining, with is Information getting more in the budget than Mining?
In this case, the budget is not following the strategic plan.
So while we must rage about the very poor budget, what is most important are the long and medium term economic plans. If we are adopting and continuing with the Vision 20:2020, then a second Medium Tern Development Plan to cover 2014 to 2017 should be submitted. If We are discarding the Vision 20:2020, then a new vision should be presented.
God does not give a nation orange juice; he gives them oranges. Nigeria is the largest economy in Africa, she has the largest population in Africa and sits on the largest crude oil deposit in Africa, with the most educated diasporas from Africa, however these are all factors of production, it’s a vision, backed by a plan that converts population to a prosperous middle class and crude oil to petrol.
We have to wrote a plan to make orange juice out of our oranges. This is our problem; we will fix it…
Nicely put