Understanding the importance of Federal budgeting process in Nigeria

Nigeria's President Muhammadu Buhari is set to present the 2018 appropriation bill before parliament today, marking a crucial step in the government's efforts to return to the January to December budget cycle. The collaboration between the executive and the legislature is imperative in ensuring that the budgeting process runs smoothly and efficiently. Egie Akpata, Director Union Capital Markets, shed light on the significance of budget cycles at both the national and sub-national levels in a recent interview on CNBC Africa. The maturity of Nigeria's democracy plays a pivotal role in the cooperation between the executive and the legislature. Akpata highlighted that the current challenges in meeting budget deadlines are more of a timetable issue rather than a lack of cooperation. Delays in the budget process can hinder timely execution of government projects and programs, emphasizing the need for better time management and coordination between the branches of government. One of the key points discussed in the interview was the financial outlook for sub-national entities, particularly state governments. Despite improvements in oil prices, many states are still grappling with deficits, reflecting the need for enhanced financial management and revenue generation strategies. Akpata noted that while some states may break even, the majority are facing significant financial challenges, underscoring the importance of fiscal discipline and efficiency at the sub-national level. The issue of borrowing emerged as a contentious topic, with Akpata pointing out the limitations faced by states in accessing funds compared to the federal government. States' heavy reliance on bailout funds and existing debts pose challenges in seeking additional financing options. The stringent conditions attached to borrowing, coupled with the federal government's cautious approach to approving state loans, further constrain the borrowing prospects for sub-national entities. In contrast, the federal government has been exploring external borrowing to fund its budget, with a focus on improving local revenues to reduce dependency on loans. Akpata highlighted the necessity of enhancing tax revenues at the federal level, noting that Nigeria's tax structure primarily relies on corporate taxes rather than individual income taxes. The potential shift towards foreign borrowing could potentially impact the local corporate debt markets, although the long-term implications remain uncertain. As Nigeria navigates its budgeting process and financial challenges, the need for strategic fiscal management and economic reforms becomes increasingly evident. The delicate balance between borrowing, revenue generation, and expenditure control will be critical in ensuring financial stability and sustainable economic growth for the country.