Nigeria’s waning capacity for Capital Projects Implementation
In discussing the extent of infrastructure gap in Nigeria, it is not possible to overlook the role of domestic finance in financing infrastructure. The major source of domestic financing for infrastructure in Nigeria is the government, and at the national, the Federal Government of Nigeria. Successive administrations in the past differ widely in the amounts they spend and the sectors they target. The amounts generally vary based on the amounts derived from crude oil sales rather than any clear sectoral plan for the infrastructure development for the country. However, one feature has remined constant in the performance of these demonstrations: budget implementation for capital projects have largely be miserable. The reasons for this phenomenon range from poor revenue actualization to disjointed project management strategies, among other factors. Most of the projects receiving budgetary allocations include projects that have remained under construction for nearly a decade or more. In the following paragraphs, I undertake a cursory review of capital budget implementation at the national level in the past eight years. The reviews carried out here are based on the figures officially made public by the Budget Office of the Federation (BOF) for the respective years through its quarterly and annual budget implementation reports.
In 2009, capital budget implementation (here measured through the percentage of cash backed capital projects which were utilized at the end of the budget year) ranged from a miserly 25% to 87%. Critical sectors to the economy like power and roads construction which had relatively higher budget allocation were among the lowest performing sectors with 25% and 47% implementation levels respectively. The sectors with the best performance were Agriculture & Water Resources, aviation & the ports, and defence, all performing a bit above 80%. This level of performance was however only realized with an extension of the implementation period to the first quarter of the following, 2010. Overall, the average level of capital projects implementation across ministries, departments and agencies(MDAs) of the Federal Government was 60.59%. It should be noted that the said performance was only based on released funds which was about 40% less than the budgeted amount for capital votes in the fiscal year.
Things changed moving on to 2011, as the capital projects implementation moved up to 87.90% only after an extension of the budget years to the first and second quarters of 2012. A closer look at the figures reveal that most of the agencies which recorded very high levels of implementation (between 90-100%) were agencies whose capital projects were mainly administrate capital items. Some of these agencies include the Federal Civil Service Commission(FCSC), the National Population Commission (NPC), the Independent National Electoral Commission (INEC), etc. Agencies saddled with the responsibility of implementing critical infrastructure projects had rather lower implementation levels. Overall, the average capital implementation performance of the year of 87.90% was based on a cash release shortfall of up to 40%. However, for the 2012 fiscal year, performance had dropped to 67.45%. Though most of the agencies implementing infrastructure project had recorded higher level of performance, cash releases for the year was 44.4% below budgeted amount for capital projects. In other words, when placed against the actual budgeted sum, the capital project implementation was less 60% percent across sectors and agencies.
The 2013, budget year saw the best level of implementation compared to previous years. The level of performance across MDAs moved up to 96.11%. While major infrastructure implementing agencies had very high levels of performance, reported levels of capital utilization only represented 42.6% of less than the amount budgeted by the government. Again, when estimated based on the actual budgeted amount, the performance of capital projects was lower than 60% and even 50% for some sectors. There was not much difference in the extent of implementation of capital projects in the subsequent two years, 2015. The overall performance of capital projects was 92.47% across MDAs. With about 35% less than the budgeted amount, this reported level of performance would certainly be much less than what has been reported.
Recently, in 2016, the performance of the capital component of the annual budget was 97.75% after about five months extension of the implementation period into the year 2017. The 2016 budget year has been about the poorest so far considering that as at the end of 2016, only about 7% of the budgeted amount for capital projects were cash-backed. The bulk of the 97.75% level of implementation was achieved only in 2017.
What is clear from the foregoing is a clear indication that there has been a perennial challenge with in the execution of infrastructure projects in Nigeria. While the Federal Government has rarely fallen short on the both the cash releases and expenditure on salaries and overhead throughout the same period under review, the case has always been different for capital projects. Apart from budgeted amounts not been fully implemented, in instances where monies were fully released they are rarely fully expended, save for cases in which such monies were committed to the purchase of operating equipment within government agencies. The implications of these is that even with the very meagre amounts that were budgeted, only a ridiculously low amount generally goes to real infrastructure development in Nigeria. Many instances point to several government agencies preferring to commit a most of the capital votes to the purchase of operational items like vehicles, computers, and staff houses in some cases.
In conclusion, the Federal Government needs to urgently address the epidemic of uncompleted or abandoned projects which litter the entire landscape of Nigeria. With the dwindling purchasing power of the naira due to obvious supply challenge with foreign currency, it will remain a daunting challenge to have government complete projects in record times unless its approach to project management is corrected. The practice where every new political appointee wants to have a new project within their period of service cannot be allowed to continue. An audit of existing projects needs to be undertaken as a way of properly streamlining government’s spending on capital projects, with emphasise on prioritizing critical infrastructure.