ANNUAL BUDGET PLANNING
Ministry of Budget and Planning (MoBP) provides guidance in budget planning, particularly stating timelines for different budget activities and responsibilities. MoBP also directs roles for budget stakeholders given the need for consultation and engagement in the development of the contents of budget policy statement.
Budget Planning and Calendar
Enugu State budget planning and preparation processes are guided by approved timelines that runs from the second quarter of each year to December. The first activity in the budget process is for MoBP to hold a joint budget planning meeting to activate the budget process. This is in consultation with the Enugu State Economic Planning Commission (ESECPC) and State Ministry of Finance (MoF) to answer the following questions:
- What government activities should be covered?
- How short-run expenditure projections should be made?
- What framework and budget decisions should be made?
- Have Economic and Fiscal Updates (EFU) been carried out? The EFU is a process that critically updates the economic and fiscal environment of an economy and provides the basis for future fiscal planning and projections.
- Have a Fiscal Strategy Paper (FSP) been prepared? The FSP summarizes the aggregate fiscal projections and strategies over the medium-term period.
- Have a Budget Policy Statement (BPS) been prepared? The BPS presents the correct policy for the new budget year that addresses proper link of the year’s budget with policy and planning (MTSS, MTEF), budget credibility and realism, prioritization and efficient sectoral allocations.
Effective annual budget and planning is a pre-requisite for successful budget preparation and consists of all activities undertaken before the issuance of annual call circular, which is the start of budget preparation sub-process. At the planning level, staff of MoBP and ESEPC would be expected to jointly:
- Collect and review information on expenditure outturn;
- Collect and review information on revenue performance;
- Develop revenue forecasts;
- Develop expenditure projections; and
- Determine sector/MDA envelops.
These fiscal targets would contain explicit basis and assumptions upon which they are anchored.
Economic and Fiscal Updates (EFU)
The MoBP in collaboration with the ESEPC jointly prepares the EFU annually.
Purpose of EFU
- Analyzes recent economic developments at global, national and state levels and also considers the implications of these for the fiscal framework.
- Presents key economic indicators, including for the petroleum sector
- Examines prior year budget performance and the implications on the current and next budget years.
- Considers fiscal prospects for the current year, including key fiscal risks and potential mitigation measures.
- Presents key considerations for the next year’s budget.
- Presents impact of State expenditure on service delivery and growth.
- Concludes with a set of policy recommendations which should flow through the FSP and BPS to the annual budget preparation.
Fiscal Strategy Paper (FSP)
The MoBP and the ESEPC have joint responsibility for the preparation of the FSP by the end of February annually, with input from the Accountant General’s Office, the Debt Management Department (DMD), and the MoF. Overall coordination is by the MoBP under the supervision of the Honourable Commissioner.
Purpose of FSP
- It is a 3-year document rolled forward annually which provides the narrative and fiscal policy priorities for Medium Term Fiscal framework (MTFF)
- it provides macroeconomic framework with input from EFU, including analysis of trend in key microeconomic indicators – GDP, inflation, interest rate, exchange rate and unemployment
- It updates review of previous year’s budget performance, drawing on analysis contained in the EFU
- It presents the State’s medium –term fiscal objectives and targets.
- It forecasts medium-term revenues based on assumptions that affect oil and non- oil revenue and IGR, and determines the aggregation budget size (aggregation expenditure) each year for 3 years based micro fiscal modeling.
- Crucially, it specifies a budget size consistent with sustainable threshold of deficit financing
- It provides deficit and financing items, including debt service.
- It provides fiscal risk and mitigation measures.
- It provides conclusion and recommendations.
The Honourable Commissioner, MoBP inaugurates the budget committee to properly harmonize all issues relating to the medium-term fiscal targets and annual fiscal priorities. The budget committee is made up of the following members and chaired by the the Honourable Commissioner, Ministry of Budget and Planning. Other members include:
- Commissioner, Ministry of Finance;
- Executive Secretary, Enugu State Economic Planning Commission;
- Permanent Secretary, Ministry of Budget and Planning;
- Accountant General;
- Permanent Secretary, Debt Management and
- Chairman, Board of Internal Revenue.
The duties and responsibilities of this committee include the following;
- Review of fiscal targets
- Review of aggregate spending limits
- Review of planning and contingency Reserves
- Review of sector spending ceilings; and
- Recommendations on fiscal policy thrust.
Stakeholders in the budget process fall into two categories, namely: the internal stakeholders (all MDAs- central and line ministries, sub-vented agencies and parastatals) and external stakeholders (individual citizens, the mass media, Civil Society Organizations (CSOs), Community Based Organizations (CBOs), Faith Based Organizations (FBOs), the organized private sector, trade groups, professional bodies, associations, town unions, diplomatic missions, etc.
The responsibility for budget preparation and execution is not limited to the MoBP and other relevant MDAs. The MoBP shall involve all internal stakeholders in the entire process because they are the source of data for performance review of the previous year’s budget, they are the implementers of the budget, they are the source of inputs (MDAs’ budget proposals) for the next budget and they are the ones to monitor and report on projects’ implementation/service delivery. However, the management and control of the budget is a prerogative of the MoBP.
Stakeholders’ consultation has the following benefits:
- It presents an opportunity for the government to give account of its stewardship to the electorate regarding the implementation of past budgets;
- It gives the government an opportunity to explain the annual budget policy thrust to the citizens:
- It is an effective way to involve citizens in each stage of government’s work, from planning and budgeting to monitoring the performance of the public services;
- It provides an opportunity for citizens and communities to articulate and present their development needs to the government for consideration and possible inclusion in the budget;
- It is an avenue for the government to present its development policy objectives and priorities to the citizens, including MDA service delivery charters;
- It provides the platform for the Government to ensure consistency of government policies with the development priorities of the citizens
- It facilitates open, transparent and inclusive government; and
- It brings the government closer to the citizens through exchange of information
Stakeholders’ consultation can be done through:
- Democratic representation
- Direct consultation in meetings and seminar, either with civil society groups, business leaders, traditional leaders, faith groups, or the general public;
- Range of survey techniques e.g., opinion polls, to record what the public needs and what it thinks about specific issues; and
- Through radio and other media seeking out the public views
Purpose and Content of Budget Policy Statement
The MoBP has the responsibility to prepare the budget policy statement with input from the ESEPC.
- Builds on analysis of the EFU and the FSP;
- Multi-year document which emphasizes the main policy thrust for annual budget preparation;
- Determines a “prudent budget size” consistent with Macroeconomic stability and sustainable debt;
- Uses State Government’s policy priorities for growth and development to drive the inter-sectoral allocation of resources
- Provides 3-year sector ceilings which are distributed to the MDAs as part of the annual budget call circular;
- Provides the EXCO with realistic and objective policy options for informed budget policy statements;
- Provides guidelines on the admittance of capital projects and programmes to the budget and
- Articulates a robust and comprehensive policy driven budget call circular and provides “take off” point for the annual budget cycle.
Contents of the Budget Policy Statement:
- Broad guide on sector priorities and justifications including guidance for the costing of capital investments together with the associated recurrent cost (personnel and overhead)
- Annual aggregate spending limit: (revenue forecast minus contingency reserve);
- Planning reserve: (included in the annual aggregate spending limit). Planning reserve is a proportion of the annual aggregate spending limit not allocated to spending MDAs in the budget call circular. The planning reserve is allocated to spending MDAs at budget defense stage to augment for shortfall in budget request.
- Contingency reserve;
- Annual spending limit for MDAs (Planning reserve not included);
- A detailed budget call circular;
- Gender mainstreaming of social issues.
Presentation of Budget Policy Statement to State Executive Council
The draft State Budget policy statement and guidelines shall be presented to the State Executive Council within stipulated timeline for review, consideration, modification and endorsement.
Consultation and Engagement with the Legislature
The State Executive Council shall prior to final endorsement of the state budget policy statement hold further political engagement with members of the SHA. This is to improve the understanding of the legislators of the fiscal possibilities and options. Political engagement in the budget process helps to temper unrealistic demands and adds credibility to budget enforcement.