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Temitope A. Osanyintuyi
Learning Objectives (a) define budgeting and explain its links to the development process; (b) outline the budget process in Nigeria and discuss its shortcomings; (c) relate elements of recent budget reforms in Nigeria; and (d) articulate the need for greater inclusiveness in budgeting Introduction Budgeting could be viewed as the chain of activities and processes through the gamut of identifying expenditure needs, and mobilization and allocation of resources to meet the needs. It also covers the monitoring and control of expenditure. In this regard, budgeting serves directly as a tool of development policy since it is the means through which governments allocate resources to provide the goods and services – health, education, infrastructure, security etc needed to improve the well-being of people. Budgeting can also be conceived of as the process of formulating and implementing a budget, which in its simplest conception, refers to a statement of intended expenditure and its sources of finance over a definite period. In this regard, Olaloku (1994) states that government budgeting is essentially an exercise in the planning of government revenues and expenditure. To put this definition of budgeting in proper context however, it is important to note that a budget represents a statement of both the resources to be made available to the budgeting entity and the priorities of those who manage it. This implies that budgeting goes beyond ‘mere’ revenue and expenditure projections and relate to the plans, goals and objectives of the budgeting entity, and how these are to be achieved. Seen in this broader context, government budgeting represents an important aspect of economic management, and the budget can be regarded as a tool of government policy. In its capacity as a policy tool, the ultimate goal of budgeting is to improve the lives of the people.
The stated objectives of government budgets in Nigeria have in some way or other. CBN. annual budgets have been given names such as “Budget of Reconstruction and Development”. . For the most part. b. always reflected the nation’s development challenges and aspirations. however. FEC) to take final decision on total expenditure and sectoral ceilings. Preparation of proposals for the capital budget and rolling plan if any to be done by the operating ministries and agencies within the limit set and pass same to the NPC. Review of financial estimates of the projects for inclusion in the budget to be done by the Budget Office of FMF. d. it is felt that budgeting in Nigeria has not successfully served as an effective tool of development policy in terms of actualizing stated policy goals. Determination of the financial resources available in the next fiscal year (FMF. The four institutions should review economic conditions and make forecasts. This paper therefore examines the budgeting process in Nigeria and highlights recent reforms in the budget process. Consequently. Several factors related to the budgeting process have been responsible for this. it identifies perceived shortcomings in the budget process and examines the role of greater participation in the budget process. NPC. In doing this. The Traditional Budget Process in Nigeria The budget process in Nigeria has traditionally followed a series of steps as outlined below: a. Collaboration between the FMF and NPC required to harmonise position. c. Setting general priorities among and within various sectors to be done by the NPC. This stage starts with the issuance of the budget call circular by the FMF e. Determination of level of government expenditure (FMF and NPC).
utilizing five-year development plans from 1970 – 1985 and 3-year rolling plans from 1990 to 1999. FMF. These include: Lack of plan budget link and coordination: a budget is a financial plan. l. Budget Execution – Executive arm of the government. Though Nigeria started development planning from 1962. Consideration of the final budget by the FEC – FMF. 2005) Poor Fiscal Management: For the most part. In practice. NPC and ministries and agencies. This has resulted in poor budget implementation and given room for widespread corruption in budget implementation. i. Public spending was pro-cyclical (following a boom-bust cycle). resulted in actual expenditure levels that bore no semblance to the budget Weak Monitoring and Evaluation: The monitoring and evaluation/audit aspects of the budget cycle have not been given the required prominence and attention. Draft Final Budget: Putting together the reviewed estimates in final form to be done by the Budget Office (FMF). with specific reference to Due Process Compliance. particularly between 1991 and 1993.f. Scrutiny of the financial estimates of budget proposals. g. and be linked to larger development plans at those levels. . j. Budget Office and NPC h. fiscal management in Nigeria was characterized by a lack of fiscal discipline. NPC. budgeting was operated as if it ended with the authorization stage. the linkage of developments plans to annual budgets has never been attained (Ubani and Akiode-Afolabi. especially of approved capital budget proposals to be done by the Budget Office (FMF). Authorisation of the budget – NASS. while fiscal deficits predominated. High levels of extra-budgetary expenditure. Budget Hearing/Defence – Ministries. Budget Monitoring and Evaluation/Audit The traditional budget process in Nigeria suffered from several shortcomings. k. and government budgets at all levels should ideally derive from.
outcomes and impacts. The civil society has been involuntarily incapacitated from engaging effectively in national budgeting processes effectively for reasons which include lack of relevant information and knowledge of budgetary processes. there is currently no real scope or time for these role-players to make substantial contributions to the budget debate within the Legislatures. The focus has thus been on inputs in terms of amounts spent rather than on outputs. Legislators at all tiers are yet to cultivate the habit of cultivating the needs and preferences of their constituencies as a guide to their approval and oversight functions over the fiscal operations of government. According to UNIFEM (2002:115): “The budget process in Nigeria is non-participatory. the budget process has witnessed some changes meant to correct observed lapses. the organised private sector and the media have some opportunities to attend budget readings and hearings during the legislative phase. Planning and budgeting processes are yet to become broad based activities in Nigeria. In particular. Poor access to and quality of budget information further also undermines the ability of civil society and the media to research.” Though civil society. monitor and comment on government budgeting. Non-Participatory Nature of the Budget Process: It has been noted that the budgeting process in Nigeria is still non-participatory. Recent Reforms in the Budget Process Since 2005. budgeting has been dome within a medium term (3-year) perspective in Nigeria.Input Focus: The budgeting approach in Nigeria was line-item based and possibly incremental. It focuses on government rather than national programmes. It is mainly a government exercise. The use of a Medium Term Expenditure . Budget democracy is still a strange concept to policy makers.
In addition. which . 3. Stakeholder Consultation: The Medium Term Revenue and Expenditure Frameworks are presented at a one-day open interactive forum usually involving the private sector.Framework (MTEF) helps to improve consistency in budgeting as well as enhances plan-budget coordination. Budget reforms have also witnessed the introduction of an oil price based fiscal rule. debt service and spending by Ministries. whereby revenues projections are based on a benchmark rice for crude oil and any excess revenue arising from higher-than-benchmark prices are saved in an Excess Crude Account. MDAs are also expected to develop Medium Term Sector Strategies (MTSS). Allocation is guided by factors such as payroll size as well as the priority accorded to the service provided by each MDA against the background of government’s policy goals. public sector and the political class. which provides their maximum spending limit over the medium term. 4. An Expenditure Envelope is then allocated to each MDA. Departments and Agencies (MDAs)). Determination of MDA Envelopes: This stage involves sub-allocating the total MDA Expenditure Envelope among the various MDAs. The consultations are meant to obtain stakeholder input for the budget. This is done by the Budget Office in consultation with relevant agencies of government. Preparation of Medium Term Revenue Framework: The first step is the estimation of expected revenues over the medium term. Preparation of Medium Term Expenditure Framework (MTEF): This involves determining the maximum amount to be spent (Aggregate Expenditure Limit) over the medium term and how it is to be allocated among major expenditure heads (statutory transfers. This is primarily to ensure that budget deficits are sustainable and that government spending does not result in inflation Budget Process under MTEF The budget process under the MTEF follows a sequence of steps as follows: 1. 2. there is also a fiscal rule that limits the budget deficit to no more than 3 percent of GDP. civil society. Consultations are also held with the National Assembly.
At the National Assembly. the award of contracts for the execution of projects under the budget is expected to pass the test of Due Process Certification.gov. strategies and goals contained in the National Economic Empowerment and Development Strategy (NEEDS). submissions by MDA and its subsequent evaluation and consolidation by the Budget Office. In addition to these. Budget reforms have also included elements of performance budgeting (by requiring MDAs to specify the exact targets that they want to achieve and costing these) as well as improving the accessibility of budget information through budget publications and publishing of budget estimates and allocations. committee hearings on the budget provide another opportunity for civil society contribution into the budget.gov. identifies programmes and projects 5. Traditional Stages: Following the completion of the above stages. it is shared with the National Assembly for their information. 6.ng). . Such publications are now readily available through the websites of the Federal Ministry of Finance (www. Preparation of a Fiscal Strategy Paper: All the items prepared previously are used to provide a Fiscal Strategy Paper which is presented to the Federal Executive Council for consideration. provides cost estimates and an implementation time-table and defines expected project outcomes.ng) and the Budget Office of the Federation (www. the Millennium Development Goals (MDGs) and specific sector strategies (Budget Office.fmf. Once it is approved by the FEC. and final Presidential Approval after passage by the legislature. to be carried out.budgetoffice. presentation for Presidential Approval. 2006). presentation of the Appropriation Bill to the national Assembly.articulates their goals and objectives. Policy Focus of Recent Budgets The Nigerian National Budget in recent years has been prepared within the framework of the policy thrusts. the traditional budget preparation phases of Budget Call Circular issuance.
Agusto. f. Employment generation. Achieve universal primary education: Ensure that all boys and girls are able to complete a full course of primary schooling . and Strenthening human capacity through qualitative and functional education. Development of the Power and Energy Sector. c. The Millennium Development Goals (MDGs) comprise a set of eight time-bound goals and associated targets to be achieved by 2015. Land Reforms aimed at encouraging commercialised farming. Value reorientation The Seven-Point agenda focuses on the following priority areas: a. Food security and poverty reduction. It is also a plan for attaining the Millennium Development Goals (MDGs) and also serves as the nation’s Poverty Reduction Strategy Paper (PRSP). The NEEDS may be regarded as Nigeria’s current development plan. Eradicate extreme poverty and hunger: Halve the proportion of people living on less than one US dollar per day. d. g. which are: i. 2006.2007 period. Poverty reduction. e. Currently. Wealth creation. ii. and iv. Halve the proportion of people who suffer from hunger 2. government is in the process of harmonizing the second phase of NEEDS (NEEDS II) with the Seven-Point Agenda of the current administration. Development of mass transportation. Improving wealth creation and employment generation through diversification.NEEDS and the MDGs provide the high-level policy that guides budgetary expenditure allocations (Obasanjo. b. NEEDS was initially formulated as a medium-term development plan to span the 2004 . Provision of adequate security of life and property. These goals and targets are to: 1. 2005). NEEDS has four main goals. iii.
Promote gender equality and empower women: Eliminate gender disparity in primary and secondary education 4. “Building Physical and Human Infrastructure for Job Creation and Poverty Eradication”. Address the special needs of the least developed countries In line with these high-level policy directions. recent national budgets in Nigeria have focused on issues of poverty reduction. Health spending will be expected to pay attention to combating . human capital investment (education and health). The 2005 Budget had has its theme. 5. Improve the living conditions of 100 million slum dwellers by 2020 8. it should be expected that government spending will accord priority to the areas of physical infrastructure investment (especially power. Ensure environmental sustainability: Reverse the loss of environmental resources. Halve the proportion of people without access to safe drinking water and basic sanitation. transport and communications). Reduce child mortality: Reduce the death rate of children under five by two thirds. Given the policy thrusts provided by NEEDS and the MDGs as well as the budget themes.3. Improve maternal health: Reduce the number of women who die in childbirth by three quarters 6. job and wealth creation through investments in human and physical capital. gender issues. Develop a global partnership for development: Develop an open rulebased non-discriminatory trading and financial system. malaria and other diseases: Halt the spread of HIV/AIDS and malaria and start to reverse it 7. agriculture and rural development and the provision of social safety nets. The 2006 and 2007 budgets were also developed along these lines with the themes of “Accelerating the Building of Physical and Human Infrastructure for Job Creation and Poverty Eradication” and "Accelerating Physical and Human Infrastructure for Wealth Creation and Poverty Reduction" respectively. Combat HIV/AIDS.
97% 7.98% 3.812.29% 5.02 9 93. 2004.87 6 109. TABLE 1: MDAS WITH HIGHEST BUDGETARY ALLOCATIONS.000.HIV/AIDS and malaria as well as issues of maternal health and infant mortality.563.86% 8. Intergovernmental Affairs (for spending on youth projects).76 10.00 0 101. The national budgets over the 2004 – 2006 periods listed the priority areas as roads.67% 6.074. For 2007.844 8.75 8 106. Housing and Urban Development and the Environment. the amount was increased to N110 billion.34% .035. The table below shows sectors with the highest budgetary allocations over the 2005 – 2007 period. Water Resources.519 80.68% 8. health and security while the 2007 budget focused on improving the quality of education.940.63% 5. water supply.685.09% 5.145 73. agriculture.868.15% 6.944.011. The resources go to 10 key ministries: Agriculture.04% 6.88% 166. Women’s Affairs.77% 5.48% 4.527. Education. power.39% 5.09% 6. With respect to the MDGs. Power and Steel. Works.06% 3.451.749.621.79 9 111.426.653. 2007). healthcare and social services (Okonjo-Iweala.548 71.456.719. 2005 – 2007 MDA AMOUNT (N) % OF TOTAL MDA EXPENDITURE % OF TOTAL EXPENDITURE 2005 BUDGET Education Defence/MOD/Army/Airforce/Navy Works Power and Steel Police Formation & Command Water Resources Health Presidency 2006 BUDGET Education Health Defence/MOD/Army/Air Force/Navy 120. Health. the Federal Government allocated N100 billion from debt relief funds for spending on the achievement of the MDGs.89% 5.26% 8.22% 6.092 69. the debt relief gains (DRGs) arising from the debt relief granted Nigeria by the Paris Club of Creditors in 2005 is supposed to be channeled into social spending aimed at achieving these targets.96% 5.18% 4.294. education. Usman.748.415. In 2006.968.
expected outcomes in terms of greater employment.00% 5.774.11% 191.703 78.20% 5. It is thus believed that the budgeting process in Nigeria may still benefit from greater inclusiveness of stakeholders in the development planning and budgeting process. wealth creation and poverty reduction.771.20% 5.811.66% 5.000. better plan-budget linkages and perhaps.41% 10.319 10. involving the intended beneficiaries is necessary if the well being of the people is to be guaranteed by the planning and budgeting process.896.530.004.16% 8. better budget implementation. While the reforms of the budget process have resulted in greater fiscal discipline.92 9 122.14% 4. various years 3 91.40 7 104.21% 4.79% 4. A number of advantages arise from making planning and budgeting processes more inclusive and participatory.569.62% 4. Firstly.53% 4.54 0 95.617.507. Inclusive and participatory budgeting will help to ensure that the needs and interests of intended beneficiaries are taken into cognizance and form the basis for the articulation of plans.399. policies and allocation of resources.435.99 9 117.40% 5. improved health service delivery.000 94.22% 4.651.19% Improving the Budget Process through Greater Participation The emphasis of present day planning and budgeting processes is that of involving all segments of the society.245.22 2 185. In other words.38% 5.000.18% 4.66% 6. planning and budgeting will reflect the people’s needs and this can be expected to make the budget process a better .102 6.11% 6.075.983.093.000.69% 5.Works Police Formation & Command Water Resources Power and Steel 2007 BUDGET Works Education Health Defence/MOD/Army/Airforce/Navy Power and Steel Police Formation & Command Water Resources Source: Appropriation Acts.314.999.45% 8.001 85.28% 5.500. better quality of education and security of life and property are yet to materialize.000 80.
decision makers. Budgeting can also be improved through a greater focus on performance. community leaders. Thirdly. political leaders. Fourthly. stakeholder involvement can also be expected to strengthen implementation. corruption. farmers. transparency and accountability. academic and so on – help to ensure that various interests and special needs are taken care of in planning and budgeting. While recent reforms have tried to correct the observed lapses to varying degrees. a focus on inputs and nonparticipatory planning and budget processes.tool of development policy since development is simply a change in the quality of life of the people within a nation Secondly. rather than inputs. stakeholder participation in the planning and budgeting process enhances openness. The reasons for these are varied and include poor plan-budget link and coordination. prominent personalities. Nongovernmental organizations (NGOs).retirees. failed to serve as an effective tool of implementing development policy. lack of fiscal discipline. public servants private sector operatives. The involvement of different segments of the society . men. inclusive and participatory budgeting helps to redress socio-economic imbalances and marginalization of weaker or vulnerable groups in society. which form the hallmarks of good governance. for the most part. . distinct production communities. greater inclusiveness is still needed to promote a more effective planning and budgeting process and ensure that budgeting results in an improvement of the living standards of the people. professional groups. ineffective monitoring and evaluation. women. Community Based Organizations (CBOs). traders. monitoring and evaluation as this implies that people become better informed about plans and budgets and are more likely to ensure that implementation goes as planned. youths. Conclusion Budgeting in Nigeria has.
2005 Budget Office of the Federation (BOF) (2006). Obasanjo. Ministerial Briefing on Budget 2004 Ubani. Chima and Abiola Akiode-Afolabi (2005). 22 April. “”Linking High-Level Policy to Detailed Spending Plans”. Okonjo-Iweala. E. UNIFEM (2002). The Budget Process in Nigeria: Issues and Challenges for Gender Responsive Budgeting. October 11. Budget Office at the Nigerian-British Chamber of Commerce Business Luncheon.References Agusto. A Handbook on Budgeting: A Guide to the Due Process Approach (Lagos: CDD). “2007 Budget Speech”. Presentation by His Excellency. 2007. Presentation on the 2007 Federal Budget by the Honourable Minister of Finance at the International Conference Centre. Chapter 2. 2006. Ngozi (2004). “Policy and Legal Framework of Budgeting” in Centre for Democracy and Development (CDD). “The 2007 Federal Budget”. Abuja. Olabode M. Abuja. . (2005). Presentation by the Director-General. (2007). “The 2005 Budget and its Implications for Business and Investment”. January 8. President Olusegun Obasanjo at the Joint Session of the National Assembly. Presentation for the 2006 Service-Wide Training for Budget Officers on Public Sector Budgeting. Nenadi. (UNIFEM) Usman. Olusegun (2006).
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