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JULY, 2010
APPROVAL PAGE
This thesis has been approved by the Department of Accountancy, Faculty of Business
-------------------------- ------------------------------
DATE DATE
CERTIFICATION
completed the requirements for research work for the Degree of Doctor of Philosophy
in Accountancy.
This work incorporated in this thesis is original and has not been submitted in part or
in full for any other Diploma or Degree of this or any other University.
................................................................
PG/PhD/04/38081
DEDICATION
This thesis is dedicated to Almighty God for His infinite love, grace and mercy
To late Dr. A. M. O. Anyafo in honour of his contributions to this work and others and
This research work would have not been completed without support and assistance of
Lord Jesus Christ for providing me strength and protection throughout the duration of
this course.
Surely, the progress recorded in this research work arose from the commitment and
giant and a man of great honour and achievement. With deep sense of humility on my
part, I thank him for his special interest, commitment and belief in this work, and for
whom I beckoned at very odd hours for guidance, advice, and direction. He did not
relent in giving the push and support towards the completion of this work. I cannot
thank you enough; you have been a great source of inspiration to me starting from the
providing the necessary guidance; your wealth of knowledge provided the basis for the
completion of this work. I cannot thank you enough; you have been a great source of
encouragement to me from the time you assumed headship till now. You have been
my academic mother; I will live to remember your good deeds. Remain blessed.
University of Nigeria, Prof. (Mrs) U. Modum, who laid the foundation and provided
the intellectual input that inspired me to push this thesis forward. Her magnanimous
Administration, University of Nigeria for his support and advice. I also appreciate the
wonderful support and encouragement of Mr. R.O. Ugwuoke, S.N. Kodjo, V.U.
Ezeugwu. I will live to remember your good deeds. I appreciate the support of the
Rector, Federal Polytechnic Nasarawa, Mr. P.O Salami. He offered assistance and
advice at various times in the course of this work. I thank Mr.W.O.Nwokocha for his
Business Administration, University of Nigeria, for their intellectual input towards the
patience, support and encouragement all through the duration of the study.
I thank my distinguished friend, Umar Tela, who assisted me at various time toward
the completion of my research work. I also thank Austin Ujunwa for his suggestion
Above all, I am indebted to the various scholars, authors and experts whose ideas
formed the theoretical bases for this study and those who assisted me in the course of
this work.
Worthy of mention are Mr. Leo Sani of National Bureau of Statistics, Abuja and Mr.
Suleiman of CBN, Abuja. I thank my course mate, Mr. Mike Ekwe for his wonderful
support.
My thanks also go to all staff of Department of Accountancy, University of Nigeria,
which includes Mr. Omeje, Mrs. Ezeokonkwo and Mrs. Ngozi Oti.
I also recognize the effort and support of my colleague, Mr. E.E Akpan. I thank Daniel
Sekpe G. for typing and setting the manuscript.
I remain grateful to Institute of Chartered Accountants of Nigeria [ICAN] for their
review and acceptance to sponsor this work under the ICAN Ph.D research grant.
Finally, I assume responsibility for errors, omission and short comings that may be
ABSTRACT
This study analyzed the effect of public expenditure and national income accounting on
macroeconomic performance in Nigeria for the period, 1980 – 2007. The study empirically verified
the effect of public expenditure on growth of the economy. The study also examined the challenges
of improving fiscal discipline, bringing resource allocation in line with development priorities and
creating an enabling environment for public financial managers and protecting due process.
Secondary data were the main source of data used for analysis. The hypotheses formulated were
tested using simple and multiple regression techniques. Models were applied for predicting the
impact of public expenditure on GDP, industrial capacity utilization, gross fixed capital formation
and inflation. Reasonable measures of economic development (national income) and state activity
(public expenditure) can through the employment of econometric estimation, isolate the effects of a
few variables on public spending. There are in general six different formulations of Wagner’s
hypothesis which have been employed to test the law on increasing state activities. This study has
modified these models and developed new models called “Expanding Activity” models which can be
used for the prediction of the impact of categories of public expenditure on gross domestic product
(GDP).They also predict an increasing relative share for the public sector in the total economy as per
capita income grows. The findings showed that both recurrent and capital expenditure have
significant positive impact on gross domestic product (size of the economy). This means that
decreasing or cutting capital expenditure will create negative impact on the growth of the economy.
The findings also proved that huge recurrent expenditures do suppress the impact of capital
expenditure on the economy. Empirically, the findings have also shown that there is strong positive
relationship between recurrent and capital expenditure and gross fixed capital formation in Nigeria.
Similarly, findings showed that both public capital and recurrent expenditure have negative impact
on inflation rate in Nigeria, which confirms inflation to be determined largely by both internal and
external factors. Thus, openness of the economy is highly correlated with inflation. This means that
there are so many other exogenous variables that impact positively on inflation rate in Nigeria. GDP
per capita as aggregate of national income accounting and also an indicator of economic well-being
provided good results on the nation’s economic health as shown by the impact of exchange rate,
employment rate, and industrial capacity utilization and inflation rate. The researcher discovered that
there are factors hindering the effectiveness of public expenditure as a fiscal policy tool, which
include high level of leakages in public funds, fiscal indiscipline, corruption, weak governance in
public expenditure and poor budget implementation. It is recommended that Government needs to
take urgent steps in full implementation of various reforms in public expenditure management,
which include Medium-term Expenditure Frameworks, Fiscal Responsibility Act and Public
Procurement Act. The accounting system in government should also reflect changing patterns in
public expenditure management.
TABLE OF CONTENTS
TITLE PAGE i
APPROVAL PAGE ii
CERTIFICATION iii
DEDICATION iv
ACKNOWLEDGEMENTS v
ABSTRACT viii
LIST OF TABLES ix
CHAPTER ONE: INTRODUCTION 1
1.1 BACKGROUND OF THE STUDY 1
1.2 STATEMENT OF RESEARCH PROBLEM 6
1.3 OBJECTIVES OF THE STUDY 8
1.4 RESEARCH QUESTIONS 9
1.5 RESEARCH HYPOTHESES 10
1.6 SIGNIFICANCE OF THE STUDY 11
1.7 SCOPE AND LIMITATIONS OF THE STUDY 12
REFERENCES 14
GROWTH 36
ACCOUNTING 68
MANAGEMENT 78
REFERENCES 84
REFERENCES 105
EXPENDITURE 112
EXPENDITURE 118
REFERENCES 144
AND RECOMMENDATIONS
GROWTH. 22
CONSTITUTION 31
TOTAL EXPENDITURE:
CHAPTER ONE
INTRODUCTION
government activity. This appears to be the case with many countries, especially
the developing ones. Nigeria has been adopting public expenditure as a practical
simply be seen as expenses which the public sector incurs for its maintenance,
for the benefit of the economy, external bodies and for other countries. Klein
(1976:4) states the view that public expenditure can comprehensively and
et.al.(1999:184) also express the view that public sector can be broadly defined
activities are under the control and general direction of government. The public
sector in Nigeria consists of the Federal Government, State Government, Local
mass of varying decisions and developments- with varying implications for the
among other things. Social and community services include education, health,
housing and others. The items classified under transfers are public debt charges
subventions.
There have been inconclusive results on the growth effects of the ratio of total
expenditure compositions for a given level of the total have many effects on
output growth.
and others). Other works along this line which investigate the disaggregated
(1995), Ogiogio (1995) and Odusola (1996). Ekpo (1995) regresses the
investment, using ordinary least square approach with annual data from 1960-
1990. Ogiogio (1995) investigates the growth impact of recurrent, capital and
the links between public expenditure and economic growth in Nigeria are
Fajingbesi, et. al. (1999), Ezirim (2006) and Tsauni (2007). It is a fact that both
public expenditure and economic growth are bicausually related. This makes
any deductions from a single equation model invalid. This is owing to the
analysing the existing link between public expenditure and economic growth in
Nigeria. The ordering of the variables are inflation rate, output and total
expenditure.
The studies by Ezirim (2006: 87) investigates the factors that truly affect public
expenditure in less developed countries using data from Nigeria. The studies by
Tsauni (2007: 93) examines whether there is any causal relationship between
deeper evaluation. Most of these studies did not take into cognizance a wide
range of growth determinants like employment rate, investment, inflation rate,
basis. The study will adopt a wider variety of variables incorporating multiple
macroeconomic growth.
The way in which public expenditure are allocated has significant effect on
economic growth and poverty alleviation. “The link between public outlay and
Nigeria. They perceive that the role of the pubic sector in the growth and
consequently the public sector itself. Good economic policy is critical for
meaningful national development. According to Hiley (1999: 11), the four main
and competitive real exchange rate, exercising fiscal prudence, and operating
Fiscal crisis is mainly at the root of the economic distress confronting nearly all
economic activities in desired ways with the allocation of resources and their
use for the attainment of stability and growth (Anyafo, 1996: 244; Buhari, 1993:
149), Samuelson (1980: 144), Hilley (1999: 11), Premchand(1989) and Adubi,
Although the effects of fiscal policy are extensive, they are particularly
between the two, even though the relationship could not be statistically
government expenditure and growth have not been well documented in the
knowledge there have not been extensive studies on the effects and relationship
Nigeria. This has necessitated the need to fill the research lacuna in Nigeria.
economy since the early 1980s has raised genuine concern about the efficacy
2002: 42)
This study aims at examining the relationship between public expenditure and
Nigerian economy.
Nigerian economy.
investment in Nigeria,
investment in Nigeria,
macroeconomic variables.
1.4 RESEARCH QUESTIONS.
This study has been structured to answer the following questions:
1. What is the effect of public capital expenditure on the growth of the Nigerian
economy?
2. What is the effect of public recurrent expenditure on the growth of the Nigerian
economy?
3. What is the effect of total (both capital and recurrent) public expenditure on the
investment in Nigeria?
5. What is the relationship between public capital expenditure and total investment
in Nigeria?
6. What effect has both capital and recurrent public expenditure in Nigeria on the
the nation?
RESEARCH HYPOTHESES
In order to achieve the above stated objectives, the following hypotheses have
HYPOTHESIS 1
Public capital expenditure does not have positive and significant impact on the
HYPOTHESIS 2
Recurrent public expenditure does not have positive and significant impact on
HYPOTHESIS 3
Public recurrent and capital expenditure do not have significant effect on the
HYPOTHESIS 4
HYPOTHESIS 5
HYPOTHESIS 7
HYPOTHESIS 8
The nature and form of National Income Accounting does not significantly
due process.
will benefit from this work as they will be well informed on necessity of
evaluation of fiscal policies of governments. The study will also bring to fore
III The Academia: It will add to the body of literature on public expenditure,
macroeconomic policies and performance. The work will also throw more light on
The scope of the research is on the relationship between public expenditure and
economic growth. This study centred on Nigeria and made use of Federal
capacity utilization were collected from CBN statistical bulletin and Annual
The study is limited by the shortcomings in the published data, particularly data
from the yearly National Accounts, which have a way of introducing some
procedure and harmonization of new compilations with the back series for
consistency.
the institutions visited .However, the problem was sufficiently addressed in the
fairly efficient strategies adopted in data collection and the reasonable time
2.1 INTRODUCTION
In the early days of the development of fiscal policy, during which it was still
used as a tool to prevent a depression, the belief then was that the same technique
managerial skills; and fiscal policy can minimize the cyclical impact through the
chronic and reflects structural bottlenecks of the economy rather than those that
are cyclical in nature. In developing countries, it has been held that injection of
work itself out through increased imports and increases in prices rather than
with the aim of making appropriate structural adjustments in the economy Thus
shifting the major burden of adjustment to fiscal policy. “Also, the dominant role
pressure,”( Premchand (1989: 15). Thus, the role of fiscal policy in the long-run
capacity, on large expenditure for development purposes, and on projects that are
more viable from the point of view of social return than financial return. The role
overall ratio to GDP and partly on their function and economic characteristics.
Governments of many countries pursue a number of economic objectives. While
variables.
national economies and of the policies that government uses to try to affect
economies grow quickly, providing their citizens with rapidly improving living
prosperity, during the early 1970s, why did Nigeria economy began to falter in
creates falls below the growth rate of the population that enters the labour force.
Why does unemployment sometimes reach very high levels? Why, even during
• What causes prices to rise? What causes inflation and what can be done about
it?
• How does being part of a global economic system affect a nation’s economy?
economy as a whole?
practical importance and are constantly debated by politicians, the press and the
and developing nations may be summarized by saying that rich nations have at
some point in their history experienced extended periods of rapid economic
growth, while the poorer nations either have not experienced sustained growth or
have had periods of growth offset by period of economic decline. Why, for
example, did resource poor Japan and Korea experience growth rates that
power, whereas several resource rich nations of Latin America and Sub-Saharan
Africa such as Nigeria have had erratic or negative growth in recent years?
Today every major economy is an open economy, that is, one that has extensive
economy is one that restricts trade by imposing various imports restrictions such
as high tariffs or quotas and does not interact economically with the rest of the
country.
Most empirical growth studies have evolved from the sources of growth
1991: 23). The focus of most empirical studies to date has been on growth
other empirical studies that emphasize the growth effects of monetary interest
relationship between the ratio of government consumption to GDP and the rate
of growth of output. It has also been held that the average ratio of infrastructure
Barro (1989) - + +
Diamond (1989) - + + + +
Easterly (1990) - +
Marlow (1986) - -
Marsden (1983) -
Michaely (1977) +
Orsmond (1990) + + - +
Polak (1989) + +
Rubinson (1977) +
Saunders (1985) -
Skinner (1987) - -
Tyler (1981) +
Weede (1986) - -
Note: A positive effect is indicated by “+”,negative by “-”, and no effect by “0”. TG denotes total government expenditure;
CG current expenditure; INF infrastructure; EDH education and health; TR transfers; TAX tax receipts; DEF fiscal deficit;
RINT real deposit interest rate; RX rate of change in real exports; and CPI rate of inflation (consumer prices). All variables
are expressed as ratios to either GDP or GNP, except for RINT, RX, and INF, which are in percent. Estimates for Michaely
(1977) are based on equations using data contained in his paper.
Source: Khan and Villanueva (1991), Page 21
“The positive impact on growth of the average ratio of expenditures on education and
health has also been generally confirmed”, (Khan and Villanueva, 1991:22).
the growth effects of taxation are also inconclusive. The diverse impact of
different compositions of a given level of the overall Tax-to-GDP ratio gave rise
to this ambiguity. The study by Orsmond (1990) cited by Khan and Villanueva
(1991: 21) attempts to disaggregate tax effects, and concludes that the ratio of
import taxes to GDP is positively associated with the growth rate of output.
Furthermore, it was confirmed that there have been empirical studies by Martin
and Fardmanseh (1990), where expenditure ratios are found to have positive
growth effects, while tax and deficit ratios exert negative effects. This pattern is
reversed, however, when non-tax revenue replaces deficits, that is, the growth
effect of the expenditure ratio becomes negative and that of the tax ratio turns
positive. When the ratios of expenditure, tax, and deficit to GDP are jointly
Villanueva, (1991). The situation is different when the ratio of non-tax revenue
is
substituted for the deficit ratio, where the expenditure ratio now has a negative
effect on growth, whereas both the tax and non-tax revenue ratios have positive
effects.
The work of Khan and Villanueva (1991:22) raises the question; why is the
• The length of time over which the sample observation are averaged.
explanatory in the regression equation for the growth rate of output, but there
time. Orsmond (1990) as cited in Khan and Villanueva (1991:23) rightly states
that the long gestation period for such expenditure biases downward both the
size and significance of their coefficients. Studies that utilize samples over a
longer time, such as those by Diamond (1989) and Otani and Villanueva (1989),
variables is another possible factor that accounts for the diverse results from
It is only the empirical growth equation of Otani and Villanueva (1989) that was
would not only take account of all variables relevant to the process of economic
growth, but also would separate the endogenous from the exogenous and policy
economic growth.
and human resources, its capital stock (building and machines), its technology
and the economic choice made by its citizens, both individually and collectively.
Fiscal policy, which is determined at the national, state and local levels, concerns
growth of the nation’s money supply and is under the control of a government
since then. The possible link between the government’s budget deficit and the
For instance in the work of Tsauni (2007:95), the causal relationship between
The equation as stated above confirmed that Granger Causality tests are related to
the significance of the g’s and d’s conditional on the optimal lag lengths m, n, q
and r (Jackson, Fethi and Fethi, 1998 in Omotor 2006) as cited by Tsauni
(2007:95). This work confirmed that causality exists between economic growth
and education expenditure and went further to examine the nature and direction
of causality pair wise granger causality test was utilized which showed that the
hypothesis that economic growth (EG) does not granger cause recurrent
expenditure on education (RDEX) and that economic growth (EG) does not
rejected, but the hypothesis that EDEX does not granger cause EG, that RDEX
does not granger cause EG and that CDEX does not granger cause EG were
rejected. Thus, it indicates that granger causality runs one-way from education
expenditure to economic growth and not the other way. As stated in Tsauni
(2007:97), “this finding is compatible with the Keynesian theory and the
responsibilities are functionally allocated to the three tiers of government, that is.
Federal, State and Local Government. We have the first list of social services that
are exclusively made for the Federal Government which includes National
of each Federal, State and Local Governments. Residual subjects are contained in
the third list which includes Social Services that are not specifically mentioned
under the exclusive or concurrent lists. The State and Local Governments are to
provide services under the third list. The list of services as assigned to the three
public expenditure and the association with economic growth. Most studies
have also tried to review these theories which include the work of Ezirim,
countries rise, the relative share of the public sector in national output
would rise. Following this theory, there are possibilities that the activities
increase. Ezirim (2006: 87) therefore argues that these increase in State
Buhari (1993: 155 ) also accepts that Wagner’s argument has support from
occur. Tsauni (2007: 92), expresses the view that public expenditure can be
and also state the opposite view of Keynes which regards public
“the two completely opposite arguments reflect the view points over the
issue of what is the causal relation between economic growth and public
expenditure”.
why all types of governments manifest the tendency for increasing public
includes:
iv. The need to increase and harmonize the scale of various public
v. Rising drift of population from rural to urban areas with the resultant
civic amenities.
viii. The need to finance the dictates of economic plans and growth
HYPOTHESIS)
This second theory of public expenditure growth was offered by Allan Peacock
the time pattern of change in the level of public expenditure. This happens to be
the result of study by Wiseman and Peacock (1961) on public expenditure in the
United Kingdom for the period, 1890-1955. They agree that public expenditure
They argue that at some times, some social or other disturbances take place
which at once shows the need for increase in public expenditure which the
existing public revenue cannot meet, Ezirim (2006: 85). According to Buhari
hypothesis is credit to Collin Clerk (1943), who argues that when the share of
cent of the total economic activity of the country, inflation would be the natural
result; and this would be so even when the country is operating under a
balanced budget.
Therefore, at any time the share of the aggregate economic activity reaches the
critical limit of 25 per cent, the income earners would be affected by reduced
incentives (as a result of high tax incidence), and this would hamper their level
of productivity. The resultant effect being producing less than their capabilities
elasticity of demand for public services in three ranges of per capita income. In
capita income are low, demand for public service tend to be generally low. The
low levels, a demand for services supplied by the public sector such as health,
typical of developed economies, the rate of public sector growth tends to fall as
Buchanan (1980), is that the less the total government intrusion into the
economy, ceteris paribus, the greater the extent to which taxes and expenditure
are decentralized.
financed mainly from taxes and other charges, spending will therefore be
would be”. Ezirim (2006:89), also argues that, “the Leviathan’s hypothesis
Ezirim (2006: 90), cites other studies that offer explanation on other theories of
public expenditure. Such works include Baumol (1967) who offers explanation
Baumol (1967), expresses the view that the rise in government expenditure in
terms of unbalanced growth between public and private sector. The economy is
divided into progressive private sector and non progressive public sector, he
states that productivity rises only in the private sector, whereas wage rate rises
in both, and as a result public expenditure would rise. It went ahead to argue
Rastow (1971), offers explanation that the growth in public expenditure is better
The reviewed theories have raised some salient issues that are of much interest
to scholars in this field of study. To start with, it can be expressed that Wagner’s
Another issue is that, from Wagner’s opinion, a number of factors that affect
activities; the need to provide and expand the sphere of public good; rising
in size and nature of public services; increasing welfare and social security
costs; budget deficits and debt servicing requirements; target economic growth
rates or levels and development plans’ target. Ezirim (2006), agrees that the
major factor affecting public expenditure would include all major social and
Wagner’s opinion. The critical evaluation of these theories have provided good
public expenditure.
In Nigeria, like the rest of the developing world, examining the productiveness
of the various components of public spending has always been given less
attention (Fajingbesi, et.al. 1999: 151).This implies that before any meaningful
imperative.
contributes to growth and also emphasis that the distribution between capital
Ogiogio (1999) in his work examines the growth impact of recurrent, capital
and sectoral expenditure over the period 1970-93. The study went further to
have more significant effect than the capital expenditure while five-year lags of
year planning horizon (Hiley, 1999). Thus, confirming that both government
expenditure can achieve economic growth and be causally related, thus making
any deduction from a single equation model invalid. This is as a result of the
growth at 10 per cent significant level. When it was composed into recurrent
and capital military expenditure, the former was more growth retarding than the
confronting governments.
To address the deficiencies in public expenditure management in Nigeria,
particularly since mid 1986 when the Structural Adjustment Programme (SAP)
was adopted.
Adubi , et.al. (1999:181) define the public sector as that portion of the national
economy in which economic activities are under the control and general
its various organs manage public funds to meet national goals and objectives. It
composition and timing of government outlays, for the sake of achieving set
express the view that the traditional role of public expenditure suggest that it
shapes the course and determines the state of economic development. The
population.
problems are often caused by imprudent public expenditure. Based on this fact,
the World Development Report of 1998 warns that careless public expenditure
can lead to prolonged recession and place a heavy burden on the poor,[Adubi,
managed, they usually create distortions which retard, rather than promote
economic growth and development. This is typically the case for Nigeria,
where, despite the huge resources that accrued to the nation during the boom era
and the tremendous increase in public expenditure during the period, there was
little to account for it. For quite a long period now, as generally observed, we
conclusion that the manner and style by which public expenditure is made and
expenditure are very essential for growth. Three types of public expenditure are
view accept that there is some minimum amount of capital expenditure required
for growth (Diamond, 1990). However, Tanzi (1988) and Diamond (1990),
argue that some recurrent expenditure may well be equally beneficial to growth
The second argument usually put across to support capital outlay is that the
than recurrent spending. Fajingbesi,et. al.(1999) argue that this may be true in
the short run, but later, it will put pressure on the aggregate demand, thus
capital cannot be the only requirement for growth. Framework for its use is
also very useful, if not it will be wasted. Hemming (1991) observed that the
Fajingbesi, et. al. (1999) conclude that public expenditure contributes to growth
and emphasized that it is the composition rather than the level which is
important and also moved ahead to say that the distinction between capital and
between the size of public expenditure and growth include Landau (1986),
Barro(1990), Grier and Tullock (1989). Others that have found a positive
relationship are those of Ram (1986), Aschauer (1989) while those of Kormendi
and Maguire have found no significant relationship. Most of the above studies
GDP.
Balassa (1978) used pooled data of 10 countries for 1960-1966 and 1966-1973.
Regresses include the initial per capital GDP level, its squared value, the initial
level of human capital, proxied by primary and secondary enrolment rates, the
are weighted by either the level of GDP or population. However, these standard
errors do not differ greatly from the OLS estimates. The result showed that the
OECD for 1960- 1985 including initial per capita GDP, an institutional sclerosis
transfer. This result contrasts sharply with the findings of Barro (1989).
Diamond (1989) used five-year averages of growth rates for 125 countries
capital, growth of the labour force, export growth and external interest rate. The
Diamond (1989) finding is consistent with the result of Barro (1989) and also
consistent with the result of Castles and Dowrick (1988). Diamond (1989) also
introduced exchange rate in real export as one of the regressors. The result also
showed that exchange rate in real export has a positive co-efficient in relation to
current expenditure.
averages for the period 1965-1985, with the level of per capital income in 1965,
inflation rates in excess of 20 percent as regressors. The result shows that the
model.
Easterly (1990) used a cross-sections of 22 developed and 70 developing
countries, using- 2 -averages for the period 1965-1987. Regressors include the
interest rate less than minus 5 percent). His result show that co-efficient of
support the view that current expenditure promotes export. This result is
consistent with the Keynesian model, which posits that increase in expenditure
Koester and Kormedi (1989) used vector-auto regression to estimate the impact
countries. The estimation result is very interesting. The estimation showed that
Landau (1983 and 1986) studies use cross-sectional data for 104 countries over
1960- 1977, including education, energy consumption, initial GDP per capita
and climate dummies. The 1985 study utilizes 16 developed countries for
pooled cross-sections over the 1952-1976 period, with investment rate, per
capita initial GDP, changes in terms of trade, education, and various dummy
negative, while the co-efficient for transfers was positive. The results are not a
Marlow (1986) used the simple ordinary least square methodology to investigate the
relationship between the size of government sector and the level of growth for a cross-
section of 19 industrialized countries during 1960-1980. The result shows that the size
the pioneer works that advocated for the downsizing of the public sector through
the introduction of Structural Adjustment Programme in most developing countries of
the world.
Marsden (1983) is the first study along this line that compared countries with
low growth and another 10 countries with high growth, using mixed data for
developed and developing countries with high growth, using mixed data for
developed and developing countries during 1970-1979. The result shows that
developed countries, with labour and capital as additional regressors over 1972-
1981. The result shows that total government expenditure is positively linked to
fiscal deficit.
1960-1982 period with initial per capita GDP and an index of democracy as
and political environment. The result shows that the high level expenditure on
the part of government has a negative impact on transfers, economic growth and
This is even more worrisome when one considers the level of corruption and
fiscal indiscipline in the Nigerian public sector. Thus, the proponents of the
social theory posits that it only the private sector that can efficiently allocate
1965-1973 and 1974-1982 with the terms of trade, population, and investment
rates as other regressors. The emphasis is to investigate the fixed effects of total
negative co-efficient for tax receipts, the result documents evidence to support
Michaely (1977) in using averages of the ratio of exports to GNP and change in
this ratio for 41 developing countries over the period 1950—1973, coefficients
of the Spearman rank correlation are computed. The result ranked rate of
the period 1960-1966, with domestic and foreign investment, labour growth,
1986 period. This study undertakes both linear and non-linear regressions,
revenues, and the fiscal deficit. Other regressors include the initial per capita
growth.
1985. Regressors are the ratio of total investment to GDP, median interest rate
on 6-12 month deposits, corrected for the average annual rate of inflation
1960-1970 and 1970-1977, using the ratio of total investment to GNP, growth
of labour force, growth of real exports, and a dummy variable that takes value
one if the country is low-income, zero otherwise. In the 1986 study, annual data
for 88 LDCs covering the period 1960-1982 are used. First, the growth
also estimated using a cross- sectional sample. The same explanatory variables
1977, with the rate of total investment, labour force growth, growth of total real
(2007). There are other empirical studies that focused on the growth effects of
(1991).
empirical one. Presently, there is a vast body of studies that examines the
Table 2.7 summaries the results from empirical studies on the relationship
developing countries
Table 2.7:
Selected Empirical Studies of Public Expenditure and Macroeconomic Variables
Author Sample Explanatory Main results
Landu (1983) Panel (27 LDCs) Categories of g GC has negative impact.
Kormendi and Panel (N=47) GC GC insignificant.
Meguire (1985)
Landu (1985) Cross-section 65 G and various GC and GI significantly
LDCs (1960-80) functional types negative. Eduction is
insignificant.
Ram (1986) 115 countries Private investment, Externality effect of G is
(1960) -80) and labour force positive, especial in lower
growth rate income countries. G has a
negative impact.
Grier and Tullock 113 country panel GC GC significant negative,
(1989) (1951-80) but positive for Asian sub-
sample.
Romer (1990) Cross-section of 112 G, GC, GI and human G significant and negative
counties (1960-85) capital but GI has a positive
coefficient.
Alexander (1990) Panel 13 OECD GC, GI and deficits GC and inflation have
countries (1959-84) (growth rate of shares) negative impact on growth.
Barro (1970-90) 98 countries (1960- GC GC has a negative impact.
85)
Chan and Gustafson Time series on Uk G less transfer (levels), G a positive impact on
(1993) (1955-86) private consumption private consumption.
and relative price of
public goods
Devarajan, et al Panel 14 OECD Functional types of G Health and infrastructure
(1993) (1970-90) (health, education, spending have positive
transport, etc) impact; education and
defence have negative
impact.
Easterly and Rebllo Cross-section of 100 Government surplus, GI has a negative impact
(1994) ADCs and LDCs GI, GC and other types on growth, GC a negative
(1970) of expenditure and impact, but positive impact
taxes, and human on private investment.
capital Spending on infrastructure
has positive impact on
private investment.
Lin (1994) 62 country panel I and G (growth rates), Mixed result. GI insig. In
(1960-85) growth rate of labour ADCs, but significantly
force positive in LDCs.
Source: Kweka, J.P and Morrisey O. (2000: 4)
Table 2.7 (cont.)
Selected Empirical Studies of Public Expenditure and Macroeconomic Variables
Nigeria is seen as a land of great potential. There are abundant natural and
human resources, before now, the economy should have been transformed into
major growth in the world and subsequently joined the league of newly
achieving this is through the annual budget and, where necessary through
efficiency as well as overall impact on the economy. Also very significant is the
deliberate measures aimed at moving the relevant economic system from its
year. The most important fiscal tool which government uses is the National
budget as a yardstick to raise and allocate funds and measure its performance in
a fiscal year.
Akinkugbe (2004) argues that the government is the vehicle through which
the focal point of reference irrespective of the type of political set up being
what has made the difference between Europe, America, Asia and the laggard
Africa in the last half century. “In Nigeria, the government has implemented
budgets for forty-eight (48) years since independence in 1960. Today, we are
“Whereas Malaysia in 1960 was poorer than Nigeria, today, their economic and
The difference between Nigeria and Malaysia in those 48 years is that Malaysia
government in May, 1999 was a good omen to tackle the inherited structural
To ensure a solid foundation for effective reforms and sustainable long term
growth of the nation’s economy, budgets were usually adopted yearly as a fiscal
in the economy and for the realisation of selected policy goals during a given
period.
According to Oluyemi ( 2004:53), “The economy has recorded mixed
oil, weak industrial base, low level of agricultural base, low level of agricultural
However, from the look of things in the last few years, there are indications that
capital expenditure has not been having the necessary impact on growth in the
system. The apparent failure of that expenditure to uplift the nation’s economy
Ezekwesili (2002) argues that it is the widely lampooned abuse of the public
treasury that has led the country down the path of lean resources and brought
along the continuous budgetary constraints that we must get a handle on, or
The best measure for enlarging the envelope of resources in countries with
budgetary challenges like Nigeria is to plug the holes in the public treasury.
The good governance that citizens of any nation demand starts with the good
governance of the public treasury. Nigerians have not had the good fortune of
such good governance of public wealth. Nzenwa (2000) also expresses the view
that the bulk of developmental resources are held by the government and her
choices and decisions affect almost every other thing, even the options available
officials to plan for the provision of services, and is an excellent alibi for non-
aggregate and in the various sectors is also needed as a signpost to guide the
decisions.
The days are gone when expenditure were considered merely in terms of type
and the authorities responsible for incurring them. Currently, what is envisaged
allocation, which in turn deal with the maximization of individual and social
that link budget as being finally decided in the bureaucratic process with
Availability of Revenue).
Effective fiscal policy requires an effective budgetary process that integrates the
each function and their contribution to the allocation and stabilization purposes.
resources to those sectors whose projects and programmes have been reviewed
There was greater recognition, over the years of the impact of the budget on the
The United Nations (UN), since its creation, has been leading the initiatives to
of social accounts was published in 1947. There was a revision later in 1968
(Adamu, 1996: 27). The main motivation for the individual scholar to produce
flows, which refer to actions and effects that take place within a period of
time, and stocks, which refer to a position at a point of time. For example, in
the case of a company’s audited accounts, stocks appear in the balance sheet
and related tables, while flows appear in all the other accounts and tables.
flow have specific natures such as wages, taxes, interest, capital flows etc.
Thus, these record the ways in which a a unit’s assets and liabilities are
changed.
by Adamu (1996: 26) on the basis of the status of the transactions and,
current transfers?
production and balance between the supply and users of goods and
(ISIC). Kinds of activities are grouped broadly into major divisions. Each
analysing the economic situation, the units could be classified into those
the pre-second World War work of John Mars, Margery Perham and A.J. Brown.
Isaac Dina made a frail attempt to establish another estimate immediately after the
war. However, it was not successful nor was any final result published. (National
Planning Lagos, 1975). Before the appointment of A.R. Press and I.G. Stewart by the
of Nigeria’s national income and what came out of this pioneering work was
published in 1953, and they did not only contain the first systematic set of data but
also much basic of conceptual and methodological issues. Henceforth from that
moment, the report was to form the basis of any further national income estimation in
Nigeria, nevertheless the actual data were only for one financial year, 1950-1951. it is
on record that the first set of time series data for Nigerians gross domestic product, for
the period 1950- 51 to 1957-59 was made available by the more comprehensive
exercise carried out in the later year of 50’s and early 60’s by the team led by E.F.
Jackson and P.N.C. Okigbo. Once more, like its pioneer predecessor “the resulting
report was to establish the benchmark for economic policy and economic statistics for
visit of World Bank mission, the Jackson and Okigbo’s estimates were
(4) Depreciation Xx
(Income) Xx Output Xx
=== ===
instrument Current income and output were classified as flows. Wealth was
counted as stock. It is possible to account for wealth too in order to produce
balance sheet of national assets and liability, which also affect national welfare.
Understand who buys the output of the economy among household, for
The tasks of budgeting have become more complex and seemingly intractable.
productive.
raising resources have given rise to serious questions on the direction of fiscal
policy and on the institutional adequacy of the budget machinery for controlling
Komolafe, et. al. 1999:3). The transactional link between the objectives and the
shortest planning horizon, the budget has become the most versatile tool
worldwide.
Thus, there is the need to evaluate the impact of the budgetary operations on the
economy and of the economy on the budget and the relationship of these
of the fiscal policy can be attained through the instruments of taxes, expenditures
and to an extent the provision of credit. The effects of these instruments are not
identical and one task of budgeting is to ascertain the effects of each and to
arrange the three instruments so that they collectively serve the purpose. Third,
levels of government, notably the state and local governments and through the
close coordination among all three levels in all phases of the budgetary process.
and to influence the economic activities of the community in desired ways and is
concerned with the allocation of resources between the public and private sectors
and shifty, budget formulation and execution, and financial management. The
within the public sector and is influenced at each stage by the goals of fiscal
policy. Although there is less convincing evidence that fiscal policy alone would
1999: 7).
developing countries where per capita incomes are generally very low. In
consideration of this fact, the tools of taxation and public expenditures should be
Public spending in social services like education, water and health care, etc is
macroeconomic balances, particularly the fiscal and trade deficits and the rate of
influencing real incomes and indirectly, through changing the rate of economic
spending creates incomes directly, some of which might benefit poor households.
These incomes in turn create other incomes through the income expenditure
multiplier process. These are the primary income effects (or the “expenditure
services. The well-being of the beneficiaries are usually improved by these in-
kind transfers and also enhance their longer-run income-earning potentials. They
involve both current and capital transfers to the recipients and can be called the
process of medium term fiscal planning, annual budgeting and regular monitoring
The understanding of the budgetary process is very essential because of its role as
a tool for economic management and also the awareness of the implications of
Expenditure targeting is very much a policy issue and an area of growing concern
adjustment programmes.
mobilizing, allocating and managing resources for the execution of public sector
budgeting are essentially complementary and related processes for the realization
of national goals.
development strategy. In Nigeria, despite these close links between planning and
indisputably a key government tool for the implementation of social, political and
expenditure adjustment is also important. There are proves indicating that social
sectors, which offer opportunities for protection of the poor, are often considered
situation of economic adjustment. The importance of this issue lies in the fact that
the revenue base of a state depends on the level of its economic activities. Thus, the
MANAGEMENT
fundamental premise is that accounting has a crucial role in the formulation and
governments.
Budgets have acquired new and deserving policy. It is the main tools for
by accounting.
Despite the long pedigree, government accounting has suffered a long neglect at
the hands of accounting profession and the government. Development over the
years have had a major impact on the course and tenor of financial management
37).
cost effective. Presently there is much dissatisfaction with the existing systems,
Fajingbesi, A.A. and Odusola, A.F. (1999), Public Expenditure and Growth.
NCEMA, Ibadan.
Komolafe, O.S., Julilian, H. and Hiley, M. (1999), Fiscal Policy Planning and
Management in Nigeria, NCEMA, Ibadan, Nigeria.
Kweka J.P and Morrissey, O. (2000), “Government spending and Economic
Growth” Tanzania, 1965-1996, Credit Research Paper Central for Research in
Economic Development and International Trade, University of Northingham
RESEARCH METHODOLOGY
identifying variables and their relationships which will enable the obtaining of
This study adopted the ex- post- facto research design as well as the analytical
typology.
relationship of variables.
The data used were mainly data collated from Central Bank of Nigeria Annual
This work adopted the approach by Fajingbesi and Odusola (1999:137) and
Adubi and Obioma (1999:181) in their studies. The research therefore made use
of secondary data. Such data were sourced from National Publications, Budget
Commission.
The data were of the following forms; Total Public Expenditure on annual basis
investment, capacity utilization and inflation rate for the period 1980-2007.
The population for this study confined to Fiscal policy variables and
strongly on the sample variables of this study which include ,GDP ,Public
Expenditure ,Inflation Rate, Gross Capital Formation and Industrial Capacity
Utilization.
The respective data were collated from Central Bank of Nigeria Publications,
Planning Commission. The sample size of the study is the period 1980-2007.
The public expenditures were used as the dependent variable. They have
accordingly been used in studies by Fajingbesi and Odusola (1999: 137) and
Ezirim(2006: 85).
Investment: The gross capital formation was used as proxy for investment.
capacity utilization,
Economic Growth: The GDP was used as proxy for economic growth and sizes
of the economy.
Y = B0 + B1X + U - - -- - - - - - (3.1)
X= Explanatory Variable.
B0= Intercept of Y.
For multiple ones, the general multiple regression model is applicable as follows:
where
Y is the regress and; the Xs are the regression and the bs the parameters.
The random error term, u, is added to make the model probabilistic rather
than deterministic. It is also known as stochastic variable. It is assumed that
for any given set of values of X1, X2, ……, Xn, the random error u has a
normal probability distribution with mean equal to zero and variance equal
variable X given that the other X variables are held constant, and b0 is the Y –
intercept. The coefficients b0, b1…., bn are usually unknown because they
iii Specify the probability distribution of the random error component, u and
In specifying the models being used in this study, the following alphabets were
INF= INFLATION
INV= INVESTMENT
HYPOTHESIS 1
Public capital expenditure does not have a positive and significance relationship
HYPOTHESIS 11
Recurrent Public expenditure does not have positive and significant impact on
HYPOTHESIS 111
economic growth.
HYPOTHESIS 1V
HYPOTHESIS V
HYPOTHESIS vii
ICU = Bo + B1 PE + U ………………….(7)
HYPOTHESIS viii
The nature and form of national income accounting does not significantly affect
This is with the pattern of Demirguc-Kunt and Levine (1996), Levine and
Simple and multiple techniques are use for testing the models. The regression
N ∑X12 - (∑X1)2
and
bo = ∑Yi - bi ∑Xi
The testing of the significance of the multi-variate regression model for this study
was undertaken with the help of the Analysis of Variance table as shown below.
TABLE 3.1: ANOVA TABLE
Freedom
determination (R2), the t-ratio and F- ratio were obtained using the electronic
computer.
the total variation in the dependent variable (Y) that is the Gross Domestic
Where:
existing between gross domestic product (GDP) and the selected indicators
of macroeconomic performance.
R = ±√ R2
Where
–1 ≤ R ≤ 1
3.7.3 THE SIGNIFICANCE TEST
The significance of our multi-variety estimates is tested using a combination
The F-test is a test of significance of R2. In other words, it shows whether there is
variables X1, X2,….X7. If R2 is found statistically not significant, this implies that
there is no linear relationship between Y and X, that is, the true b’s are zero
whether the variable in the model bring significant information. In other words, it
MSR
F* =
MSE
DECISION RULE:
F- RATIO
Having computed the F-value, the null hypothesis (H0) is accepted at ∝ = 0.05
tail test. Here, F1-∝ k, n-k-1 degree of freedom is the critical value obtained from
the set of independent variables, then the student t-test is carried out to find
n–2
t=R
1 – R2 for n-2 degrees of freedom
DECISION RULE:
The null hypothesis (H0), that is, β = 0 is accepted at ∝ significant level and n-k-
Where:
t1-∝/2, n-k-1 is the critical value obtained from the t-distribution table.
When the error term in one time period is positively correlated with the error
term in the previous time period, we face the problem of autocorrelation. This is
(Koutsoyiannis, 1993).
The analysis of data will be done with a personal computer (PC), which is a
powerful tool that reduces the burden of voluminous calculations. The software
selected for the study is the Software Package for Social Sciences (SPSS).
REFERENCES
Adubi, A.A. and Obioma, E.C. (1999), “Public Expenditure Management in
Nigeria”, in Fiscal Policy Planning and Management in Nigeria,
Ibadan: NCEMA,
Fajingbesi, A.A. and Odusola, A.F. (1999), Public Expenditure and growth.
NCEMA, Ibadan.
Fortune, P. (1998), “Mutual Funds Part 11: Fund Flows and Security
Returns”, NewEngland Economic Review,.
4.1 INTRODUCTION
This chapter presents available data on public expenditure trend and those of
period. Having specified the models the researcher proceeds with the estimation,
The GDP as an index of growth and size of an economy has been employed in
GDP is the GDP measured in terms of the price level at the time of measurement
(unadjusted for inflation). Real GDP is the nominal gross domestic product that has
been deflated or inflated to reflect changes in the price level. One way to calculate real
GDP is to create a price index based on data on the price changes that occurred over
various years.
NGN'M
million and N18,564,594.73 million in 2004, 2005 and 2006 respectively. Also
as reflected in table 4.2.1b, the gross domestic product at 1990 constant basic
prices stood at N205, 222.05 million and N267, 549.98 million in 1981 and
The economy recorded a sluggish growth averaging about 2.62% for the two
decades 1981-2000. However since 2003, the economy has been experiencing
appreciable growth. For instance, in 2003, 2004, 2005 and 2006, it grew
The Implicit price deflator of the gross domestic product at basic prices stood
that year. The implicit price index, or GDP deflator can then be found by
Government was N4805.2 million or 32.1% total expenditure and accounted for
9.7 percent of the GDP. It increased to N4846.7 million and N5506 million in
1981 and 1982 respectively, while the percentages share of GDP moved to 10.7
end of 2007. While the recurrent expenditure /GDP ratios continued to drop
from 9.2% in 1984 to 7.7% in 2007. (see table 4.3a and 4.3b respectively)
TABLE 4.3a: RATE OF GROWTH OF RECURRENT, CAPITAL AND TOTAL
EXPENDITURES ON GDP
(N million)
Year GDP Total TE as% Recurrent RE as% RE as% Capital CE as% CE as%
N’m Expend. GDP Expend. TE GDP Expen. Of TE GDP
(TE) N’m (RE) (CE)
1980 49630 14968.6 30.2 4805.2 32.1 9.7 10163.4 67.9 20.5
1981 50460 11413.7 22.6 4846.7 42.5 9.6 6567 57.5 13.0
1982 51570 11923.2 23.1 5506 46.2 10.7 6417.2 53.8 12.4
1983 56710 9636.5 17.0 4750.8 49.3 8.4 4885.7 50.7 8.6
1984 63010 9927.6 15.8 5827.5 58.7 9.2 4100.1 41.3 6.5
1985 71370 13041.1 18.3 7576.4 58.1 10.6 5464.7 41.9 7.7
1986 72130 16203.7 22.5 7676.9 47.4 10.6 8526.8 52.6 11.8
1987 106890 22018.7 20.6 15646.2 71.1 14.6 6372.5 28.9 6.0
1988 142660 27749.5 19.5 19409.4 69.9 13.6 8340.1 30.1 5.8
1989 222460 41028.3 18.4 25994.2 63.4 11.7 15034.1 36.6 6.8
1990 267060 60268.2 22.6 36219.6 60.1 13.6 24048.6 39.9 9.0
1991 285630 66584.4 23.3 38243.5 57.4 13.4 28340.9 42.6 9.9
1992 549800 92797.4 16.9 53034.1 57.2 9.6 39763.3 42.8 7.2
1993 697100 191228.9 27.4 136727.1 71.5 19.6 54501.8 28.5 7.8
1994 911400 160893.2 17.7 89974.9 55.9 9.9 70918.3 44.1 7.8
1995 197770 248768.1 125.8 127629.8 51.3 64.5 121138.3 48.7 61.3
1996 2833200 337417.6 11.9 124491.3 36.9 4.4 212926.3 63.1 7.5
1997 2801972.6 428215.2 15.3 158563.5 37.0 5.7 269651.7 63.0 9.6
1998 2708430.9 487113.4 18.0 178097.8 36.6 6.6 309015.6 63.4 11.4
1999 3194015 947690 29.7 449662.4 47.4 14.1 498027.6 52.6 15.6
2000 4582127.3 701050.9 15.3 461600 65.8 10.1 239450.9 34.2 5.2
2001 4725086 1017996.5 21.5 579300 56.9 12.3 438696.5 43.1 9.3
2002 6912381.3 1018178.1 14.7 696800 68.4 10.1 321378.1 31.6 4.6
2003 8487031.6 1225988.3 14.4 984300 80.3 11.6 241688.3 19.7 2.8
2004 11411067 1384000 12.1 1032700 74.6 9.0 351300 25.4 3.1
2005 14572239 1743200 12.0 1223700 70.2 8.4 519500 29.8 3.6
2006 18564595 1842587.7 9.9, 1290201.9 70.0 6.9 552385.8 30.0 3.0
2007 20657318 2348593 11.4 1589270 67.7 7.7 759323 32.3 3.7
SOURCE: (1) National Bureau of Statistics – National Accounts Survey (2007)
indicated in table 4.3a and 4.3b, stood at N10163.4 million or 67.9 percent of total
expenditure, while the capital expenditure/GDP ratio was 20.5 percent. The capital
to GDP ratio fell to 6.4 percent in 1984. Capital expenditure fell persistently from
1980 up to 1985 until the beginning of the structural adjustment programme (SAP) in
Nigeria. A clear indication of the foreign exchange impact on the capital budget and
1986 and 2007. It rose from N8,526.8 million in 1986, representing 52.6 percent of
total expenditure. The capital expenditure to GDP ratio dropped greatly from 11.8
As shown in table 4.3a and 4.3b, 1980 and 1983 witnessed fall in both capital and
recurrent expenditures.
Starting from 1986 which happens to be the SAP period there were considerable in
crease in both capital and recurrent expenditure the sum of N7,696.9 million was spent
as recurrent expenditure in 1986 representing 47.4% of Federal Government Total
expenditure. By the
end of 1993, recurrent expenditure rose to N136,727.10 million representing 71.5% of
total Federal Government expenditures as against 58.1% of total expenditures in 1985
before the commencement of the SAP. Capital expenditure accounted for N54501.8
million in 1986 or 52.6% of total expenditures before coming down to N8,526.8
million or 28.5% of total expenditures in 1993.
There was continual increase in public expenditures between 1980 and
expenditures .For the rest of the period covered in this study i.e.1984-
directly productive as they represent payment either for work done in the past or
for debt service which represent outlay for credit received in the past (Ojo and
N3418.5 million, which represents 22.8 percent of the total expenditure of the
percent.
and other services, accounted for 21.8 percent share of Total Federal
were still minimal at 12.3 percent share of total expenditures in 1980. This
increase in public sector borrowing which helped to maintain the high level of
Starting from 1984, there were high increases on transfer payments indicating
50.4 percent, 49.5 percent and 62.6 percent in 1984, 1985 and 1986 respectively
total expenditure rose up 71.6% and 75.5 in 1991 and 1992 respectively. As a
result, transfer payments generally and debt services in particular, have become
expenditure.
Table: 4.4a Functional Classification of Total Federal Government Expenditure: 1980-2007
N million
YEAR TOTAL ADMINIS- % ECONOMIC % SOCIAL & % TRANSFERS %
EXPENDITURE TRATION SHARE SERVICES COMMUNITY
SERVICES
1980 14968.5 3418.5 22.8 6449.7 43.1 3264.4 21.8 1836 12.3
1981 11413.7 2895.2 25.4 4128.8 36.2 2155 18.9 2234.7 19.6
1982 11302.9 2467.5 21.8 2887.5 25.5 1692.2 15.0 4255.7 37.7
1983 10164.5 3666.1 36.1 2670.7 26.3 1930.9 19.0 1896.8 18.7
1984 9927.6 2940 29.6 983.2 9.9 1005.6 10.1 4998.8 50.4
1985 13040.9 3097.8 23.8 1208.1 9.3 2286.2 17.5 6448.8 49.5
1986 16223.7 2940.5 18.1 1613.6 9.9 1517.4 9.4 10152.2 62.6
1987 22018.7 7862.5 35.7 3252.6 14.8 1088.1 4.9 9815.5 44.6
1988 27749.5 7676.4 27.7 3349.9 12.1 3840.2 13.8 12883 46.4
1989 41028.3 8888 21.7 5345.3 13.0 6074.9 14.8 20720.1 50.5
1990 60268.2 9460.1 15.7 5099.4 8.5 5492 9.1 40216.7 66.7
1991 66584.4 10298.8 15.5 4448.4 6.7 4168.6 6.3 47668.6 71.6
1992 93835.5 13973 14.9 5477.1 5.8 3494.9 3.7 70890.5 75.5
1993 136645.4 26447.8 19.4 23000.7 16.8 12382.7 9.1 74814.2 54.8
1994 156837.2 29319.9 18.7 31012.7 19.8 15079.9 9.6 81424.7 51.9
1995 254038 42095.7 16.6 49067.1 19.3 23036.4 9.1 139838.8 55.0
1996 282969.6 61986.4 21.9 69422.2 24.5 26343.4 9.3 125217.6 44.3
1997 428215.2 110882.1 25.9 177407.1 41.4 28232.6 6.6 111693.4 26.1
1998 487113.4 89943.9 18.5 212724 43.7 46143.2 9.5 138302.3 28.4
1999 947690 139961.3 14.8 344032 36.3 55001.8 5.8 408694.9 43.1
2000 701,059 174578.6 24.9 141324.9 20.2 86767.6 12.4 298388.3 42.6
2001 1018026 230064.9 22.6 312768.9 30.7 132970.4 13.1 342221.4 33.6
2002 1188715 405313.4 34.1 281244.3 23.7 221898.9 18.7 280258 23.6
2003 1225957 395807.4 32.3 194013.9 15.8 158302.2 12.9 477833.2 39.0
2004 1384001 444618.6 32.1 226503.5 16.4 164423.2 11.9 548455.9 39.6
2005 1743240 606285.9 34.8 329343.2 18.9 223007.8 12.8 584603.1 33.5
2006 1942588 707422.5 36.4 341894.5 17.6 272850.4 14.0 620420.4 31.9
2007 2348620.3 785412.4 33.4 451418.19 19.2 328044.89 14.0 783717.48 33.4
Nigeria
Government between 1980 and 2007 resulted in overall surplus in only two
years (that is 1995 and 196), while there were fiscal deficits in the remaining
years “The growth and persistence of fiscal deficit in Nigeria in recent times has
(Ozurumba, 2008: 12). Most of the time, if not all, the realized revenue were
so high and resulting in ever bigger deficits. Financing the fiscal deficit mainly
through the banking system, most especially the Central Bank’s Ways and
Means Facility, has resulted in rapid growth of domestic liquidity, with its
the Naira (see table 4.5a on financing of fiscal deficit). Also the after-mount of
aggregates above the average annual target. As shown in table 4.6a, the federal
and 1996 respectively. The fiscal deficit rose from N1,975.2 million in 1980 to
part of Government.
Table: 4.5a:
Fiscal Operations of the Federal Government of Nigeria: 1980-2007
(N million)
1980 1981 1982 1983 1984 1985 1986
total federally collected
revenue 15233.5 13290.5 11433.7 10508.7 11253 15050.4 12595.8
oil revenue 12353.3 8564.4 7814.9 7253 8269.2 10923.7 8107.3
non-oil revenue 2880.2 4726.1 3618.8 3255.7 2984.1 4126.7 4488.5
Federation account 14746.5 10182.8 9884.9 9798.5 10672 13750.2 11868.3
Federal government
retained revenue 12993.3 7511.6 5819.1 6272 7267.2 10001.4 7969.4
total expenditure 14968.5 11413.7 11923.2 9636.5 9927.6 13041.1 16223.7
recurrent expenditure 4805.2 4846.7 5506 4750.8 5827.5 7576.4 7969.9
capital expenditure 10163.3 6567 6417.2 4885.7 4100.1 5464.7 8526.8
Current surplus(+)/deficit(-) 8188.1 2664.9 313.1 1521.2 1439.7 2425 272.5
% of GDP 16.1 2.6 0.3 1.3 1.2 1.7 0.2
Overall surplus(+)/deficit(-) -1975.2 -3902.1 -6104.1 -3364.5 -2660.4 -3039.7 -8254.3
% of GDP -3.9 -3.8 -5.5 -2.8 -1.2 -2.1 -5.7
Financing: 1975.2 3902.1 6104.1 3364.5 2660.4 3039.7 8354.3
Foreign (net) 255.3 464.4 263.5 1106.9 1184.5 1045.9 708.1
Domestic (net) 387.1 4200.8 3402 7057 2928.2 571.2 475.5
banking system (net) 150.7 3018 3989.2 5296.3 2370 785.6 475.2
of which
CBN -122.9 3624.1 2989.2 3271.2 1418.9 -567.6 6042.7
Deposit money banks
non Bank Public 236.4 1182.8 412.8 1760.7 558.2 -214.4 0.3
other funds 1332.8 -763.1 2438.6 -4799.4 -1452.1 1422.6 7070.7
source: Central Bank of Nigeria, Statistical Bullent(2008)
Table: 4.5a (cont.)
Fiscal Operations of the Federal Government of Nigeria: 1980-2007
N million
In Nigeria, deficits are financed through foreign loans, domestic loans and other
funds (drawing down of cash balances). The domestic loans are further divided
into loans from non-banking system, (Ozurumba, 2008: 120). The sum of
1980 and 1981 respectively. This amount jumped to N1106.9 and N1184.5
million in 1983 and 1984 respectively (see table 4.6a). It was only in year 2000
when there was no evidence of foreign loan in financing the entire deficit of
N103777.3 million from the figures indicated in table 4.6a domestic financial
markets had been the main source of financing the deficit in Nigeria, with the
Central Bank accounting for the major part of credit to the Federal Government.
especially through the Central Bank could be noticeable. “The financing of the
fiscal deficit by borrowing from the Central Bank is highly inflationary and
activities and the level of public debt which must be repaid in the future,” (Ojo
borrowing from the Central Bank, is an increase in credit expansion and money
supply of goods and services. The result will invariably accelerate inflationary
pressures in the economy. Ojo and Okunrounmu (1992: 236) argue that “the
Nigerian experience is that for most of the years when the Federal Government
borrowed heavily from domestic source to finance its fiscal deficit, credit
expansion exceeded the targets stipulated in the monetary and credit guidelines
In this section, our earlier stated hypotheses for the study are tested.
The relevant model for testing this hypothesis as stated in chapter three
is
Ge = bo+biPCE+U…………….. (1a)
where;
U= Stochastic
A summary of the Non-Log linear computer results is indicated in equation 1b
below:
Ge = -565232.353+23.915PCE… ……………(1b)
(t = 9.548)
R2 = 0.778
_
R2 = 0.770
F = 91.159
DW = 0.775
The above equation 1b indicates that 77.8% of variations in GDP (size of the
value is greater than 2 (i.e. 9.548 > 2) showing that the impact of Public Capital
Also the F – value is significant since the calculated value of 91.159 is greater
On the basis of the above, since the Public Capital Expenditure coefficient is
positively signed in the equation and t-value is also significant, the null
Ho: Recurrent public expenditure does not have positive and significant
From the analysis of our earlier stated model in chapter three and
application of relevant data for this hypothesis, that is;
Ge = bo + bi RPE + U……………………(2a),
Where:
R2 = 0.969
_
R2 = 0.968
F = 808.075
DW = 1.172
the GDP (Size of the economy) are caused by recurrent public expenditure. The
RPE is positively signed, which means it has a positive impact on GDP and its t
value of 4.44
The analysis here is based on our earlier stated model in chapter three for this
The following summarised n on-log linear computer results were obtained: GDP
(t = 12.513) (t=-0.710)
R2 = 0.969
_
R2 = 0.967
F = 396.585
DW= 1.111
The above equation indicates that 96.9% of variations in GDP (Size of the
Nigerian economy) as shown by the R2 value, are caused by both recurrent and
public capital expenditure. The RPE is positively signed, while the PCE is
negatively signed, showing that both variables produce different results when
combined together in the linear equation and when stated separately. It has also
significant and even negatively signed. The implication of the above is that
neither the null nor the alternative hypothesis can be fully accepted or rejected.
hypothesis is rejected. The one to accept is rather the null hypothesis. In this
way, when the two independent variables are used in same model, their results
value of 396.585 is greater than the critical value of 3.39 (i.e. at Fo.05).
On the basis of the basis of the above, the null hypothesis is rejected and the
From the analysis of our earlier stated model in chapter three for this
hypothesis i.e.
Nigeria.
Based on this fact, the null hypothesis is rejected and the alternative
investment in Nigeria.
The equation for this hypothesis and model as stated in chapter three ere
as follows;
coefficient of .856 which is very close to one. This also means that there is
investment in Nigeria.
Ho: Public capital and recurrent expenditure do not have positive and
R2 = .110
_
R2 = .039
F = 1.550
DW= 0.970
The above equation indicates that 11% of variations in inflation rate as shown
by R2 value are caused by public capital and recurrent expenditure. Both PCE
and RPE are negatively sighed showing that they have negative impact on
inflation rate and their t – values are less than 2 proving that the impact is not
significant.
Ho: Public expenditure does not have positive and significant impact on
(t = 1.929)
R2 = 0.125
_
R2 = 0.092
F = 3.721
DW= 0.198
positively sighed showing it has a positive impact on ICU and its t – value is
less than 2 (i.e. 1.929<2) showing that the impact is not significant.
At the same time, the equation is significant since the calculated f-value of
Ho: The nature and form of national income accounting does not
its indices.
GDP per capita is the summary index of the relative economic well-being
of the people in different nations and also as one of the goals of Human
This hypothesis tests the extent to which the nations economic health is
The model to test this hypothesis is as stated in chapter three, which is:
U = Error Term
From the analysis of our earlier stated model in chapter three and the
obtained.
R2 = 0.719
R2 = 0.670
F = 14.725
DW = 0.376
Based on this fact, the null hypothesis is rejected and the alternative
hypothesis accepted.
Ojo, M.O and Okunrounmu, T.O. (1992), “Why fiscal policies Matter in
African” Countries Economic and Financial Review, CBN
vol. 30 No 4.
RECOMMENDATIONS.
1. This study aims to shed some further empirical light on the issue of
1980—2007
budget deficit and public debt. The data in table 4.5a reveals the nature of
the extra government spending. Its biggest part was devoted to higher
The study has given insights regarding the output effects of these fiscal
public expenditure.
2. The observation over the period 1980-2007 covered in this study is that
al,1997:257).
1970 and 1995, the ratio of potentially productive public expenditure (i.e.
capital spending) averaged 9.7 per cent .This is far below the average of
21 and 16-17 per cent for Africa countries and other developing regions
Odusola,1999:140).
capital expenditure declined in 1983 but the rate of reduction was higher
There was reduction in total public expenditure in 1981, 1982 and 1983,
thus indicating -10.37, -27.64 and -25.0 respective over these years.
1986, during the SAP period. By 1993 recurrent expenditure had risen to
to growth.
The data used in this model are inflation rate, GDP, total expenditures.
They all derived from the Statistical Bulletin and the Annual Report and
Again its t-value is greater than 2 (i.e., 9.548 > 2) showing that the impact
model
Ge = bo + bi PCE + u ----(1a)
macroeconomic conditions.
Evidence from the results showed that inflation produce some dampening
positively and significantly affected real output while the effect of real
growth. This is typically the case for Nigeria, where, despite the huge
resources that accrue to the nation during the boom era and the tremendous
increase in public expenditure during the period, there was little to account
for it.
“This points to the conclusion that the manner and style by which public
Obioma, 1999:186).
5.3 CONCLUSION
The findings show that both recurrent and capital expenditure have significant
positive impact on gross domestic product (size of the economy). This means that
growth of the economy. The findings also proved that huge recurrent
line with the findings of Maku (2009: 10) that public expenditure activities-like
impact on economic growth. This study has also proved that both recurrent and
indicating that there are many other exogenous variables that impact positively
be used to ensure
a reasonable level of economic activity, it equally exposes the potentials of these
domestic product (GDP) which is the total naira value of final output.
GDP per capita calculations attempt to give additional information about how
citizens living in the same countries over time or for comparing standard of
However, international comparisons for GDP per capita are some what suspect
5.4 RECOMMENDATIONS
contracts for which public funds are to be channelled to. This is necessary
With special respect to this work’s contribution to knowledge, we recall that Wagner’s
law states that as per income rises in industrialised countries, the relative share of the
public sector in national output will also rise. An important thing to note is that this
law finds applicability in developed countries, our work has shown that this law also
yet to have pride of place. Thus, this law finds applicability irrespective of whether a
There are in general six different formulations of Wagner’s hypothesis. These are:
Product,
GDPR is real Gross Domestic Product, N is the total population size, and C is
The first formulation was employed by Peacock and Wiseman (1961), Musgrave
(1969), and Goffman and Mahar (1971). The second functional form was formulated
and tested by Pryor (1968). The third formulation was suggested and formulated by
Goffman (1968) and Mann(1980). The fourth was utilized by Musgrave (1969),
Gupta (1967) and Michas (1975) considered the fifth formulation and the sixth
All of the above functional forms have been employed to test Wagner’s hypothesis.
This study has modified these models and developed new models called “Expanding
Activity” models which can be used for the prediction of the impact of categories of
1. GE = f (PCE)……………… (i)
2. GE = f (RPE)……………….(ii)
where;
GE = Gross Domestic Product
PCE = Public Capital Expenditure
RPE = Recurrent Public Expenditure
U = Stochastic error term.
The models capture the distinguishing features of the two categories of public
expenditure in Nigeria.
APPENDIX I – REGRESSION RESULTS ON GDP AND CAPITAL
EXPENDITURE
MODEL 1
Regression
Descriptive Statistics
Mean Std. Deviation N
GDP 3814480.0964 5798844.68210 28
Capital Expenditure 183140.2357 213890.59476 28
Correlations
GDP Capital Expenditure
Pearson Correlation GDP 1.000 .882
Capital Expenditure .882 1.000
Sig. (1-tailed) GDP . .000
Capital Expenditure .000 .
N GDP 28 28
Capital Expenditure 28 28
Model Summary(b)
Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson
1 .882(a) .778 .770 2783781.90088 .775
a Predictors: (Constant), Capital Expenditure
b Dependent Variable: GDP
ANOVA(b)
Model Sum of Squares df Mean Square F Sig.
1 Regression 706432707009029.000 1 706432707009029.000 91.159 .000(a)
Residual 201485483463936.400 26 7749441671689.860
Total 907918190472965.000 27
a Predictors: (Constant), Capital Expenditure
b Dependent Variable: GDP
Coefficients(a)
Model Unstandardized Coefficients Standardized Coefficients t Sig.
B Std. Error Beta
1 (Constant) -565232.353 697988.261 -.810 .425
Capital Expenditure 23.915 2.505 .882 9.548 .000
a Dependent Variable: GDP
R2 = 0.778
Ř2 = 0.770
F = 91.159
DW = 0.775
GDP = -565232.353 + 23.915PCE
(t = 9.548)
From the above tables, there is a positive correlation between GDP and Capital Expenditure (with Pearson
Correlation coefficient of 0.882).
77.8% of the predicator (i.e. Capital Expenditure) fits into the model and considering a regression coefficient
(R) of 0.882, the variables fit into the model. Since the calculated F-value (91.159) is greater than the critical
F-value (df = 1, 26) (9.41), the null hypothesis should be rejected and the alternate accepted.
This is further validated with the t-value (9.548) which is greater than 2.0.
APPENDIX II – REGRESSION RESULTS ON GDP AND RECURRENT
EXPENDITURE
MODEL 2
Regression
Descriptive Statistics
Mean Std. Deviation N
GDP 3814480.0964 5798844.68210 28
Recurrent Expenditure 323305.5429 457642.84589 28
Correlations
GDP Recurrent Expenditure
Pearson Correlation GDP 1.000 .984
Recurrent Expenditure .984 1.000
Sig. (1-tailed) GDP . .000
Recurrent Expenditure .000 .
N GDP 28 28
Recurrent Expenditure 28 28
Model Summary(b)
Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson
1 .984(a) .969 .968 1043327.77839 1.172
a Predictors: (Constant), Recurrent Expenditure
b Dependent Variable: GDP
ANOVA(b)
Model Sum of Squares Df Mean Square F Sig.
1 Regression 879616336290965.000 1 879616336290965.000 808.075 .000(a)
Residual 28301854182000.730 26 1088532853153.875
Total 907918190472965.000 27
a Predictors: (Constant), Recurrent Expenditure
b Dependent Variable: GDP
Coefficients(a)
Model Unstandardized Coefficients Standardized Coefficients T Sig.
B Std. Error Beta
1 (Constant) -217805.030 242893.448 -.897 .378
Recurrent Expenditure 12.472 .439 .984 28.427 .000
a Dependent Variable: GDP
R2 = 0.969
Ř2 = 0.968
F = 808.075
DW = 1.172
GDP = -217805.030 + 12.475RPE
(t = 28.427)
From the above tables, there is a positive correlation between GDP and Capital Expenditure (with Pearson
Correlation coefficient of 0.984).
96.9% of the predicator (i.e. Capital Expenditure) fits into the model and considering a regression coefficient
(R) of 0.984, the variables fit into the model. Since the calculated F-value (808.075) is greater than the
critical F-value (df = 1, 26) (9.41), the null hypothesis should be rejected and the alternate accepted.
This is further validated with the t-value (28.427) which is greater than 2.0.
APPENDIX III – REGRESSION RESULTS ON GDP, CAPITAL AND
RECURRENT EXPENDITURE
MODEL 3
Regression
Descriptive Statistics
Mean Std. Deviation N
GDP 3814480.0964 5798844.68210 28
Capital Expenditure 183140.2357 213890.59476 28
Recurrent Expenditure 323305.5429 457642.84589 28
Correlations
GDP Capital Expenditure Recurrent Expenditure
Pearson Correlation GDP 1.000 .882 .984
Capital Expenditure .882 1.000 .907
Recurrent Expenditure .984 .907 1.000
Sig. (1-tailed) GDP . .000 .000
Capital Expenditure .000 . .000
Recurrent Expenditure .000 .000 .
N GDP 28 28 28
Capital Expenditure 28 28 28
Recurrent Expenditure 28 28 28
Model Summary(b)
Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson
1 .985(a) .969 .967 1053420.65606 1.111
a Predictors: (Constant), Recurrent Expenditure, Capital Expenditure b Dependent Variable: GDP
ANOVA(b)
Model Sum of Squares df Mean Square F Sig.
1 Regression 880175813507473.000 2 440087906753736.600 396.585 .000(a)
Residual 27742376965492.650 25 1109695078619.706
Total 907918190472965.000 27
a Predictors: (Constant), Recurrent Expenditure, Capital Expenditure b Dependent Variable: GDP
Coefficients(a)
Model Unstandardized Coefficients Standardized Coefficients t Sig.
B Std. Error Beta
1 (Constant) -144179.162 266263.063 -.541 .593
Capital Expenditure -1.596 2.248 -.059 -.710 .484
Recurrent Expenditure 13.149 1.051 1.038 12.513 .000
a Dependent Variable: GDP
R2 = 0.969
Ř2 = 0.967
F = 396.585
DW = 1.111
GDP = -144179.162 -1.596PCE + 13.149RPE
(t = 12.513)
From the above tables, there is a positive correlation between GDP and Capital Expenditure as well as GDP and
Recurrent Expenditure (with Pearson Correlation coefficients of 0.882 and 0.984 respectively).
96.9% of the predicators (i.e. Recurrent and Capital Expenditures) fits into the model and considering a regression
coefficient (R) of 0.984, the variables fit into the model. Since the calculated F-value (808.075) is greater than the
critical F-value (df = 1, 26) (9.41), the null hypothesis should be rejected and the alternate accepted.
This is further validated with the t-value (12.513) which is greater than 2.0.
APPENDIX IV – REGRESSION RESULTS ON RECURRENT EXPENDITURE
AND GROSS FIXED CAPITAL FORMATION
MODEL 4
Pearson Correlation
Recurrent Expenditure Gross Fixed Capital Formation
Recurrent Expenditure Pearson Correlation 1 .953(**)
Sig. (2-tailed) .000
N 28 28
Gross Fixed Capital Formation Pearson Correlation .953(**) 1
Sig. (2-tailed) .000
N 28 28
** Correlation is significant at the 0.01 level (2-tailed).
From the above tables, there is a strong positive correlation between Recurrent Expenditure and Gross Fixed
Capital Formation (with a Pearson’s correlation of 0.953 and a Spearman’s Correlation of 0.960).
Thus, for every positive change in one of the variables, there is a corresponding positive change in the other
variable.
APPENDIX V – REGRESSION RESULTS ON GROSS FIXED CAPITAL
FORMATION AND CAPITAL EXPENDITURES
MODEL 5
Pearson Correlations
Gross Fixed Capital
Formation Capital Expenditure
Gross Fixed Capital Formation Pearson Correlation 1 .856(**)
Sig. (2-tailed) .000
N 28 28
Capital Expenditure Pearson Correlation .856(**) 1
Sig. (2-tailed) .000
N 28 28
** Correlation is significant at the 0.01 level (2-tailed).
From the above tables, there is a strong positive correlation between Gross Fixed Capital Formation and
Capital Expenditure (with a Pearson Correlation of 0.856 and a Spearman’s Correlation of 0.943).
Thus, for every positive change in one of the variables, there is a corresponding positive change in the other
variable.
APPENDIX VI – REGRESSION RESULTS ON INFLATION RATE, CAPITAL
AND RECURRENT EXPENDITURES
Model 6
Regression
Descriptive Statistics
Mean Std. Deviation N
Inflation Rate 21.6857 18.60467 28
Capital Expenditure 183140.2357 213890.59476 28
Recurrent Expenditure 323305.5429 457642.84589 28
Correlations
Model Summary(b)
Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson
1 .332(a) .110 .039 18.23679 .970
a Predictors: (Constant), Recurrent Expenditure, Capital Expenditure
b Dependent Variable: Inflation Rate
ANOVA(b)
Coefficients(a)
Model Unstandardized Coefficients Standardized Coefficients t Sig.
B Std. Error Beta
1 (Constant) 26.973 4.610 5.852 .000
Capital Expenditure -2.87E-005 .000 -.330 -.737 .468
Recurrent Expenditure -1.14E-007 .000 -.003 -.006 .995
a Dependent Variable: Inflation Rate
R2 = 0.110
Ř2 = 0.039
F = 1.550
DW = 0.970
GDP = 26.973 – 2.87E-005PCE – 1.14E-007RPE
(t = 5.852)
Regression
Descriptive Statistics
Mean Std. Deviation N
Inflation Rate 21.6857 18.60467 28
Capital Expenditure 183140.23
213890.59476 28
57
Correlations
Model Summary(b)
ANOVA(b)
Model Sum of Squares df Mean Square F Sig.
1 Regression 1031.091 1 1031.091 3.224 .084(a)
Residual 8314.523 26 319.789
Total 9345.614 27
a Predictors: (Constant), Capital Expenditure
b Dependent Variable: Inflation Rate
Coefficients(a)
R2 = 0.110
Ř2 = 0.076
F = 3.224
DW = 0.970
GDP = 26.977 – 2.89E-005PCE
(t = 6.017)
Regression
Descriptive Statistics
Mean Std. Deviation N
Inflation Rate 21.6857 18.60467 28
Recurrent Expenditure 323305.54
457642.84589 28
29
Correlations
Model Summary(b)
Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson
1 .302(a) .091 .056 18.07564 .946
a Predictors: (Constant), Recurrent Expenditure
b Dependent Variable: Inflation Rate
ANOVA(b)
Coefficients(a)
R2 = 0.091
Ř2 = 0.056
F = 2.604
DW = 0.946
GDP = 25.651 – 1.23E-005RPE
(t = 6.096)
APPENDIX VII – REGRESSION RESULTS ON AVERAGE INDUSTRIAL
CAPACITY UTILIZATION AND PUBLIC EXPENDITURE
MODEL 7
Regression
Descriptive Statistics
Mean Std. Deviation N
Average Industrial Capacity Utilization 44.9357 11.95483 28
Public Expenditure 348729.9857 577016.42227 28
Correlations
Average Industrial Capacity Utilisation Public Expenditure
Pearson Correlation Average Industrial
Capacity Utilisation 1.000 .354
Public Expenditure .354 1.000
Sig. (1-tailed) Average Industrial
Capacity Utilisation . .032
Public Expenditure .032 .
N Average Industrial
Capacity Utilisation 28 28
Public Expenditure 28 28
Model Summary(b)
Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson
1 .354(a) .125 .092 11.39442 .198
a Predictors: (Constant), Public Expenditure
b Dependent Variable: Average Industrial Capacity Utilisation
ANOVA(b)
Model Sum of Squares df Mean Square F Sig.
1 Regression 483.132 1 483.132 3.721 .065(a)
Residual 3375.652 26 129.833
Total 3858.784 27
a Predictors: (Constant), Public Expenditure
b Dependent Variable: Average Industrial Capacity Utilisation
Coefficients(a)
Model Unstandardized Coefficients Standardized Coefficients t Sig.
B Std. Error Beta
1 (Constant) 42.379 2.528 16.761 .000
Public Expenditure 7.33E-006 .000 .354 1.929 .065
a Dependent Variable: Average Industrial Capacity Utilisation
R2 = 0.125
Ř2 = 0.092
F = 3.721
DW = 0.198
AICU = 42.379 + 7.33E-006PE
(t = 1.929)
From the above tables, there is a weak correlation between PE and Inflation Rate (with Pearson Correlation
coefficient of 0.354).
12.5% of the predicator (i.e. Public Expenditures) fits into the model and considering a regression coefficient
(R) of 0.354, the variables do not fit into the model. Since the calculated F-value (3.721) is lesser than the
critical F-value (df = 1, 26) (9.41), the null hypothesis should be accepted.
This is further validated with the t-value (1.929) which is lesser than 2.0.
APPENDIX VIII- REGRESSION RESULTS ON GDP PER CAPITA , EXCHANGE RATE,
EMPLOYMENT RATE, INDUSTRIAL CAPACITY UTILIZATION AND INFLATION RATE
MODEL 8
Regression
Regression
Descriptive Statistics
Correlations
Industrial
GDP Per Exchange Employment Capacity
Capita Rate Rate Utilization Inflation Rate
Pearson Correlation GDP Per Capita 1.000 .769 .307 .406 -.283
Exchange Rate .769 1.000 .508 .085 -.341
Employment Rate .307 .508 1.000 -.378 .329
Industrial Capacity
.406 .085 -.378 1.000 -.343
Utilization
Inflation Rate -.283 -.341 .329 -.343 1.000
Sig. (1-tailed) GDP Per Capita . .000 .056 .016 .073
Exchange Rate .000 . .003 .333 .038
Employment Rate .056 .003 . .024 .044
Industrial Capacity
.016 .333 .024 . .037
Utilization
Inflation Rate .073 .038 .044 .037 .
N GDP Per Capita 28 28 28 28 28
Exchange Rate 28 28 28 28 28
Employment Rate 28 28 28 28 28
Industrial Capacity
28 28 28 28 28
Utilization
Inflation Rate 28 28 28 28 28
Model Summaryb
ANOVAb
Sum of
Model Squares df Mean Square F Sig.
1 Regression 4E+010 4 1.058E+010 14.725 .000a
Residual 2E+010 23 718180302.1
Total 6E+010 27
a. Predictors: (Constant), Inflation Rate, Employment Rate, Industrial Capacity
Utilization, Exchange Rate
b. Dependent Variable: GDP Per Capita
Coefficientsa
Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) -92288.8 45042.111 -2.049 .052
Exchange Rate 639.880 146.887 .739 4.356 .000
Employment Rate 1857.661 6362.303 .052 .292 .773
Industrial Capacity
1539.075 500.141 .392 3.077 .005
Utilization
Inflation Rate 218.569 376.149 .087 .581 .567
a. Dependent Variable: GDP Per Capita
R2 = 0.719
^
2
R = 0.670
F = 14.725
DW = 0.376
GDP Per Capita = -92288.8 + 639.88EXR + 1857.66EMR + 1539.08ICU + 218.57INF
From the tables above, there is a strong positive relationship between GDP Per Capita and Exchange
Rate; while there is a weak positive relationship between GDP Per Capita and Industrial Capacity
Utilization and Employment Rate. There is also a weak negative relationship between GDP Per
The coefficient determination R2 shows that 71.9% of fluctuations in GDP Per Capita are accounted
for by the model, while 28.1% of variations is accounted for by factors outside the model. Exchange
Rate is the most significant of the variables, followed by Industrial Capacity Utilization. The F value
of 14.725 is significant at 5% level of significance, thus we reject H0 and conclude that the nature of
national income accounting does have a significant impact on the nation’s economic health.
APPENDIX IX
FISCAL
RESPONSIBILITY
ACT,
2007
FISCAL RESPONSIBILITY ACT 2007
ARRANGEMENT OF SECTIONS
Sections:
PART I ESTABUSHMENT, FUNCTIONS, POWER OF THE FISCAL
RESPONSIBILITY COMMISSION.
V PART X BORROWING
44. Conditions of borrowing and verification of compliance with limit
45. Leniency financial institutions
46. Prohibition against C8N In Its relation with Government agencies and Parastatls.
47. Power of the minister to grant guarantees.
- AR1 XI - TRANSPARENCY AND ACCOUNTABILITY
An Act to provide for prudent management of the Nation Resources, ensure Long-Tern,
Macro-Economic stability of the National Economy secure greater accountability arid
transparency n Fiscal operations within a Medium Term Fiscal Policy Framework, and the
establishment of the Fiscal Responsibility Commission to ensure the promotion and
enforcement of the Nations Economic objectives; and for related matters
Commencement
Establishment
1. (1) There shall be established, a body to be known as the Fiscal Responsibility
of fiscal
Commission (in this Act referred to as ‘the Commission’). responsibility
Commission.
(2) The Commission shall be a body corporate with perpetual succession and a
common seal and may sue and be. sued In its corporate name.
2. Responsibility
(1) For the purpose of performing its functions under this Act, the Commission shall
powers and
have power to: functions of the
Commission.
(a) compel any person. or government Institution to disclose information
relating to public revenues and expenditure; and
(b) cause an investigation into whether any person n has violated any provisions
of this Acts
(2) If the Commission is satisfied that such a person has committed any punishable
offence under this Act violated any provisions of this Act, the Commission shall
forward a report or the investigation to the Attorney-General of the Federation for
possible Prosecution.
4. (1) The Commission shall establish and maintain a Fund from which shall be defrayed
Establishment
of Funds for the
all expenditure incurred by the Commission. Commission.
(2) There shall be credited to the Fund established pursuant to - subsection (1) of
this section, the budgetary allocation from the Federal Government and
grants from any other source.
(c) a representative of the. Federal Ministry of Finance of a level not below the
rank it Director; and
(d) one member to present each of the following six geopolitical zones of the
country, that is: North Central, North-East North-West, South-East,
South West, and South-South.
(2) All members of the Commission shall be persons of proven integrity and must
possess appropriate qualifications with not less than 10 years cognate post
qualification experience.
(3) The Chairman and other members of the Commission other than ex-office
members shall be appointed by the President subject. to confirmation by the
Senate.
(4) The Chairman arid members representing the six geo-political zones shall full
time members.
6. The Chairman and members of the Commission shall hold office for a single term of
Tenure of
office
5 years.
7. The Commission shall have power to:. Power of the
commission
(a) formulate and provide general policy guidelines for the discharge of the functions of
the Commission;
(b) superintend the implementation of the policies of the Commission;
(c) appoint for the Commission, such numbers of employees as may in the opinion of the
Commission be expedient and necessary for the proper and efficient performance of
the. functions of the
Commission;
(d) determine the terms arid conditions of service In the Commission, including
disciplinary measures for the employees of the commission;
(e) fix the remuneration, allowances and benefits of the employees of the Commission as
approved by the Salaries and Wages Commission;
(f) do other things, which in its opinion are necessary to ensure the efficient performance
of the functions of
the Commission; and
(g) regulate its proceedings and make standing orders with respect to the holding of its
meetings, notices to be given, the keeping of minutes of its proceedings and such
other matters as the Commission may, from time to time, determine. V
8. (1) Notwithstanding the provisions of section 5 (2) of this Act, a member of the
Cessation of
membership
Commission shall cease to hold officer if
(2) There shall be paid to other members of the Commission such sitting allowances and
benefits as may be determined by the Revenue Mobilization Allocation and Fiscal
commission may, from time to time, approve.
10. The Commission shall prepare and submit to the National Assembly not later than
Submission of
annual report of 30th-June in each financial year; a report of its activities including all cases of
the commission contravention Investigated the during the preceding financial year, and shall include
in the report a copy of its audited accounts for the preceding financial year.
11. (1) The Federal Government after consultation with the States shall Middle term
expenditures
(a) not later than six months from the commencement of this Act, cause to be prepared
and laid before the National Assembly, for their’‘ consideration a Medium Term.
Expenditure, Framework for the next three financial. years; and
(b) thereafter, not later than four months before the Commencement of the next financial
year, cause te be prepared a medium-Term Expenditure Framework for the next three
financial years.
(2) The frame-work so laid shall be considered for approval with such modifications If
any, as the National Assembly finds appropriate by a resolution of each House of the
National Assembly.
(iii) the strategic; economic, social and developmental priorities of the Federal
Government for the next three financial years,
(lv) an explanation of how the financial objectives, strategic, economic, social and
development priorities ,and fiscal measures set out pursuant to sub-paragraphs (i), (II)
an I (iii) of this paragraph relating to the economic objectives set out In section 16 of
the Constitution;
(2) Aggregate expenditure for financial year may exceed the ceiling imposed by the
provisions of subsection (1) of this section, If in the opinion of the President there is a
clear and present threat to national security or sovereignty of the Federal Republic of
Nigeria.
13. (1) The Minister shall be responsible for the preparation of the Medium-Term
Preparation of
Expenditure Framework. middle term
expenditure
framework
(2) In preparing the draft Medium-Term Expenditure Term Framework, the Minister:
(a) may hold public consultation, on the Macro-economic - Framework, the Fiscal
Strategy Paper, the Revenue and Expenditure Framework, the strategic, economic,
social and developmental priorities of government, and such other matters as the
Minister deems necessary:
Provided that, such consultations shall be open to the public, the press and any
citizens or authorized representatives of organization, names of citizens, who may
attend and be heard
(b) Shall seek inputs form the:
(i) National Planning Commission,
(ii) Joint Planning Commission,
(iii) National Commission on Development Planning,
(iv) National Economic Commission,
(v) National Assembly
(vi) Central Bank of Nigeria,
(vii) National Bureau of Statistics,
(viii) Revenue. Mobilization Allocation and Fiscal Commission,
(ix) any other relevant statutory body as the Minister may determine; and
(c) Shall consider and reflect as may be deemed appropriate the input of the
bodies and persons referred to in subsection (a) and (b) of this section.
Time limit for 14. (1) The Minister shall before the end of the second quarter of each financial
preparation of
middle term year, present the Medium-Term Expenditure Framework to the Federal
expenditure Executive Council for consideration and endorsement.
framework to
federal executive
council
(2) The Medium-term Expenditure Framework as endorsed by the Federal executive
Council shall take effect upon approval by a resolution of each house of the National
Assembly.
15. The Medium Term expenditure Framework as approved by the National Assembly
Publication of
shall be published in the Gazette. middle term
expenditure
framework in
16. (1) Subject to subsection (2) of this section, the president may cause adjustments tothe
beGazette
Adjustment to
the medium made to a Medium-Term Expenditure -Expenditure Framework.
term
expenditure
framework
(2) Any adjustment to a Medium-Term Expenditure Framework shall be limited to:
17. States and Local Governments which so desire shall be and assisted by the Federal
Assistance to
states and local Government to manage their fiscal Governments affairs within the medium-term
Governments.
framework.
18. Notwithstanding anything to the contrary contained in this Act any other law, Annual
the budget
to be derived
Medium-Term Expenditure Framework shall: from medium
term
expenditure
(1) Be the basis for the preparation of the estimates of revenue and expenditure required
framework.
to be prepared and laid before the National Assembly under sectlon.81 (1) of
Constitution.
(2) The sectoral and compositional distribution of the estimates of expenditure referred to
in subsection (1) of this section shall be consistent with the medium term
developmental priorities set out in the Medium Term expenditure Framework.
19. The estimates of revenue and expenditure (in the Act referred to as the annual budget
Annual budget
to
shall be accompanied by: accompanied
by certain
documents.
(A) A copy of the underlying revenue and expenditure profile for the next two years;
(b) a report setting out actual and budgeted revenue and expenditure and detailed analysis
of the performance of the budget for the 18 months up to June of the preceding
financial year;
(c) A revenue framework broken down into monthly collection targets prepared on the
basis of the predetermined Reference Commodity Price as contained In Medium-
Term Expenditure Framework;
(d) Measures on cost, cost control and evaluation of result of programmes financed with
budgetary resources;
(e) a Fiscal Target Appendix derived from the underlying Medium-Term Expenditure
Framework setting out the following targets for that financial year:
20. In preparing their annual budget, States and Local Governments may adopt the
Application of
part III to
provisions of this Part with such and modification as may be appropriate and
states and necessary.
local
governments.
PART IV - BUDGETARY PLANNING OF CORPORATIONS AND OTHER
RELATED AGENCIES
21. (1) The Government corporations and agencies and government owned companies listed in
Preparation of the Schedule to this Act (In this Act referred to as the corporations) shall, not later
estimate of
revenue and than 6 months from the commencement of this Act and for every three financial years
expenditure thereafter and not later than the end of the second quarter of every year, cause to be
by corporation
etc. prepared and submitted to the. Minister their Schedule estimates of revenue and
expenditure for the next three financial years.
(2) Each of the bodies referred to in subsection (1) of this section shall submit to the
Schedule
Minister not later than the end of August In each financial year:
(b) projected operating surplus which shall be prepared in line with acceptable accounting
practices.
(3) The Minister shall cause the estimates submitted in pursuance of subsection (2) of this
section to be attached as part of the Appropriation Bill to be submitted to the National
Assembly.
22. (1) Notwithstanding the provisions of any written law surplus and governing they
Operating
surplus and
corporation, each corporation shall establish a general reserve fund and shall allocate
general thereto at the end of fund each financial year, one-fifth of its operating surplus forth
reserve funds.
year.
(2) The balance of the operating surplus shall be aid to the Consolidated Revenue Fund of
the Federal Government, not later than one month following the statutory dead line
for publishing each corporation’s accounts.
23. (1) The Corporation’s surpluses be classified as a Federal Treasury Revenue. Classification
of operation
operating
(2) Where a corporation’s result Is a deficit, the deficit shall be classified as the
surplus
corporation’s loss fur the fiscal year.
(3) Each corporation shall, not later than three months after the end of Its financial year,
cause to be prepared and published Its audited financial reports In accordance with
such rules as may be prescribed from time to time.
24. The provisions of sections 20, 21 and 22 shall cease to apply to any of Classification
the
of application
corporations from the time of its privatization. of part IV.
25. (1) The Federal Government shall cause to be drawn up in each financial year, Annual
an cash
plan
Annual Cash Plan which shall be prepared by the office of the Accountant-General of
the federation.
(2) The Annual Cash Plan $hall be prepared In advance of the financial year setting out
projected monthly cash flows and shall be revised periodically to reflect actual cash
flows.
Disbursement
schedule
26. The Minister, shall within 30 days of the enactment of the Appropriation Act, prepare
and publish a disbursement Schedule derived from the Annual Cash Plan for the
purpose of implementing the Appropriation Act.
27. (1) The sums appropriated for a specific purpose shall be used solely Power of
for the purposes specified in the Appropriation to Act minister to
approve
(2) Without prejudice to subsection (1) of this section, the Ministry may virements
in
exceptional circumstances and in the overall public interest, recommended for
the approval of the National’ Assembly virements from sub-head of account,
without exceeding the - amount appropriated to such head of account.
28. (1) Where by the end of three months, after the enactment of the Appropriation Act,
Power to
restrict the Minister determines that the targeted revenues may be insufficient to fund the
further heads of expenditure In the Appropriation Act, the Minister shall, within the next 30
commitments.
days of such determination take appropriate measures to restrict further commitments
and financial operation according to the criteria set in the Fiscal Risk Appendix
(2) Where the target revenue are re-established, either in part or in full, the
appropriations for which further commitments were restricted shall be restored
proportionately.
(3) The provisions of subsections (1) and (2) of this section shall not apply to statutory or
constitutional expenditure.
29. (1) Any proposed tax expenditure hall be accompanied by an evaluation of its
Restriction on budgetary and financial implications in the year it becomes effective and in the three
the grant of
tax relief. subsequent years, and shall only be approved by the Minister, if it does not adversely
impair the revenue estimates in the annual budget or if it Is accompanied by
countervailing measures during, the period mentioned in this subsection through
revenue Increasing measures such as tax rate raises and expansion of the tax base.
(a) changes in the rates of the taxes mentioned in section 163 of the Constitution; and
(b) debt cancellation in an amount lower than the cost of collection.
30. (1) The Minister of Finance, through the Budget Office of the Federation, shall
Responsibility of
the budget office monitor and evaluate the implementation of the Annual Budget, assess the attainment
to monitor and
report on of fiscal targets and report thereon on a quarterly basis to the Fiscal Responsibility
implementation Council and the Joint Finance Committee of the National Assembly.
(2) The Minister of Finance shall, cause the report prepared pursuant to subsection (1) of
this section to be published in the mass and ‘electronic and on Ministry of Finance
website, not later than 30 days after end of each quarter.
31. In implementing their annual budgets, States and Local Governments may adopt the Application of
part V to states
provisions of this Part with such modifications may be appropriate and necessary. and local
governments.
32. Any fund due to the Federation from any tier of government may be set off by the
Forecast and
collection of
Federation in or towards payment or remittance of any sum due to that tier of
public revenue government from the Federation.
33. The Executive Arm of the Federal Government shall, at least 30 days before the Revenue
forecast.
deadline for the submission of its budget proposals, place at the disposal of the
National Assembly, the revenue estimate fb7the following year, including the net
current revenue and the respective memorandum items.
34. Estimated revenue shall be broken down by the Executive Arm of Government into Executive to
breakdown
monthly collection targets, including, where applicable, a separate description estimated
of
measures to combat tax fraud and evasion. revenue.
35. (1) Where the reference commodity price rise above the predetermined level, the
Penalty for
resulting excess proceeds shall be saved in accordance with the provisions ofnot
compliance
subsection (2) of this section. with part VI
(2) The savings of each Government in the Federation in pursuance to subsection (1) of
this section shall be deposited in a separate account which shall form part of the
respective Governments Consolidated Revenue Fund to be maintained at the Central
Bank of Nigeria by each Government.
(3) The Central Bank of Nigeria shall, in consultation with the Minister of Finance, the
state Commissioners of Finance, and Local Government Treasurers, invest, for and on
behalf of the Governments In tile Federation, the savings of each Government and
such investment can be undertaken in a consolidated manner, provided that, the shares
of each Government and income due to them from the investment are dearly
identified.
(4) The Central Bank of Nigeria in the discharge. of its obligation under subsection (3) of
this section shall, observe the lipids and conditions imposed by safety and prudential
considerations and the need to maintain macro-economic stability and such safety and
prudential conditions are to be agreed upon with Minister of Finance, Stat
Commissioners of Finance, and Local Government Treasurers.
(5) No Government in the Federation shall have access to the savings made in pursuance
to subsection (2) of this section, unless the reference commodity price falls below the
predetermined level for a period of three consecutive months.
(6) The augmentation referred to in subsection (5) of this section shall be limited to such
sums that will bring the revenue of government to the level contained in its budget
estimates.
(7) Notwithstanding the provisions of subsections (5) and (6) of this section and subject
to agreement by Federal and state Governments In the Federation, a proportion of the
savings may be appropriated in the following year for the capital project and
programmes.
36. (1) The creation, expansion or improvement in government action which result in Conditions
an for
increasing
expenditure Increase shall be accompanied by: government
expenditure
(a) an estimates of the budgetary or financial impact in the year it becomes effective and
in the two subsequent years; and
(b) a statement by the person requesting for the expenditure, stating that the increase is
consistent with the Appropriation Act and the Medium-Term Expenditure
Framework.
(2) The provisions of this section shall not apply to expenditures deemed inconsequential
and shall apply to State and local Government only to the extent to which they have
adopted these provisions.
37. The granting of any advantage or increase of remuneration, the creation of posts or
Conditions for allocation of career structures and admission of personnel on any account by bodies
increasing
personnel and entities including foundations established and maintained by the Federal
expenditure Government shall only be effected If, there is a prior budgetary allocation sufficient to
cover the estimated expenditure.
38. All contracts with regards to the exclusion of annual budget; shall comply with the
All contracts to
comply with
rules and guidelines on: rules and
(a) procurement and award of contracts; and guidelines.
40. In incurring public expenditures, States and Local Governments may adopt the application of
provisions of this Part with such modifications as may be appropriate and necessary. part VIII to
states and
local
PART IX - DEBTAND INDEBTEDNESS governments.
41. (1) The framework for debt management during the Financial year shall be based Framework
on
the following rules: for debt
management.
(a) Government at all tiers shall only borrow for capital expenditure and human
development, provided that, such borrowing shall be on concessional terms with low
interest rate and with a reasonable long amortization period subject to the approval of
the appropriate legislative body where necessary; and
(b) Government shall ensure that the level of public debt as a proportion of national
income is held at a sustainable level as prescribed by the -National Assembly from
time to time on the advice of the Minister.
(2) Notwithstanding the provisions of subsection 1 (a) of this section and subject to the
approval of the National Assembly, the Federal Government may borrow from the
capital market.
(3) Non-compliance with the provisions of this section shall make the action taken an
offence.
42. (1) The President shall within 90 days from the commencement of this Act and with
Limit of advice from Minister of Finance subject to approval of National Assembly, set overall
consolidated
debt of limits for the amounts of consolidated debt of the Federal, State Governments
Federal, pursuant to the provisions of items 7 and 50 of Part I of the Second Schedule to the
States and
Local Constitution and the limits and conditions approved by the National Assembly, shall
Governments be consistent with the rules set in this Act and With the fiscal policy objectives in the
Medium Term-Fiscal Framework
(2) Outstanding judgment debts not paid shall be considered part of the consolidated
debts for the purpose of application of the respective limits set in pursuance of this
section.
(3) For the purpose of verifying compliance with the limits specified pursuant to this
section, the Commission shall, at the end of each quarter, determine the amount of the
consolidated debt of each tier of government.
(4) The Commission shall publish, on a quarterly basis, a list of the Governments in the
Federation that have exceeded the limits of consolidated debt, indicating the amount
by which the limit was exceeded.
(5) Where at the. end of any quarter, the consolidated debt of the Federal, State or Local
Governments exceeds the respective limits, it shall be brought within the limit not
later than the end of the three subsequent quarters with a minimum of 25 p. cent
reduction in the first quarter.
(6) Violators of the limits specified pursuant to this section shall:
(a) be prohibited from borrowing from internal or external sources, except for the
refinancing of existing debts; and
(b) bring the debt within the established limited by restricting funding commitments
accordingly.
(7) Where non-compliance with the limit specified pursuant to this section persist after
the time limited by subsection (5) of this section, the affected tier of Government shall
also be prohibited from receiving grants from any other. Government in the
Federation
(8) Whenever the fundamentals of the proposals referred to in this section are changed
due to economic instability or change in monetary or exchange policies, the President
shall submit to the National Assembly a request for a review of the current limits.
Servicing of
43. (1) Servicing’ of external debts shall be the direct responsibility of the Government
external debt
that incurred the debt.
(2) The cost of servicing federal Government guaranteed loans shall be deducted at
source from the share of the debtor Government from the Federation Account’
PART X – BORROWING
44. (1) Any Government In the Federation or its agencies and corporations desirous of
Conditions for
borrowing and borrowing shall specify the purpose for which the borrowing is intended and present a
verifications of cost- benefit analysis, detailing the economic and social benefits of the purpose to
compliance with
limits. which the Intended borrowing Is to be applied.
(2) Without prejudice to subsection (I) of this section, each borrowing shall comply with
the following conditions:
(a) the existence of prior authorization in the Appropriation or other Act or Law for the
purpose for which the borrowing is to be utilized; and.
(b) the proceeds such borrowing shall solely be applied towards long-terms capital
expenditures.
(3) Noting in this section shall be construed to authorize borrowing In excess of the limits
set out in section 44 of this Act.
(4) The Commission shall verify on a quarterly basis, compliance with the limits and
conditions for borrowing by each Government in the Federation.
(5) Without prejudice to the specific responsibilities of the National Assembly and.
Central Bank of Nigeria, the Debt Management Office shall maintain comprehensive,
reliable and current electronic database of internal and external public debts,
guaranteeing public access to the information.
45. (1) All banks and financial institutions shall request and
Conditions for
borrowing obtain proof of compliance with the provisions of this Part before
lending to any Government in the Federation.
46. (1) The Central Bank of Nigeria in its relations with Government agencies and Prohibition
parastatals shall be subject to the following prohibitions: against CBN
in its relation
(a) Purchasing fresh issues of government securities on thc date of its primary issue in the
with
market, except in the circumstances under subsection (2)of this section; government
agencies and
parastatals
(b) Exchanging on a temporary basis, the debt securities of any Government in the
Federation for Federal public debt securities and fo’rd purchase or sale of such
securities when the final result Is similar to an exchange; or
(c) Granting guarantees on behalf of any Government in the Federation.
(2) The Central Bank of Nigeria may only underwrite securities issued by the Federal
Government, which is rolled over, to refinance maturing securities.
(3) The underwriting permitted under; subsection (2) of this section shall be offset
through a public auction at market determined rate.
(2) Any guarantee granted by the Minister shall be conditional upon the provision of a
counter-guarantee ii an amount equal to or higher than the guarantee obligation,
provided that, there are no overdue obligations form the requesting Government in the
federation to the guarantor and its controlled, corporations and such guarantee shall
also be in compliance with the following:
(a) counter-guarantee shall only be accepted from State or Local Governments; and
-
(2) Lending by banks and financial Institutions in. contravention of this Part shall be
unlawful.
(8) Whenever the fundamentals of the proposals referred to in this section are changed
due to economic instability or change in monetary or exchange policie5, the President
shall submit to the National Assembly a request for a review of the current limits.
(2) Any guarantee granted by the Minister shall be conditional upon the provision of a
counter-guarantee i an amount equal to or higher than the guarantee obligation,
provided that, there are no overdue obligations form the requesting Government in the
federation. To the guarantor and it’s controlled. Corporations and such guarantee shall
also be in compliance with the following:
(a) counter-guarantee shall only be accepted from State or Local Governments; and
48. (1) The Federal Government shall ensure that its fiscal and financial affairs areFiscal
transparency.
conducted In a transparent manner and accordingly ensure full and timely disclosure
and wide publication all transactions and decisions involving public revenues and
expenditures and their implications for its finances.
(2) The National Assembly shall ensure transparency during the preparation and
discussion of the Medium-Term expenditure Framework, Annual Budget and the
Appropriation Bill.
49. (1) The Federal Government shall publish their audited accounts not later than six
Publication of
months following the end of the financial year. bulleted
account.
(2) Federal Government shall, not later than two years following the commencement of
this Act and thereafter, not later than 7 months following the end of each financial
year, consolidate and publish in the mass media, its audited accounts tor the previous
year.
(3) The publication of general standards for the consolidation public accounts shall be the
responsibility of the office of the Accountant-General of the Federation.
50. The Federal Government through its budget within 30 days after the end of each Publication of
summarized
quarter, publish a summarized report on budget execution in such form as may report
be on
prescribed by the Fiscal Responsibility Commission and not later than 6 months after
budget
execution.
the end of the financial year, a consolidated budget execution report showing
implementation against physical and financial performance targets shall be published
by the Minister of Finance for submission to the National Assembly and
dissemination to the public.
54. The Federal Government may provide technical and financial assistance to States and
Technical and
financial Local Government that adopt similar fiscal responsibility legislation along the same
assistance to lines as this Act for the modernization of their respective tax, financial and asset
states and
local administration.
government.
55. The President shall, in addition to any other power, to conferred on him under this Power of the
Act, make regulations generally for the purposes of carrying into effect the provisions
of this Act
56. In this Act Appropriation Act’ means an Act or Law passed by the National or State
Assembly or Local Government authorizing spending from the Consolidated Revenue
Fund and includes a Supplementary Appropriation Act or law; “Appropriation Bill”
means the Bill referred to in sections 59 the Constitution of the Federal Republic of
Nigeria, 1999; “Aims of Government” means the Executive, Legislature and
Judiciary; “Borrowing term means any financial obligation arising from:
(ii) giving details guidelines and instructions on the perpetration of the estimates and
expenditure in a manner consistent with the medium term developmental priorities set
out In the Medium Term Expenditure Framework;
“Capital Expenditure” means spending or an asset that lasts for more than one
financial year and expenses associated with the acquisition of such assets;
“concessional terms” means the terms of the loan must be at an interest rate not
exceeding 3 percent;
“consolidated debt7 means the aggregate of the outstanding financial obligations of
Government including those of its Parastatals and agencies at any point in time arising
from:
(i) borrowing money including principal, interest, fees of such
borrowed money,
(ii) the deferred payment for property, goods or services.
(iii) bonds, debentures, note or similar instruments,
(iv) letters of credit and reimbursement obligations with respect thereto,
(v) Guarantees,
(vi) trade or banker’s acceptances,
(vii) capitalized amounts of obligations under leases entered into primarily as a method of
raising financing or of financing the acquisition of the asset leased,
(viii) agreements providing for swaps, ceiling rates, ceiling and floor rates, contingent
participation or other hedging mechanisms with respect to the payment of interest or
the convertibility of currency and
(ix) a conditional sale agreement, capital lease or other little retention agreement;
“Cost-benefit-analysis” means an analysis that compares the cost of undertaking a service,
project or programme with the benefits that citizens are likely to derive from it;
“Fiscal Risk Appendix” An explanatory attachment that provide a set of indicator that can be
used to measure local fiscal risk;
“Fiscal Risk Target ”A provides numerical target for each risk indicator wit which a fiscal
entity will be considered fiscally healthy.
“Fiscal Year” has the meaning ascribed in the Constitution;
“Fiscal Policy Objectives” means the goals set by Government for attainment of set targets
for a given period;
“Government Owned Company” means a statutory corporative Government agency and a
company. in which Government controlling interest;
“Medium-Term Expenses Framework” means the document referred to and the content of
which is prescribed in section 1 of this Act; -
“Minister” means the Minister charged with the responsibility for finance;
“Net debt” means the Consolidated Debt less what is owed to Government, its Parastatals
and agencies at any point in time;
“President” means the President of the Federal Republic of Nigeria;
“Public Debt Securities” means public debt represented by securities issued by the Federal
Government (including those of the Central Bank of Nigeria), the State and Local
governments;
“Public Expenditure” means outlays other than those resulting into debt reduction;
“Public revenue” all moneys received by a Government in the Federation;
“Quarter” means one quarter of a financial year and quarterly shall be construed
accordingly;
“Recurrent Expenditure” means normal overhead and administrative .expenses and
personnel cost Including salaries, emoluments and other beqerits of employees;
“Reference Commodity price” means such price as may be determined by the President
subject to the approval of the National Assembly;
‘Refinancing of debt securities” means issuance of securities to repay the existing debt;
“State financial institution” means any financial institution in which one or more state
government has controlling shares;
“State” shall be construed to include the Federal Capital Territory;
“Tax expenditure projections” means the projected amount expected to be utilized in the
granting of tax relief or tax holiday;
‘Tax revenue projections” means the projected collectible tax or revenue within a particular
planning period; and
‘Tier’s of Government” means the. Federal, State and
Local Governments;
57. This Act. may be cited as the Fiscal Responsibility Act,
2007.
SCHEDULE
EXPLANATORY MEMORANDUM
This Act, among other things, establishes the Fiscal Responsibility Commission
charged with the responsibility of monitoring and enfolding the provisions of this Act
to ensure greater accountability, transparency and prudence in the management of the
Nation’s resources by the Federal Government, Government-owned corporations or
companies and agencies as provided for under sections 13, 16 (1) and (2) and Item 60
of the Exclusive Legislative List s set out in Part 1 of the Second Schedule to the 1999
Constitution of the Federal Republic of Nigeria and provides incentives to encourage
States and Local Government pass similar fiscal responsibility legislation.
I certify, in accordance with Section 2 (1) of the Acts Authentication Act, CAP. A2,
Laws of the Federation of Nigeria 2004, that this is a true copy of the Bill passed by
the both Houses of the National Assembly.
SECTION:
(4) The Chairman and other members of the Council shall be appointed by the
President
(5) Subject to subsection (2) of this section, a member of the Council being:
(a) the holder of an elective office under the Constitution of Nigeria, shall
hold office for a period he remains so elected and no more; and
(b) the Director-General of the Bureau, shall hold office on such terms and
conditions as may be specified in his letter of appointment.
Functions of
2 The Council shall the council
(a) Consider, approve and amend the monetary and prior review thresholds
for the application of the provisions of this Act by procuring entities;
(b) consider and approve policies on public procurement;
(c) approve the appointment of the Directors of the Bureau;
(d) receive and consider, for approval, the audited accounts of the Bureau of
Public Procurement; and
(e) ”approve changes in the procurement process to adapt to Improvements In
modern technology”
(f) give such other directives and perform such other functions as may be
necessary to achieves the objectives of this Act.
3. (1) There is established an agency to be known as the Bureau of Public The establishment
Procurement in this Act referred to as “the Bureau of the Bureau of
Public
(2) The Bureau: procurement
(a) shall be a body corporate with perpetual succession and a common seal;
(b) may sue and be sued in its corporate name; and
(c) may acquire, hold or dispose of any property, movable or immovable for
the purpose of carrying out any of its
function under this Act. Objectives
(2) The Bureau shall serve as the secretariat for the Council.
(3) The Bureau shall, subject to the approval of the Council, have power to:
(a) enter into contract or partnership with any company, firm or person which
in its option will facilitate the discharge of its functions;
(b) request for and obtain from any procurement entity information including
reports, memoranda and audited accounts, and other Information relevant
to Is functions under this Act; and
(c) liaise with relevant bodies or institutions national and International for
effective performance of its functions
under this Act.
7. (1) There shall be for the Bureau, a Director-General who shall be Director
General and
appointed by the President, on the recommendation of the Council after Staff of the
competitive selections. Bureau
(2) Subject to the Pension Reform Act, the terms and conditions of service
(including remuneration, allowances, benefits and pensions) of officers
and employees of the Bureau shall be as determined by this Council.
(3) Without prejudice to the general of subsection this section, the Council
shall have power to appoint either on transfer or on recommend from any
public service in the Federation, such number of employees as may, be
required to assist the Bureau in the discharge of any of its functions under
the Act and persons so employed shall be remunerated (including
allowances) as the Council may consider appropriate.
Staff
Regulations
10. (1) The Council may, subject to the provisions of this Act and within six
months of the inauguration, make staff regulations relating generally to the
conditions of service of the employees of the Bureau and without
prejudice to the foregoing, such regulations may provide for:
Pension
11. Employees of the Bureau shall be entitled to pensions, and other provision
retirement benefits as prescribed under the pension Act.
Funds of the
12. (1) The bureau shall establish and maintain a Fund, to be approved by the bureau
Council into which shall be paid and credited:
(a) the sums appropriated by the National Assembly for the running of the
Bureau;
(b) all subventions, fees and charges for service rendered or publications
made by the Bureau; and
(c) all other assets which may, from time to time, accrue to the Bureau.
(2) The Bureau shall charge its fund to meet all its expenditure.
(3) The Council may make regulations for the Bureau:
(a) specifying the manner in which assets or the funds of the Bureau are to be
held, and regulating the marking of payment into and out of the fund: and
(b) requiring the keeping of proper accounts and records for the purpose of the
fund in such form as may be specified inthe rules.
(4) The Bureau may, from time to time, apply the proceeds of the fund for:
(a) the cost of administration of the Bureau;
(b) the payments of salaries, fees and other remuneration, employees of the
Bureau or experts or professionals appointed by the Bureau;
(c) the maintenance of any property acquired by or vested in the Bureau; and
(d) any matter connected with all or any of the functions of the Bureau under
this Act.
(e) the payments of salaries, fees and other remuneration, of employees of the
Bureau or exports or professional appointed by the Bureau; and
(f) any expenditure connected with all or any of the function of the Bureau
under this Act.
13. (1) The financial year of the Bureau shall be the same as that of the Financial year
Federal” Government. budgeting and
annual report
(2) Not later than 6 months before the end of the financial year, the Bureau
shall submit to the Council an estimate of its expenditure and projected
income during the text succeeding year.
(3) The Bureau shall keep proper account and records of its receipts,
payments assets and liabilities and shall in respect of each financial year
prepare a statement of account in such form as the Council may direct.
(4) The Bureau shall within 6 months after the end of the financial year to
which the accounts relates cause the accounts to be audited in accordance
with guidelines supplied by the Auditor-General of the Federation.
(5) The Bureau shall at the end of each financial year, prepare and submit to
the council a report in such forms as shall accurately capture all activities
of the Bureau during the preceding year and shall include in the report a
copy of the audited accounts of the Bureau for that year.
14. (1) Subject to the provisions of this Act, no suit shall be commenced Legal
proceedings.
against the Bureau before the expiration of 30 days after written notice of
an intention to commence the suit shall have been served upon the Bureau
by the intending plaintiff or his agent; and the notice shall clearly and
explicitly state:
(a) the cause of action;
(b) the particulars of the claim;
(c) the name and address of legal practitioner of the intending plaintiff; and
(d) the relief being sought.
(2) The Director-General of the Bureau,
. its officers, employees or agents shall not personally be subject to any
action, claim or demand by, or any person in respect of anything done or
omitted to be done in exercise of any functions or power conferred by this
Act upon the Bureau, its Director-General, officers, employees or agents.
16. (1) Subject to any exemption allowed by this Act, all public procurement Fundamental
principal for
shall be conducted: procurement
(a) subject to the prior review thresholds as may from time to time be set by
the Bureau pursuant to Section 7 (1) (a)-(b);
(b) a supplier, contractor or consultant during the last three years prior to the
commencement of the procurement proceedings. in issue, failed to
perform or to provide due care in performance of any public procurement;
(c) the bidders is in receivership or is the subject of any types of insolvency
proceedings or If being a private company under the Companies and
Allied Mater Act, is controlled by a person or persons who are subject to
any bankruptcy proceedings or who have been declared bankrupt and or
have made any compromises with their creditors within two calendar years
prior to the initiation of the procurement proceedings;
(d) the bidder is in arrears regarding payment of due taxes, charges, pensions
or social insurance contributions, unless such bidders have obtained a
lawful permit with respect to allowance, deference of such outstanding
payments or payment thereof In installments;
(e) the bidders has been validly sentenced for a crime committed in
connection with a procurement proceeding, or other crime committed to
gain financial profit;
(f) the bidder has in its management or is in any portion owned by any person
that has been validity sentence for a crime committed in connection with a
procurement proceedings, or other crime committed to gain financial
profit; and
(g) the bidder fails to submit a statement regarding Its dominating or
subsidiary relationships with respect to other parties to the proceedings
and persons acting on behalf of the proclaiming entity participating in
same proceedings or whom remains in subordinate relationship with other
participants to the proceedings.
(9) In such cases the procuring entity shall inform the Bureau, and person
referred to In subsection (8) (a)-(g) of this section, In writing that the bid
or tender in question has been excluded and the grounds for the exclusion
and to keep a record of same in the file pertaining to the public
procurement proceeding in question.
(10) All communications and documents issued by procuring entitles arid the
Bureau shall be in English language.
(11) AII communications regarding any matter deriving from this Act or
proceedings of public procurement shall be in writing or such other form
as may be stipulated by the Bureau.
(12) Every procuring entity shall maintain both file and electronic records of all
procurement proceedings made within each financial year and the
procurement records shall be maintained for a period often years from the
date of the award.
(13) Copies of all procurement records shall be transmitted to the Bureau not
later than 3 months after the end of the financial year and shall
(a) Information identifying the procuring entity and the contractors;
(b) the date of the contract award;
(c) the values of the contract;
(d) the detailed records of the procurement proceedings.
(14) All unclassified procurement records shall be open to inspection by the
public at the cost of Copying and certifying the documents plus an
administrative charge as may be prescribed from time to time by the
Bureau.
(15) The criteria Stipulated as the basis upon which suppliers or contractors
would be evaluated shall not be charged in the course of any procurement
Proceedings.
(16) The burden of providing fulfillment of the requirements for participation
In any procurement Proceedings shall lie on the supplier or contractor.
(17) A contract shall be awarded to the lowest evaluated responsive bid from
the bidders substantially responsive to the bid solicitation.
(18) Notwithstanding Subsection (16) of this Section, the Bureau may refuse to
issue ‘certificate of “No Objection” to Contract Award’ on the ground that
the price is excessive.
(19) Pursuant to subsection (17) of this section, the Bureau may direct either
that the procurement proceedings be entirely cancelled or that the
procuring entity conduct are-tender.
(20) Pursuant to Subsection (18) of this section, the Bureau may either direct
that the procurement proceedings be entirely cancelled or that the
procuring entity conduct a re-tender.
(21) The accounting officer of a procuring entity and any officer to whom
responsibility is delegated are responsible and accountable for any actions
taken or omitted to be taken either in compliance with or in contravention
of this Act.
(24) Persons who have been engaged in preparing for a procurement or part of
the proceedings thereof may neither bid for the procurement in question or
any part thereof either as main contractor or sub-contractors nor may they
cooperate in any manner with bidders in the course of preparing their
tenders.
(25) A procuring entity shall not request or stipulate that a bidder should
engage a particular subcontractor as a requirement for participating in any
procurement proceedings.
(26) All procurement contracts shall contain provisions for arbitral proceedings
as the primary forms of dispute resolution.
(28) All procurement contract shall contain warranties for durability of goods,
exercise of requisite skills in service provision and use of genuine
materials and inputs In execution.
17. Subject to the monetary and prior review thresholds for procurements in Approving
Authority
this Act as may from time to time be determined by the Council, the
following shall be the approving authority for the conduct of public
procurement:
(a) in the case of:
(i) a government agency parastatal, or corporation, a Parastatals Tender
Board; and Approving authority.
(ii) a ministry or extra-ministerial entity, the Ministerial Tender Board.
18. Subject to regulations as may from time to time be made by the Bureau Procurement
under the direction of the Council, a procuring entity shall plan its planning
procurement by:
(a) preparing the needs assessment and evaluation;
(b) identifying the goods, work or services required;
(c) carrying appropriate market and statistical surveys and on the basis
prepare an analysis of the cost implications of the proposed procurement;
(d) aggregating its requirements wherever possible, both within the procuring
entity and between procuring entities, to obtain economy of scale and
reduce procurement cost;
(e) integrating its procurement expenditure into its yearly budget;
(f) prescribing any method for effecting the procurement subject to the
necessary approval under this Act; and
(g) ensuring that the procurement entity functions stipulated in this section
shall be carried out by the Procurement Planning Committee.
19. Subject to regulations as may from time to time be made by the Bureau Procurement
under direction of Council, a procuring entity shall, in implementing its implementation
procurement plans:
(a) advertise and Solicit for bids in adherence to this Act guidelines as may be
issued by the Bureau from time to time;
(b) to Invite two credible persons as observers in every procurement process,
one person each representing a recognized;
(i) private sector professional organization whose expertise is relevant to the
particular goods or service being procured, and
(ii) non-government organization working in transparency, accountability and
anti-corruption areas, and the observers shall not intervene in
The procurement process but shall have right to submit their observation
report to any relevant agency or body including their own organizations or
associations;
(c) receive, evaluate and make a selection of the bids received in adherence to
this Act and guidelines as may be issued by the Bureau from time to time;
(d) obtain approval of the approving authority before making an award;
(e) debrief the bid losers on request;
(f) resolve complaints and disputes If any;
(g) obtain and confirm the validity of any performance guarantee;
(h) obtain a “Certificate of’ No Objection’ to Contract Award” from the
Bureau within the prior review threshold as stipulated In Section 3 (a) of
this Act;
(i) execute all Contract Agreements; and
(j) Announce and publicize the award In the format stipulated by this Act and
guidelines as may be Issued by the Bureau from time to time.
20. (1) The accounting officer of a procuring entity shall be the Accounting Accounting
officer
person charged with line supervision of the conduct of all procurement
processes; in the case of ministries the Permanent secretary and in the case
of extra-ministerial departments and corporations the Director-General or
officer of co-ordinate responsibility.
(2) The accounting officer of every procuring entity shall have overall
responsibility for the planning of, organization of tenders, evaluation of
tenders and execution of all procurements and in particular shall be
responsible for:
(a) ensuring compliance with the provisions of this Act by his entity and
liable in person for the breach or contravention of this Act or any
regulation made hereunder whether or not the act or omission was carried
out by him personally or any of his subordinates and Its shall not be
material that he had delegated any function, duty or power to any person
or group of persons;
21. (1) For each financial year procuring entity shall establish a Procurement Procurement
planning
Planning Committee. committee
(2) The Procurement Planning Committee shall consist of:
(a) the accounting officer of the procurement entity or his representative who
shall chair the Committee;
(b) a representative of:
(i) the procurement unit of the procuring entity who shall be the Secretary,
(ii) the unit directly in requirement of the procurement,
(iii) the financial unit of the procuring entity, (iv) the planning, research and
statistics unit of the procuring entity,
(v) technical personnel of the procuring entity with expertise In the subject
matter for each particular procurement, and
(vi) the legal unit of the procuring entity.
22. (1) There Is hereby established by this Act in each procuring entity a
Tender
tenders board (In this Act referred to as “the Tenders Board”). Board
(2) Subject to the approval of the Council, the Bureau shall from time to time
prescribe guidelines for the membership of the Tenders Board.
(3) The Tenders Board shall be responsible for the award of procurements of
goods, works and services within the threshold set In the regulations.
(4) In all cases where there is a need for prequalification, the Chairman of the
Tenders Board shall constitute a technical sub-committee of the Tenders
Board charged with the responsibility for the evaluation of bids which
shall be made up of professional staff of the procuring entity and the
Secretary of the Tenders Board who shall also be the Chair of the
Evaluation Sub-committee.
(5) The decision of the Tenders Board shall be communicated to the Minister
for implementation.
23. (1) Where a procuring entity has made a decision with respect: to the Prequalificatio
minimum qualifications of suppliers, contractors or service providers by n of bides
requesting interested persons to submit applications, to pre-qualify, it shall
set out precise criteria upon which it seeks to give consideration to the
applications and in reaching a decision as to which supplier, contractor or
service provider qualifies, shall apply only the criteria set out In the
prequalification documents and no more.
(e) any other requirement that may be established by the procuring entity in
conformity with this Act and procurement regulations relating to the
preparation and submission of applications to pre-qualify and to the
prequalification proceedings.
(5) The response by the procuring entity shall be given within a reasonable
time and in any event within a period of at most seven working days so as
to enable the supplier, contractor or consultant to make a timely
submission of its application to pre-qualify.
(10) The procuring entity may require a supplier, contractor or service provider
who has been pre-qualifies to demonstrate its qualifications again in
accordance with the same criteria used to pre-qualify the supplier,
contractor consultant.
(11) The procuring entity shall promptly notify each supplier, contractor or
service provider requested to demonstrate its qualifications again whether
or not the supplier, contractor or consultant has done so to the satisfaction
of the procuring entity.
(12) The procuring entity shall disqualify any supplier, contractor or service
provider who fails to demonstrate its qualification again if requested to do
so.
24. (1) Except as provided by this Act, all procurements of goods and works Open
competitive
by all procuring entities shall be conducted by open competitive bidding. bidding
(2) Any reference to open competitive biding in this Act means the process by
which a procuring entity based on previously defined criteria, effects
public procurements by offering to every interested bidder, equal
simultaneous information and opportunity to offer the goods and works
needed.
(3) The wining bid shall be that which is the lowest evaluated responsive bid
which has been responsive to the bid with regards to work specification
and standard.
25. (1) Invitations to bid may be either by way of National Competitive Invitation
to bid.
Bidding or International Competitive Bidding and the Bureau shall from
time to time set the monetary thresholds for which procurements shall fall
under either system.
(ii) in the case of goods and works valued under National Competitive
Bidding, the Invitation for bids shall be advertised on the notice board of
the procuring entity, any official web sites of the procuring entity, at least
two national newspapers, and in the procurement journal not less than six
weeks before the deadline for submission of the bids for the goods and
works.
26. (1) Subject to the monetary and prior review thresholds as may from time
Bid security to time be set by the Bureau all procurements valued in excess of the
prescribe& by the Bureau shall require a bid security in an amount not
more than 2% of the bid price by way of a bank guarantee issued by a
reputable bank acceptable to the procuring entity.
(2) The Bureau shall from time to time specify the principal terms and
condition of the required bid security in the tender documents.
27. (1) All bids in response to an invitation to open competitive bidding shall Submission of
be submitted in writing and in addition to any other stipulated in the tender bids
documents signed by an official authorized to bind the bidder to a contract
and placed in a sealed envelop.
(2). All submitted bids shall be deposited in a secured tamper- proof bid-box.
(3) All bids submitted shall be in English language.
(4) The procuring entity shall issue a receipt showing the date and time the
bid was delivered.
(5) Any bid receive after the deadline for the submission of bids shall not be
opened and must be returned to the supplier or contractor which submitted
it.
(6) No communication shall take place between procuring entities and any
supplier or contractor after the publication of a bid solicitation other than
as provided in this Act.
Rejection of
28. A procuring entity may: bids.
(a) reject all bids at any time prior to the acceptance of a’ bid, without
incurring thereby any liability to the bidders; and
(b) cancel the procurement proceedings in the public interest, without
incurring any liability to the bidders’
29. (1) The period of validity for a bid shall’ be the period specified in the Validity period
of bids,
tender documents. modification
and
withdrawal of
(2) A procuring entity may request suppliers or contractors to extend the tenders.
period of validity for an additional specified period time
(3) A supplier or contractor may refuse the request for the extension of bid, in
which case the effectiveness of its bid will terminate upon the expiration
of the un-extended period of effectiveness.
(4) A supplier or contractor may modify or withdraw its bid prior to the
deadline for the submission of bids.
30. All bids shall be submitted before the deadline or date specified in the Bids
opening
tender documents or any extension of the deadline for submission and the
procuring entity shall:
(a) permit attendees to examine the enveloped in which the bids have been
submitted to ascertain that the bids have not been tampered with;
(b) cause all the bids to be opened in public, in the presence of the bidders or
their representatives and any Interested members of the public;
(c) ensure that the bids opening takes place immediately following the
deadline stipulated for the submission of bids or any extension thereof;
(d) ensure that a register is taken of the names and addresses of all those
present at the bids opening and the organizations they represent which is
recorded by the secretary of the tenders board; and
(e) call-over to the hearing of all present, the names and address of each
bidder, the total amount of each bid, the bid currency and shall ensure that
these details are recorded by the secretary of the Tenders board or his
delegate in the minutes of the bid opening.
Examination 31. (1) All bids shall be first examined to determine to determination if they:
of bids
(a) meet the minimum eligibility requirements stipulated in the bidding
documents;
(b) have been duly signed;
(c) are substantially responsive to the bidding documents;
and
(d) are generally in order.
(2) A procuring entity may ask a supplier or a contractor for clarification of its
bid submission in order to assist in the examination, evaluation and
comparison of bids.
(3) The following shall not be sought, offered or permitted:
(a) changes in prices;
(b) changes of substance in a bid; and
(C) changes to make an unresponsive bid responsive.
(4) Notwithstanding sub-Section (3) of this Section, the procuring entity may
correct purely arithmetical errors that are discovered during the
examination of tenders.
(5) The procuring entity shall give prompt notice of the correction to the
supplier or contractor that submitted the tender.
(6) A major deviation shall result in a rejection of bid while a minor deviation
shall be subjected to clarification.
(7) The following shall be considered as major deviations:
(A) with respect to clause in an offer;
(i) unacceptable sub contracting,
(ii) unacceptable time schedule if time is of essence,
(iii) unacceptable alternative design, and
(iv) unacceptable price adjustment.
(b) with respect to the status of the bidder:
(i) the fact that he is ineligible or not pre-qualified, and
(ii) the fact that he is uninvited;
(c) with respect to bid documents an unsigned bid;
(d) with respect to time, date and allocation for submission:
(i) any bid received after the date and time for submission stipulated in the
solicitation document,
(ii) any bid submitted at the wrong location.
(8) In case of major deviations, bids shall not be considered any further and,
where unopened, shall be returned as such to the bidder. a
(9) In all cases of rejection, a letter stipulating the reasons for rejection shall
be sent, and the bidder shall not be permitted to amend his bid to become
compliant.
(10) Subject to any provision to the contrary, the following shall be considered
as minor deviations:
(a) the use of codes;
(b) the difference in standards;
(c) the difference in material
(d) alternative design;
(e) alternative workmanship;
(f) modified liquidated damages;
(g) omission in minor items;
(h) discovery of arithmetical errors;
(I) sub-contracting that is unclear and questionable;
(j) different methods of construction;
(k) difference in final delivery date;
(I) difference In delivery schedule;
(m) completion period where these are not of essence;
(n) non-compliance with some technical local regulation;
(o) payment terms; and
(p) any other condition that has little Impact on the bid.
(11). In cases not mentioned above and where there exist a doubt as to whether
a particular condition In a bid Is a major or a minor deviation, the
following rules shall apply:
(a) where the Impact on the costs Is major, It shall be regarded as a major
deviation; and
(b) where the impact on the costs Is minor, It shall be regarded as a minor
deviation.
(12) In cases of minor deviations, written classification may be obtained from
the supplier or contractor and, where applicable, and offer made for the
correction of the minor deviation.
(13) Where a supplier or contractor does not accept the correction of a minor
deviation, his bid shall be rejected.
(14) At the stage of evaluation and comparison, all minor deviation shall be
quantified in monetary terms.
(15) For the rejection of a bid, a written notice shall be given promptly to the
supplier.
32. (1) For the evaluation and comparison of bids that have been adjudged as
Evaluation of valid for the purposes of evaluation, no other method or criteria shall be
bids
used except those stipulated in the solicitation documents.
(2) The objective of evaluation shall be to determine and select the lowest-
evaluated responsive bid from bidders that have responded to the bid
solicitation.
(3) In the Course of its determination of the lowest evaluated responsive bid
from the bidders that have responded to the bid solicitation the Tender
Boards shall, in particular, undertake the fallowing processes as
applicable:
(a) checking of deviations;
(b) checking of omissions with qualification of same;
(c) application of discounts, as applicable;
(d) clarification with bidders of questionable minor deviation;
(e) qualification in monetary-terms of such questionable deviations;,
(f) Conversion to common currency;
(g) calculation ‘and tabulation of bid amount with domestic preference where
applicable;
(h) determination of the lowest calculated prices in order of rank;
(i) post-qualification of bidders, where applicable;
(j) listing-of rejection of bids, where applicable;
(k) decision of rejection of all bids where justifiable;
(I) recommendation for award; and
(m) writing up of the bid evaluation report.
(4) All relevant factors, in addition to price, that will be considered for the
purposes of bid evaluation and the manner in which such factors will be
applied shall be stipulated in the solicitation documents.
(5) Such factors shall be calculated in monetary terms as stipulated in the
solicitation documents and shall include:
(a) for goods, among others, costs of transportation and insurance, payment
schedule, delivery time, operating costs, efficiency, compatibility of the
equipment, availability of services and spare parts, related training, safety,
environmental benefits or losses by damages;
(b) for works, in addition to factors stipulated in Section 34 (1) of this Act,
and subject to Section 34 (2) of this Act, if time is a critical factor, the
value of early completion; and
(c) the value of early completion under Section 35 (2) of this Act shall not be
taken into account unless, in conformity with criteria pre-set in the bidding
documents, the conditions of contract provide for commensurate penalties
in case of late delivery.
(6) When bid prices are expressed in two or more currencies, the ‘prices of
all bids shall be converted to Nigerian Currency, according to the rate and
date of rate specified in the solicitation documents.
(7) If suppliers were pre-qualified, verification provided in the submission for
pre-qualification shall be confirmed at the time of award of contract and
award may be denied to a bidder who no longer has the capability or
resources to-successfully perform the contract.
(8) After opening of bids, information relating to the
Examination, clarification and evaluation of bids and recommendations
concerning award shall not be disclosed to bidders or to persons not
officially concerned with the evaluation process until the successful bidder
is notified of the award.
33. (1) The successful bid shall be that submitted by the lowest Acceptance. Acceptance of
bids
Acceptance cost bidder from the bidders responsive as to the bid of bid
solicitation.
(4) The Bureau shall by regulation form time to time set the limit and the
formulae for the computation of margins of preference and determine the
contents of goods manufactured locally.
35. (1) In addition to any other regulations as may be prescribed by the Mobilization
Bureau, a mobilization fee of not more than 15% may be paid to a supplier fees.
(2) Once a mobilization fee has been paid to any supplier or contractor, no
further payment shall be made to the supplier or contractor without an
interim performance certificate issued in accordance with the contract
agreement.
37. (1) Payment for the procurement of goods, works, and services shall be Interest on
settled promptly and diligently. delay
payment
(2) Any payment due for more than sixty days from the date of the submission
of the invoice, valuation certificate or confirmation or authentication by
the Ministry, Extra-Ministerial Office, government agency, parastatal or
corporation shall be deem a delayed payment.
(3) All delayed payments shall attract interest at the rate specified in the
contract document.
(4) All contracts shall includes terms, specifying the interest for late payment
of more than sixty days.
38. (1) Every procuring entity shall maintain a record of the comprehensive Recorded
procurement proceedings. payment
proceedings.
(2) The portion of the records referred to in this Section shall, on request, be
made available to:
(a) any person after a tender; proposal, offer or quotation has been
accepted or after procurement contract; and
(b) suppliers, contractors or consultants that submitted tenders,
proposals, offers or quotations, or applied for prequalification,
after a tender, proposal, offer or quotation has been accepted or
procurement proceeding have been terminated without resulting in
a procurement contract
(3) A disclosure of procurement proceedings records, prior to’ award of
contract may be ordered by a court, provided that when ordered to do so
by a court, the procurement entity shall not disclose such information, if
its disclosure would:
(4) The procuring entity shall not be liable to suppliers, contractors or service
providers for damages owing solely to failure to maintain a record of the
procurement proceedings in accordance with this Section.
(b) where the character of the goods or works are subject to rapid
technological advances; where the procuring entity seeks to enter
into a contract for research, experiment, study or development,
except where the contract includes the production of goods in
sufficient quantities to establish’ their commercial viability or to
recover research and development costs, where the procuring
entity applies this Act to procurement concerned with national
security and determines that the selected method is the most
appropriate method of procurement; or
(c) where the tender proceedings have been utilized but were not
successful or the tenders were rejected by the procuring entity
under an open competitive bid procedure and the procuring entity
considers that engaging in new tendering proceedings will not
result in a procurement contract.
(3) The provisions of this Act as regards the process for open competitive
bidding shall apply to two-stage tendering proceedings except to the extent
that those provisions vary from this section.
(5) The procuring entity may, In the first stage, engage in negotiations with
any supplier or contractor whose tender has not been rejected under an
open competitive bidding procedure with respect to any aspect of its
tender.
(6) In the second stage of the two tender proceedings the procuring entity:
(a) shall invite suppliers or contractors whose tenders have not been rejected
to submit final tenders with prices on a single set of specifications;
(b) may, in formulating the specifications, delete or modify any aspect of the
technical or quality characteristics of the goods, works or services to be
procured together with any criterion originally set out in these documents,
evaluate and compare tenders and ascertain the successful tender;
(c) may add new characteristics or criteria that conform with this Act;
(d) shall communicate to suppliers or contractors in the invitation to submit
firm tenders, any deletion, modification or addition; and
(e) may permit a supplier or contractor who does not wish to submit a final
tender to withdraw from the tendering proceedings.
(7) The final tenders shall be evaluated and compared in order to ascertain the
successful tender as defined in an open competitive bid.
Restricted 40. (1) Subject to the approval by the Bureau, a procuring entity may for
tendering
reasons of economy and efficiency engage in procurement by means of
restricted tendering if:
(a) the goods, works or services are available only from a limited number of
suppliers or contractors;
(b) the time and cost required to examine and evaluate a large number of
tenders is disproportionate to the value of the goods, works or services to
procured; or
(c) the procedure is used as an exception rather than norm.
(2) Where a procuring entity engages in restricted tendering on the basis that:
(a) the good works and service are available only form a limited number of
suppliers or contractors, it shall invite tenders from all the suppliers and
contractors who can provide the goods, works or services; and
(b) the time and cost required to examine and evaluate a large number of
tenders is disproportionate to the value of the goods, works or service, it is
shall select in a non- discriminatory manner of the number of suppliers or
contractors to ensure effective competition;
(3) For the purposes of subsection (2), of this section, the procuring entity
shall cause a notice of the selected tendering proceedings to be publish in
the procurement journal.
(4) The provisions of this Act regarding the open competitive bidding
procedure shall apply to the selective tendering proceedings, except to the
extent that those provisions are varied by this Section.
41. (1) A procuring entity may carry out procurements by requesting for Request for
quotations
quotations from suppliers or contractors where the value of the goods or
works to be procured does not exceed a sum that shall be set in the
procurement regulation.
(a) be informed whether any factors other than the charges for the goods,
works or services themselves, such as any applicable transportation and
insurance charges, customs duties and taxes are to be included in the price;
and
(b) give only one quotation and shall not be allowed to charge or vary the
quotation.
(6) Where the total value of the procurement is not more than a sum that shall
be set In the regulation, the procurement entity may not obtain the
Bureau’s approval.
Direct
42. (1 ) A procuring entity may carry out any emergency procurement where:
procurement
(a) goods, works or services are only available from a particular supplier or
contractors, or if a particular supplier or contractor has exclusive rights In
respect of the goods, works or services, and no reasonable alternative or
substitute exits; or
(b) there is an urgent need for the goods, works or services and engaging in
tender proceedings or any other method of procurement is Impractical due
to unforeseeable circumstances giving rise to the urgency which is not the
result of dilatory conduct on the part of the procuring entity;
(c) owing to a catastrophic event, there is an urgent need for the goods, works
or services making it impractical to use other method of procurement
because of the time Involved In using those methods;
(d) a procuring entity which has procured goods,
equipment, technology or services from a supplier
or contractor, determines that:
(a) may procure the good, works or services by inviting a proposal or price
quotation from a single supplier or contractor.
(b) shall include in the record of procurement proceedings a statement of the
grounds for its decision and the circumstances in justification of single
source procurement.
Emergency
procurement
43. (1) A procuring entity may for the purpose of this Act, carry out an
emergency procurement where:
(a) the country is either seriously threatened by or actually confronted with a
disaster, catastrophe, war, insurrection or Act of God;
(b) the condition or quality of goods, equipment, building or publicly owned
capital goods may seriously deteriorate unless action is urgently and
necessarily taken to maintain them in their actual value or
usefulness; or
(c) a public project may be seriously delayed for want of an item of a minor
value.
(2) In an emergency situation, a procuring entity may engage in direct
contracting of goods, works and services.
(3) All procurement made under emergencies shall be handled with
expedition but along principles of accountability, due consideration being
given to the gravity of each emergency.
(4) Immediately after the cessation of the situation warranting any emergency
procurement, the procuring entity shall file a detailed report thereof with
the Bureau which shall verify same and if appropriate issue a Certificate of
No Objection’.
44. Where a procuring entity wishes to procure services for Its needs which Expression
of interest
are precise and ascertainable: to provide
(a) it shall solicit for expressions of interest or applications to pre-qualify to services for
ascertained
provide the services by publishing a notice to that effect in at least 2 needs.
national newspapers and the procurement journal;
(b) where the value of the service to be procured is less than one million naira,
or with the approval of the Bureau, of such a low value that only national
consultants would be Interested, the procuring entity may without placing
any notice request at least 3 and not more than 10 consultants or service
providers to make proposal for the provision of the services in a format
stipulating:
(i) a statement of qualifications of the consultant to provide the service;
(ii) a statement of understanding of the procuring entity’s needs;
(iii) the methodology for providing the service;
(iv) the time frame for providing the service; and
(v) the cost or fee for the service.
45. (1) A procuring entity wishing to procure service for ib needs may do so Request for
by requesting for proposals when it intends to enter into a contract for the proposal to
provide
purpose of research, experiment, study or development, except where the services for
contract includes the production of goods in quantities sufficient to unascertained
needs.
establish their commercial viability or to recover research and
development cost.
(3) The addendum shall be communicated promptly before the deadline for
the submission of proposals to the short listed consultants to whom the
procuring entity has provided the request for proposals and shall be
binding on those consultants.
(5) The minutes shall be provided promptly before the deadline for the
submission of proposals to the consultants participating in the selection
proceedings to enable them takes the minutes into account in preparing
their proposal.
48. (1) The procuring entity shall allow sufficient time for the preparation and
Criteria for
evaluation of submission of the request proposals but shall in no case give less than 30
proposal.
days between the issue of the notice or request and the deadline for
submission.
(2) The technical and financial proposals shall be submitted simultaneously
but in separation envelopes.
(3) A proposal received after the deadline for submission of proposals shall be
returned to the sender unopened.
(4) Immediately after the deadline for submission of proposals, the technical
proposals shall be opened for evaluation whilst the financial proposals
shall remain sealed and kept in a secure bid-box until they are opened
publicly.
(5) The technical evaluation committee shall not have access to or insights to
the financial proposals until the evaluations including any Tender Boards
review are concluded.
49. (1) The procuring entity shall establish criteria to evaluate the proposals Submission
and prescribe the relative weight to be accorded to each criterion and the of
proposal
manner in which they are ü be applied in the evaluation of:
50. (1) The procuring entity shall select the successful proposal by either General
selection
choosing the proposal with: the lowest evaluated price, or procedure
(services)
(ii) the best combined evaluation in terms of the general criteria set out in the
request for proposals and the price quoted.
(2) The procuring entity shall include in the record procurement a statement
of the grounds and circumstances on which it relied to select either of the
procedures in subsection (1) of this section.
(3) Nothing in this Section shall prevent the procuring entity from resorting to
the use of any impartial panel of experts to make the selection.
51. (1) Where the procuring entity elects to choose the successful proposal Procedure for
based on technical and price factors, it shall establish a weight with selection of
proposal
respect to quality and technical price factors of the proposals in where price is
accordance with the criteria other than price as might have been set out in a factor.
the request for proposals and rate each proposal in accordance with the
such criteria and the relative weight and manner of application of the
criteria as stipulated in the request for proposals; and then
(2) The procuring entity shall compare the prices of those proposal that have
attained a rating at or above the threshold;
(3) The procuring entity shall notify the consultants whose proposal did not
meet the minimum qualifying mark or were non responsive to the
invitation for proposals and terms of reference : after the evaluation of
quality is completed within a period of 14 working days after decision has
been taken by the procurement entity;
(4) The name of the qualifying consultants, the quality scores for the technical
component of the proposal shall be read aloud and recorded alongside the
price proposed by each consultant or service provider when the financial
proposals are opened;
(5) The procuring entity shall prepare the minute of public opening of
financial proposals which shall be part of the evaluation report and shall
retain this record.
(b) the proposal with the lowest price in the case of least-cost selection; or
(c) the highest ranked technical proposal within the budget.
(7) The Consultants with the winning proposal shall be invited for
negotiations, which shall focus mainly on the technical proposals.
(8) The proposed unit rates for staff-months d reimbursable shall not be
negotiated unless there exceptional reasons.
52. (1) Where the procuring entity elects to make a quality based selection, Selection
procedure
based on consultant’s qualifications or single source selection, it shall where price is
engage. in negotiations with consultants in accordance with this Section. not a factor
(4) The procuring entity shall treat proposals and any negotiations on
selection procedure as confidential and avoid the disclosure of their
contents to competing consultants.
53. (1) The Bureau may review and recommend for investigation by any Bureau to
relevant authority any matter related to conduct of procurement recommend
investigation
proceedings by a procuring entity, or the conclusion or operation of a
procurement contract If it considers that a criminal investigation Is
necessary or desirable to prevent or detect a contravention of this Act.
(4) The Bureau shall, if satisfied that there has been a contravention of this
Act or any regulations in relation to procurement proceedings or
procurement contracts, take action to rectify the contravention which
action shall include:
(a) nullification of the procurement proceedings;
(b) cancellation of the procurement contract;
(c) ratification of anything done in relation to the proceedings; or
(d) a declaration consistent with any relevant provisions of this Act.
54. (1) A bidder may seek administrative review for any or breach by a Administrative
procuring or disposing entity under the provisions of this Act, or any review
(a) within fifteen working days from the date the bidder first became aware of
the circumstances giving rise to the complaint or should have become
aware of the circumstances, whichever is earlier;
(3) The bidder is not satisfied with the decision of the accounting officer the
bidder may make a complaint to the Bureau within 10 working days from
the date of communication of the decision of the accounting officer.
(4) Upon receipt of a complainant, the Bureau shall promptly:
(a) give notice of the complaint to the respective procuring or
disposing entity and suspend any further action by the procuring or
disposing entity until the Bureau has settled the matter;
(b) unless it dismisses the complaint:
(6) The Bureau shall make its decision within twenty- one working days after
receiving the complaint, stating the reasons for its decisions and remedies
granted, if any.
(7) Where the Bureau fails to render its decision within the stipulated time, or
the bidder is not satisfied with decision of the Bureau, the bidder may
appeal to the Federal High Court within 30 days after the receipt of the
decision of the Bureau, or expiration of the time stipulated for the Bureau
to deliver a decision.
Disposal of 55. (1) This Section shall apply subject to the Public
public
property Enterprise (Commercialization and Commercialization) Act 1999.
(2) For the purpose of this Act every procuring entity shall also be disposing
entity
(3) The open competitive bidding shall be primary source of. receiving offers
for the purchase of any public property offered for sale.
(4) The Bureau shall, with the approval of the Council:
(a) determine the applicable policies and practices in relation to the disposal
of all public property;
(b) issue guidelines detailing operational principles and organizational
modalities to be adopted by all procuring entities engaged in the disposal
of public property; and
(c) issue standardized document, monitor implementations enforce
compliance and set reporting standards that shall be used by all procuring
entities involved in disposal of public property.
(5) For the purposes of this Act, public property is defined as resources in the
form of tangible and non-tangible assets (ranging from serviceable to the
unserviceable):
(a) created through public expenditure; (b)acquired as a gift or through deeds;
(c) acquired in respect of intellectual or proprietary rights:
(d) acquired on financial instruments (including shares, stocks bonds etc.) and
(e) acquired by good will and any other gifts of the Federal Government.
(6) The means of the disposal of public assets shall include:
(a) sale and rental;
(b) lease and hire purchase;
(c) licenses and tenancies;
(d) franchise and auction;
(e) transfers from one government department to another with or without
financial adjustments; and
(f) Offer to the public at an authorized variation.
56 (1) Before slating any public property for disposal, the accounting officer Planning of
(Whether acting in his own authority or at the direction of any superior or disposal
other authority (in charge of any public property set for disposal shall
authorize the preparation of a valuation report for such property by an
independent Evaluator, or such professional with the appropriate
competence to carry out the valuation
(2) The disposal of assets whether or not listed in the Assets register for a
procuring entity shall be planned and integrated into the income and
expenditure budget projection of the procuring entity.
(3) The disposal of assets referred to in subsection (2) of this section shall be
timed to take place when the most advantageous returns can be obtained
for the asset in order to maximize revenue accruing to the government.
(4) All procuring entities shall distribute responsibilities for the public
property between the procurement unit and the Tenders Boards.
57 (1) The Bureau shall, with the approval of the Council, stipulated a Code Code of
conduct for
of Conduct for all public officers, suppliers, contractors and service public
providers with regards to their standards of conduct acceptable in matter procurement
involving the procurement and , disposal of public assets.
(2) The conduct of all persons involved with public procurement, whether as
official of the Bureau, a procuring entity, supplier, contractor or service
provider shall at all times be governed by principles of honesty,
accountability, transparency, fairness and equity.
(3) All officers of the bureau, members of Tenders Boards and other persons
that may come to act regarding the conduct of public procurements shall
subscribe to an oath as approved by Council.
(4) All persons in whose hands public funds may be entrusted for whatever
purpose should bear in mind that its utilization should be judicious.
(8) All public officers involved in public procurement and disposal of assets
shall maintain the highest standards of ethics in their relationships with
persons real or corporate who seek government commerce whether as a
bidder, supplier, contractor or service provider by developing transparent,
honest and professional relationships with such persons.
(10) Any person engaged in the public procurement and disposal of assets who
has assumed, or is about to assume, a financial or other business outside
business relationship that might involves a conflict of interest, must
immediately declare to the authorities any actual or potential interest
(11) Such a declaration shall be given such consideration at the relevant level
as is necessary so that, where it is seen that remedial action is taken, a
conflict of interest is present.
(13) A persons involved in the disposal of assets, shall not either by a third
party or by himself be interested in any manner buying directly or
indirectly these assets and shall not have or obtain any type of advantage
or revenue from the disposal for a period of three years after the disposal.
58. (1) Any natural person not being a public officer who contravenes any Office relating
to public
provision of this commits an offence and is liable on conviction to a term procurement
of imprisonment not less than 5 calendar years but not exceeding 10
calendar years without an option of fine.
(2) Any 6ffence in contravention of this Act shall be tried by the Federal High
Court.
(3) Prosecution of offences under this Act shall be instituted in the name of
the Federal Republic of Nigeria by the Attorney General of the Federation
or such other officer of the Federal Ministry of Justice as he may authorize
so to do, and in addition, without prejudice to the Constitution of the
Federal Republic of Nigeria 1999, he may:
(a) after consultation with the Attorney-General of any state of the federation,
authorize the Attorney-General or any other officer of the Ministry of
Justice of that state; or
(b) if the relevant authority so requests, authorize any legal practitioner in
Nigeria to undertake such prosecution directly or assist therein.
(4) The following shall also constitute offences under this Act.
(a) entering or attempting to enter into a collusive agreement, whether
enforceable or not, with a supplier; contractor or consultant where the
prices quoted in their respective tenders, proposals or quotations are or
would be higher than would have been the case has there not been
collusion between the persons concerned;
(5) Any person who while carrying out his duties as an officer of the Bureau,
or any procuring entity who contravenes any provision of this officer of
the Bureau, or any procuring entity who contravenes any provision of this
Act commits an offence and is liable, on conviction to a cumulative
punishment of:
(a) a term of imprisonment of not less than 5 calendar years without any
option of fine; and
(B) summary dismissal from government services.
(6) Any legal person that contravenes any provision of this commits an
offence and is liable on conviction to a cumulative penalty of:
(a) debarment from all public procurements for a period of not less than 5
calendar years; and
(b) a fine equivalent to 25% of the value of the procurement in issue.
(7) Where any legal person shall be convicted pursuant to subsection (4) of
this section, every director of the company as listed in its records at the
Corporate Affairs Commission shall be guilty of an offence and is liable
on conviction to a term of imprisonment not less than 3 calendar years but
not exceeding 5 years without an option of fine.
(11) For the purpose of the presumption under Section 51(7) of this section,
consideration shall be given to a suspect’s ability to control the
procurement proceedings or to control a solicitation or the conditions of
the contract ih question, whether total or partial.
(12) For the purposes of Section 59(5) of this section, its hall be sufficient to
prove that a reasonable business person should have known that his action
would result in his company or’ firm having an undue advantage over
other bidders to the detriment of the national treasury.
59. (1) The fixing of the seal or the Bureau shall be authenticated by the Miscellaneous
signature of the Chairman, the Director- General or of any other person
authorized generally or specially to act for purpose by the Council.
“Goods” means objects of every kind and description including raw materials,
products and equipment and objects in solid, liquid or gaseous ‘form and
electricity as well as service incidental to the supply of the goods;
“Lowest evaluated responsive bid” is the lowest price bid amongst the bids that
meets all the technical requirements and standard as contained in the tender
document;
“Margin Of Preference” means the extra mark up on price allowed any domestic
contractor or supplier bidding under International Competitive Bidding without
being otherwise disadvantageous to the terms of price;
“Minor Value” means a monetary value which is not in excess of the monetary
thresholds set for any approving authority by the Bureau;
“Monetary Threshold” means the value limit in Naira set by the Bureau outside
of which an approving authority may not award a procurement contract;
“National Competitive Bidding” means the solicitation of bids from domestic
contractors and suppliers registered or incorporated to carry on business under
Nigeria Law;
“Procuring entity” means any public body engaged in procurement and includes
a Ministry, Extra-Ministerial office, government agency, parastatal and
corporation;
“Services” means the rendering by a contractor or supplier of his time and effort
and includes any object of procurement other than goods, works or construction;
“Threshold” refers only to the approving and not the actual process of ward;
“Validity Period” means the period during which a bidder agrees not to increase
the cost of bids or to remove any components of the bid;
title 61. This Act may be cited as the Public Procurement Acts, 2007. I certify, in
accordance with section 2 (1) of the Acts Authentication Act, cap. 4, Laws of the
federation of Nigeria 1990, that this is a true copy of the Bill passed by both
House of the National Assembly.
This Act establishes the National Council on Public Procurement and the Bureau of
Public Procurement as the regulatory authorities responsible for the monitoring and
oversight of public procurement, harmonizing the existing government policies and
practices by regulating, setting standards and developing the legal framework and
professional capacity for Public Procurement in Nigeria.
SCHEDULE TO FEDERAL PROCUREMENT BILL 2007
1) (2) (3) (4) (5)
Short title of the Long title of the Bill Summary of the contents of the Bill Date passed by Date passed by the
public procurement An Act to establish the National council on public This 8111 establishes the National Council on public the Senate House of
ill, 2007. procurement and the Bureau of Public procurement procurement and the Bureau on Public procurement as 17th May, 2007. Representatives
as the regulatory authorities responsible for the the regulatory authorities responsible for the monitoring 30th May, 2007.
monitoring and oversight of public procurement, and oversight of public procurement, harmonizing the
harmonizing the existing Government policies and existing Government policies and practices by regulating,
practices by regulating, setting standards and setting standards and developing the legal framework
developing the legal framework and professional and professional capacity for public procurement in
capacity for public procurement In Nigeria: and Nigeria.
I certify that this Bill has been carefully compared by me with the decision reached by the National Assembly and found by me to be
true and correct decision of the Houses and is in accordance with the provisions of the Acts Authentication Act Cap. 4, Laws of the
Federation of Nigeria, 1990.
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