Budget and Budgetary Control in Nigeria : Procedures , Practices and Policy Issues

No abstract Keywords: budget; budgetary control; expenditure; policy issues Global Journal of Agricultural Sciences Vol. 4(1) 2005: 69-73


INTRODUCTION
Anyanwu (1998) opined that since the inception of SAP in Nigeria in 1986xthe fiscal operations of the Federal ~ovemment have been resultiflg in overa!l deficit.The term budget refers a pian.quantified in notwithstanding budget surplus that were anticipated each '-monetary terms* prepared and approved by appropriate year.The resultant effects of this are persistent decline in real authorities prior to a defined period of time, usually showing output caused by lower foreign exchange earnings and : planned income to be generated and I or expenditure to be : incurred during that period and the capital to be employed to reliance on credits from the banking sector, 'to finance the attain a given objective.In Nigeria since independence, the deficits", macro-economic imbalance.deterioration in foreign specific objectives of the national.budget include; reSt?Nes and large scale unemployment of all productive enhancement of increased production and productive capacity; resources.encouragement of export promotion and growth; agriculture and solid minerals, as the nation's major foreign exchange Within this context therefore, the fiscal operations of the earner; improvement of capacity utilization in the Federal Government when budgets are inadequateiy manufacturing sector and local sourcing of raw matorials controlled resulting in deficit are financed through the use of through targeted incentives; alleviation of poverty, creation of taxes as well as external and internal borrowing instrument.jobs and promotion of industrial peace and reduction of This influences the e~0nomic activities of the nation in desired inflation.Others include; enhancement of scientific and ways and is also used in sustaining the allocation of resources technological development to lay a firm industrial base; drastic between Ihe public and the private sectors and their use for reduction in fiscal deficit through the curtailment of wasteful attainment of stability and growth.However.out of the three spending; Stringent control of extra budgetary expenditure; major k~IIJments of fiscal policy, the concern herein is with encouragement of greater participation.of the private sector in the expenditure financing of the Government; since the the economy with a view to the eventual emergence of that quantity of money available for spending depends on the s ~~t o r as the engine of growth; engagement in guided volume of taxes Or revenue generated as well as the amount deregulation in the management of foreign market and interest of borrowing the Government is prepared to accept or sl-pport.rates; management of foreign exchange market SO as to There has been a persistent and substantial increase narrow the gap between the official and autonomous exchange in the total expenditure of the Federal Government since 1986 rate; transfer of money from wasteful recurrent avenues to (Ekerendu 1997).The expenditure programme comprises capital development through generous funding of the debts services Payment on both external and domestic nonproductive sectors.and ensuring stable and consistent macro-debt recurrent and capital expenditures, payment for economic environment.
contractual obligations, etc.One implication of this According to Onyema (1999) there is hardly any uncontrolled budget expenditure, i s that Government aspect of human endeavor that does not have some economic expenditure exceeded the revenue estimates, hence budget implications because economics as a science is essentially and fiscal operation deficits.Thus, the crucial issues concerned with the study of scarce resources, their allocation, confronting the Government is how to adequately control management and utilization.In preparing budget oroposals budgetary expenditure in order to have a sustained balance or therefore, there are competing demands for the resources at surplus budget that will enhance economic development.the disposal of Government to solve a limitless number of Sanusi (1993) noted that there is the wrong perception of the problems.Hence.the appreciation of this would be immensely role of the private sector which ought to be the engine of useful for the overall development of the economy in a manner growth as 'unpatriotic outriders" rather than what they are that will achieve balance among different types of expenditure 'Partners with Government in the task of development".While and ensure that the marginal return to expenditure is the Same Shonekan (1 993) sees lack of fiscal discipline as a bane for for all of them.budgetary gap.Akinyele (1993) comments on the faulty implementation of the budget, adding that Nigerians have never been short of ideas but lack the ideals to make ideas work.Bnrme (1993) listed corruptive system ineKciency arising from under utiliization of trained manpower.long term absence cf democratic structure in governance as culprits.
Budget serves as the melting point at which most other policy instruments find operational expression, hence provides the framework for implementing the short.medium and long term components of the national development policies and programmes.Besides, the macro-economic and sectoral impact of the policy framework of the budget, judicious Implementation of capital programmes generates growth the findings of this study will transate to a good reference material for academics, financial institutions, parastatals, governments and the public in general in budgeting.their control, practices and procedures in Nigeria. .

METHODOLOGY
Secondary data were obtained from the Central Bank of Nigeria as contained in their Economic and Financial indicators bullion as well as their Annual reports and statement of accounts from 1986 -2000.These information were subjected to analysis, discussion and interpretation using appropriate tools.directly apart from stimulating activities in various sectors.
RESULTS AND Dl~CUSSION T.,srefore, having established the rationale behind Federal Government fis&i deficits, instruments of financial and As Table 1 indicates, while the Federally allocated ineffective budgetary control Processes~ a thorough revenue is derived from oil receipts which accounts for 75% to examination of budgets and budgetab' control Processes in 85% of the total Federal Government finances, the nonail Nigeria becomes justifiable.
sector consistina of mainlv Custom and Excise duties.

A
This study is necessitated by the need to undertake an indepth appraisal and budgetary control measures in Nigeria as to gauge their effectiveness.Furthermore, in recent times liferatures are limited w i t h regards to budgetary control.practices and procedures in Nigeria.This can be partially attributed to the fact that Nigeria was under the military rule for more than 30 years out of the 44 years of her independence.Wnenever budgets are formulated, planned, prepared and presented, the control mechanisms were never adhered to thus resulting in budget implementation failures.There has lherefore not been any established laid down procedure for the implementation of budget in Nigeria.With the advent of democracy.this bad practice of non-implementation of budget to the letter has continued unabated thus becoming the major sorjrce of friction between the Executive and the Legislative a m of government.This study is intended to unveil those factors that are responsible for poor budget implementation frequently leading t heir failures while also highlighting the control mechanisms St required for a successful budget implementation.It is therefore the opinion of the authors that accounts for 15% to 25% o i the Govemment total revenue: The Federal Retained Revenue on its part comprises the statutory allocations from the Federation Account, independent revenue and deductions from loan-on-lent to state and local government.However.a review of the fiscal operation of the Federal Government between 1986 (inception of SAP) and 2000 showed lhat there was a worsening fiscal imbalance within this period as the deficit-GDP ratio increased F3m 4% to 10%.During this period, such instruments as import licenses and counter trade were used excessively and arbitrarily too.The ratio average of 6.8% beheen 1986 and 1993 increased to 11.2%.12. 3% and 13.3% in 1991, 1992 and 1993 respectively; and this however reflected the worsening gap between government revenue and expenditure.The federally , collected revenue between 1986 and 1993 decreased to 34 6% in 1992 and finally to 25.1% in 1993.Federal Government retained revenue (Federation Account) contributions also declined from a peak of 92% in 1993 to 43% in the year 2000.Thus the mode of operation of fiscal policy management determines the level of success accruing to the government from achievement of surplus, deficit or balanced budget as evident in table 1.  Table 2 shows the classification of Government revenue into: Oil and non-oil Revenue:-Oil revenue includes petroleum profit tax, rent, royalties and NNPC earnings, etc, while non-oil revenue refers to Custom and Excise Duties, Company income tax, etc. ii.
Direct and indirect tax:-Direct tax comprises of personal duties, income tax, petroleum tax etc while indirect tax includes.Excise duties, Import duties, Purchase tax, etc. iii.
Tax and Non-tax Revenue:-Tax revenue consists of both direct and indirect taxes while the non-tax revenue refers to income accurable to the government of Nigeria outside its taxes, such income from its investments, for example, Nigeria ports Plc, Nigerian airways etc. From the mid 1970s.history recorded that the economy had been mono-cultural with the crude oil exports accounting for over 90% of foreign exchange earnings and 80% to 85% of government revenue even till date.A functional breakdown of total expenditure of the Federal Government of Nigeria (FGN) shows an increasing share was being accounted for by transfer payments such as debt service on both external and domestic debts, outstanding pension and gratuities, etc.The share of transfer payments (53%) increased progressively as table 3 shows between 1986 and 1993, while the share of productive expenditure declined (those that do not add to the volume of current goods and services), and gratuities declined progressively from 77.7% to 40.1% in the same period.Thus, the growth pattern in the fiscal operations herein reflected adverse developments in revenue from the oil sector which helplessly accounted for the 90% foreign exchange earnings and 80% to 85% government revenue in Nigeria.Inflation rate rose from 9.9% in 1980 to 40.9% in 1989 and to 72.8% in 1995 before declining to about 9.2% in the year 2000.ii.

111.
Savings deposit was 6% in 1980 relative to the lending rate of 9.9%.that is, the savings cum-lending rates gap was about 3.9% in 1980.This gap in favour of the lending rate rose persistently to 8.9% in 1990; 21.44% in 1993 before slightly declining to about 16.2% in 1998.iv.
It is therefore apparent from these statistics that the level of interest rate remains unattractive and the spread between deposit and lending rates remain high, possibly reflecting inflationary expectations, high risk premium and poor risk assessment on the financial sector.These negative financial developments within an efficient banking system under deregulatory device constitute one major source of high cost of production in Nigeria.
In addition to the inefficiency in the banking system in Nigeria, there are the negative implications of government indecisions Ori what to do with respect to public utilities in Nigeria coupled with the impact of the deregulation of the tariffs on utilities.This has elicited expensive demand responses for industrial substitutes, inefficient and costly alternative for the supply of these utilities.Thus, these are not good enough to allow for an effective industrialization process in a developing country particularly within the globalization process.Despite the macro-economic achievements of some administrations in Nigeria, basic structural imbalances persist..These include the lingering problems of import dependence, reliance on a single economic sector-oil, weak industrial base, low level of agricultural production, a weak private sector, high external debt overhang, inefficient public utilities, low quality of social services ard unabating unemployment.
Below is a detailed performance appraisal of the past budget: in Nigeria, 1986 -2000.

OPTIONS FOR EFFECTIVE BUDGET COFdTKQL
For the fiscal operations of the government to arrest the decline in the economy and achieve the desired macroeconomic stability with regard to economic growth and commensurable development through efficient and effective budgetary control processes, the following measures have to be undertaken.
First, each year's budget' estimates should henceforth aim at achieving a deficit free fiscal operation through a rigid fiscal discipline entrenched in accountability, transparency and policy consistency within the framework of macro-economic stability.
Second, any project not captured in the Rolling plan should not be listed in the capital expenditure programme to avoid double funding ' and duplication of projects already executed earlier or not listed in the Budget's rolling pian.
Third, all requests for extra-budgetary expenditure should be brought within the framework of accountability, needs and provisional supplementary budget.
Fourth, in line with the current practice, each fisczl year should be reviewed at the end of every quarter instead of the mid-year to appraise, evaluate and detect shortcomings in implementation with a view to taking appropriate remediiil measures.
Fifth, the federal and state Governments or any othor tier must not finance its extra-budgetary expenditure by borrowing through andlor from CBN's credit facility or any bank without measurable collateral security or ability to pay in order to bring sanity into' the monetary and financial sector.This

5.
To expand revenue base by exploring new source(s).6.To achieve at least 3.0% overall growth rate of the GDP.No evidence that anyti~iny substantial has been achieved.
This has not been achie\~ed; information indicates a growth rate of less than 2.0%.There werr, pay increl~ses, particularly in the public sector.But given the small sire of public sector workers in the population, the pay increase did not amount to a general improvement in purchasing power.
There were reports about an improvement in the provision of operational equipment to security agents, especially police.
Several actions that defined the appropriate pol i ci es were taken, but macroeconomic stability has not been achieved.In the case of the

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S a m : CEN h7frfa: Armrrar Report and Statement of Accountsforthe year ended 31-Dec 2000.

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Budget and~udgetary Control in Nigeria: Procedures, Practices and Policy Issues.
PERFORMANCE APPRAISAL OF PAST BUDGETS IN NIGERIA.1986 -200Q.
been made.Most of the steps outlined have been taken.Impact on the Economy and Society.Unemployment rema~ned serlous problem in the society.The desired single digit has not Dee:?achieved.Mainly falling output, rising unemployment and increased erterna!dependence.The problem and abuses that charact,:-rizec! the system were ended.But the e x , , ~. ; !r stabilizing effects on prices and output we!--: not noticeable, obviously because of problems with other macro eccnornic policies.The economy and society have contin1 ied i-.rely on one single sector -. the oil f ~i revenue.This must be a factor in the growing ilnemployment and poverty in the society.There are still mf~lplaints about wezk piirchasing power in the system.Internal security remains a serious problem up till date.The expected stabiiity has noi beeci achieved.Instability is still evident till clate.Has led to the escalation in the cost of utilities especially telephone.ovsufg ensure a (xpntrcl of an achie*~aMe one digit inflation fttrrre #iCkks Lwdgeav go& thrust Sixth.P i monetary Wcy for evgr fiscal year shouM be m k e t de(mirm3 a d p e d towpards stimulating the real .-. ' secPar w h i i eke interest rate p d i should be flexible and I mqxmsbe $8 market fundamentals.Seven%, iimeiy r e k a e d appropriated funds should be dgi@ Volfarrded by government to facilitate early budget h?glementalon and d the same time engage the civil society in W g e t adwacy.budget defense sessions and monitoring d M g e 8 impkmentatien.Eigk"SI, in order to maintain IegaGty and legitimacy, &propfiation Acts should be fui6y implemented and now eams&sb duatians skwld attraci appropriate legishtive san~orts.The wed for e M i budgetary control cannot be w -& .Indeed. the pospect of building staWi as a folmd&im for accelerated rate of grwth and general ~~~e ~t in public welfare can only m s~qlbSBj economic policies that are implemented with txxtmibW avl credibility.In this ward, rechannelling of operag-~~I I P S and other w i n g s recorded to productive sedm of Ure e5~~nomy in order to improve social and ecxm& m&ltiQns.particularly in rural areas:will be a step in the fight dFecPisn.Ma-esn.the pursuit and fine tuning of ~i 6 r b s paEdt?s wITJ kad la effectiveness in puMi management and Mng abut a jump-start in our tmcbmrnk: tw~sfomtiar.Fram 6ke analysis &me, it becomes imperative that

Table 4 : Inflation. Exchange Rate, Savings. Lending ratdand Capacity Utilization in Nigeria
..Source: CBN Annual Report and Statement of Accounts (Many Series).

Table 4 ,
it is apparent that; I.