BUDGETARY REFORMS IN NIGERIA

...

BUDGETARY REFORMS IN NIGERIA: IMPLICATIONS FOR NIGERIA'S SUSTAINABLE DEVELOPMENT AGENDA. BY EGAI, N.A. (Ph.D) HENRY WALERU AKANI AND . CLINTON CHIMA UZOBOR

ABSTRACT The Nigeria nation Is in dire need of sustainable integrated development. To this end any credible budgetary reforms package must involves strict expansion of agro finance and provide value for money in all project, this involves procurement, planning, implementation and review. This study examined the place of budgetary reforms in sustainable development in Nigeria. It further spotlighted the significant of budgetary reforms in Nigeria's sustainable development agenda. To realize this lofty dream, the establishment of state-led integrated budgetary reforms strategies is considered most imperatives. Fundamental It would help to promote the critical role of budgeting and ultimately enhance transparency, accountability, due process mechanism and certification in the management of the government and award of contract. With these put in place, Nigeria's sustainability and the MGDs target will be rest assured. Key word: Budgetary Reforms, Nigeria Sustainable Development Agenda

INTRODUCTION Frankly speaking, reforms are painful but absolutely necessary, people at the various ties of government either Federal, State and Local government even corporate bodies, organizations, entities and individuals generally resist change and most cases, pioneers of change go down as villains because they are mostly perceived as being insensitive to the cries and the wo~s that accompany changes. Infact, every government institutions or agencies, has one budgetary reform or the other which brings about doing things in a better way. Therefore budget can be defined as the (CBN 2005) financial plain of the government proposed spending (expenditure) and revenue (income) generations during a particular period of time. Also, in the other words, it is an annual comprehensive report of project inflows and outflows of a country's economy.

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However, budgetary reforms according to Gbosi (2008) are conscious policies and structural guidelines that are put together to transformed, changed an institutional and regulatory framework governing market behaviour. Also Okonta (2009) defined budgetary reforms as deliberate and structural measures by the government which relies to change the institutional and regulatory framework governing public budget, planning, design, preparation, execution, monitory, supervision and auditing.

is end ~

agro

In Nigeria, since 1999 - 2008, there has been series of budgetary reforms implemented which have contributed directly or indirectly towards the development of the nation's economy~ Over the years, the Nigerian government had undertaken several budgetary reforms to ensure improvement in the lives of Nigeria's people (citizens) one of such key areas of that was well stipulate is the NEEDS document in reforming government 2004. Available evidence shows that a lot of revenue accrued to government in the past years, however, fiscal priorities seemed to have been misplaced resulting to m\smanag~m~n\ ot na\\ona\ resources. \o ?Ut \t \n anot\\ex 'No'/, t\sco.\ and monetary resources were not properly channeled , to areas whereby, they would have been of the most benefit to the Nigerian people. Therefore, from the foregoing this paper will aimed at examining budgetary reforms as a capsule for Nigeria's sustainable ·development strategies. It will also look at it prospects and challenges.

-- reform --erefore -· =. - of the

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POLICY THRUST OF THE FISCAL RESPONSIBILITY ACT 2004 The law implies that budgetary system must be conducted within a medium- term framework; that is with a more than 1 year in mind. This process is expected to efficiently reconcile needs with available resources and to give agencies a more consistent source of fu nding. In addition, it ensures allocation of money to priority projects. Specifically, the law will ensure that actual revenue and expenditure estimates are consistent with the mid-term strategic plan. It will do this by specifying monetary, fiscal and real sector targets. This wi ll

62

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--=

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=-

have the effect of ensuring consistency of real revenues and expenditures. This medium-term fiscal frame work will stabilize the fluctuations in the receipts and expenditures of government fiscal operations, as natiqnal consensus converges around a result oriented system of allocation, which will channel scares resources to those sectors which contribute more to rapid economic growth.

Management of Revenue: The old budgetary system contained no instrument of to compel revenue collecting . units such as the ministries, department, parastatals and agencies to ensure prompt and efficient collection of statutorily approved revenue and to remit same to the appropriate revenue authorities that is to say, regarding management of revenue, the law will provide for effective collection and proper maintenance of all rationally levied taxes as well as creation of new revenue areas. The limit and usage of borrowed funds: Until a few years ago there was no debt management office to monitor and analyze the borrowings of the federal and state governments to ensure that the sources, the tenure, and the amount of loan borrowed and the conditions under which those loans were contracted by the federal and state government or their agencies were consistent with the country's macroeconomic stability. One of the major financing requirements in Nigeria over the years has been excessiv~ and undemocratic borrowing. To this effect, the law will be based on cost-benefits analysis and proceeds directly to growth and development of the economy. It will require accountability and transparency in the utilization of borrowed funds and· provides access o the public top information. Also, under the fiscal responsibility Act the excessive and indiscriminate borrowings by the public sector have been put under check. All public sector loans be it domestic or foreign must be designed for a particular projects. Saving and Asset Management: The law stipulates that accounts should be opened at the Central Bank of Nigeria for federal and state government in order to cushion commodity prices variability. It also states that excess revenue above a predetermined effective price will 63

and : ·ze the ::-: fi scal : ·ented hose _25

2ction ell as

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be used in a separate account by each government. It further provides that revenues saved in the above-stated account are to be properly invested and managed by the Central Bank of Nigeria. The Principle of Due Process Mechanism. The fiscal responsibility Act provides for goods governance, accountability and transparency in all facets of government operations, especially in project implementations. Project implementation is a more complex operation. Both the federal and state governments scored poor marks in the past projects they implemented and sustained huge losses of · funds as a result. The fiscal responsibility Act provides guidelines or criteria which have to be diligently followed before public funds ca be released to ministries, departments and agencies of government for expenditure purposes. These sets of criteria, steps or conditions are generally referred to as "due process (CBN, 2005). The Setting up of compliance and enforcement management Co"-'ncil: To ensure that the fiscal responsibility Act was fully implemented to the satisfaction of interest parties a management codicil made up of all the interested parties including the federal government and the representatives of the six geo-political zones, the private sector and the civil society is to be constituted. The main functions of the council are to ensure that the fiscal · responsibility law was enforced across the federation, that the criteria for the use of public finds were pr9perly followed and to investigate and to report all cases if violations of the Act to the Attorney General of the federation for prosecution. The negative behaviour of the above variables and parameters contributed largely to the macroeconomic stability, which have characterized the Nigeria economy in the past decades. If the fiscal responsibility act is fully implemented the Nigeria economy will experience an unprecedented growth rate and the elusive macroeconomic goals of the past will become a relative.

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st ate . t also c '"ice will

64

POLICY THRUST OF THE REFORMS IN NIGERIA'S PENSION SYSTEM Pension is regular income paid by the state to people who have meritoriously left the state service after attaining the retire_ m ent age, or by former employers to people who have retired from work. The primary objectives of any pension scheme include the following: 1. Provide benefits for retirees during retirement 2. Provide benefits on disablement of an employee 3. Provide benefits to the employees' dependents after death 4. Give peace of mind to employee while in service 5. Encourage Savings 6. Foster a cordial relationship between the employers and the employees 7. Encourage the exit of old employees, thereby giving younger one promotion prospect THE 2001 PENSION REFORM In order to address the problems associated with the pension scheme in the country, the Pension Reform Act of 2004 was enacted. The main objectives of the Pension Act included: a.

b. c. d.

e.

To ensure that every person who worked in either the public service of the Federation, or the private . sector receives retirement benefits as and when due. To assist individuals save for their livelihood during old age and thereby reducing old age poverty. To ensure that pensioners were not subjected to hardship due to inefficient and cumbersome process of pension payments. To establish a uniform set of rules, regulations and standards for the administration and payments of retirement benefits for public and private sectors. To curtail the growth and accumulation of pension liabilities.

As a marked departure fro_m the erstwhile pension scheme, the Pension Act 2004 expressly provided that the scheme be governed by the cannons of safety and security of benefits, transparency, 65

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have

_ a'1 d the

accountability, equity flexibility, inclusively, uniformity and practicability. The adoption and subsequent implementation of these principles have engendered confidence and sustainability of the new pension scheme. The Pension Reform Act 2004 established the National Pension Commission (PenCom) as the body to formulate the overall pension policy, regulate, supervise and ensure the effective administration of pension matters in Nigeria. In addition, PenCom would be responsible for issuance of guidelines for the investment of pension funds and establish standards, rules and guidelines for the management of pension funds as well as approving and licensing pension fund administrators, custodians and other institutions relating to pension matters.

- _1ger one POLICY THRUST OF THE 2004 PENSION SCHEME

:

scheme : n e main

eceives : age and

=--::s. ....... ards for for

-

eme, the ; v erned by :-a sparency,

The provisions of the pension Act 2004 spelt out the features of the new scheme in order to achieve its stated objective. According to the Act, the new scheme is contributory, fully funded, and privately managed. It also provide for third party custody of funds and is based on individual account. it the take-off of the new scheme, employees with 3 years or less to retirement were allowed to continue under the old arrangement, while the persons listed under section 291 of the Federal Republic of Nigeria's constitution were exempted. The new pension scheme is mandatory for organizations that have 5 or more employees. Under the new pension scheme, both employers and the employees contribute a minimum of 7.5 per cent of the employee's emoluments into the employees' Retirement Savings Accounts (RSA). While the new Pension Act superseded and repudiated all existing legislations in the public sector. Some of the existing private sector pension scheme would continue _provided that there is evidence to show that (a) the retirement fund will fully funded at all times, and any shortfall was made up within 90 days; (b) the pension funds assets were separated from the assets of the employer; (c) the pension funds assets are held by a licenses custodian.

66

The act also made provision for any employer manag_ing its existing pension scheme prior to the new enactment to apply to the PenCom as a Closed Pension Fund Administrator (CPFA) to continue to manage such pension scheme. A CPFA cannot open or manage RSAs for employees other than its own or employees' of its parent company if it is a subsidiary. Under the new scheme, pension funds were to be privately managed by Pension Funds Administrators (PFAs). PFAs should be limited liability companies, who have been licensed to open RSA for employees, invest and manage pension funds in a manner prescribed from time to time by PenCom. Other obligations of the PFAs are to provide regular information to the employees and pay retirement benefits as prescribed under the Act as and when due. The scheme also provided for the establishment of the Pension Fund Custodian (PFCs) whose function is to warehouse pension fund assets, including contributions sent directly by the employers. The PFCs upon receipts of the contributions shall notify the P~As, who shall subsequently credit the RSAs of the ·employees. The PFCs shall be responsible for executing transactions and undertake activities relating to the administration of pension fund investments upq~ instruction by the PFA. Essentially, the PFCs are responsible for keeping pension funds assets in trust for the PFAs.

ESTABLISHMENT OF MINISTRY O'f NIGER DELTA In line with the desire of the President Umaru Musa Yar'Adua led government to restore peace, coordinate youth empowerment policy initiatives as well as reinforce the administration's commitments to the overall development of the oil rich Niger Delta region in Nigeria, in 2008, a new ministry of Niger Delta was created add to the existing government parastatal known as Niger Delta Development · Commission (NDDC). The Ministry of Niger Delta took up immediately with a NSO billion supplementary budget to National Assembly which has been since passed into law, although the effects of the newly created ministry of Niger Delta is yet to be felt by the people of the region.

67

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::::.,... . if it - - - be

PUBLIC PROCUREMENT ACT 2007 AS IT AFFECT CONTRAC AND CONSULTANTS The pub\ic procurement Bi\\ was sent to the national asse : 2003/2004 and on May 31st, 2007 the two houses passed the bill and on Ju 2007 President Umaru Musa Yar'Adua signed it into law, 1st law t signed by the president in the assumption of office in 2007.

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ESSENTIAL OBJECTIVES OF THE ACT Establishment of National Council on public procurement and burea u · public procurement as the regulatory authorities responsible for t c

monitoring and oversight of public procurement, harmonizing the existing government policies and practices by regulating, setti ng Fu nd

standards and developing the legal framework and professio nal capacity for public procurement in Nigeria and for other related matters.

: ::: sion

CORE OBJECTIVES Regulatory functions to achieve the following: 1) Th.e issue of economy and efficiency in the used of nationa l resources. 2) Enshrined competition thereby - providing level playing ground for all strata of bidders. 3) Ensures value for money 4) Institute transparency in the award of government contact and projects. FINANCIAL (CONTROL AND MANAGEMENT) ACT 2007 , This act was introduced to provide for the control and management of the public finance of the federation.

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·ately hi ch

ESTABLISHMENT OF INDEPENDENT CORRUPT PRACTICES COMMISSION (ICPC) This is a Nigerian anti-corruption agency that was inaugurated on th e 29th of September 2000. It was to be known as the Corrupt Practices and Other Related Offences Act 2000.The mandate is to receive an investigate reports of corruption in the public sector, · especially

68

,

. bribery, gratification, graft, · abuse or misuse of office and in appropriate cases prosecute the offender(s). Also, to examine, review and enforce the correction of corruption prone system and procedures of public bodies with a view of to eliminating corruption in public life, and to educate and enl ightening and fostering public support for the fight against corruption. Thus, the ICPC law prosecuted a number of prominent Nigerians, some examples are GhaJi Umar Na'Abba, Former Speaker of the House of Representative (2002), Fabian Osuji, Head of Nigerian Federal Ministry of Education (2006), Cornelius Adebayo, Head of the Federal Ministry of Communication and Transportation (2007). However, in August 2009 the ICPC started investigations ~nto an alleged N90 billion frauds leveled against managers of pension fund for retirees in the health sector. In September 2009, the ICPC summon officials of the Ministry of Education linked with the alleged mismanagement of Ni billion meant for education reform programme. Therefore, all this budgetary reforms aimed at checking waste in management of government revenue and curtail excessive spending by the government officials .

ESTABLISHMENT OF ECONOMIC AND FINANCIAL CRIMES COMMISSION (EFCC) In 2003, the Economic and Financial Crimes Commission (EFCC) was also established as an anti-corruption law enforcement agency to investigate financial crimes such as advance fee fraud (commonly called 419 frauds) and money laundering. It also tracks illicit wealth accruing from abuse of office especially attempts to integrate such wealth into the financial system. Available records shows that the Economic and Financial Crime Commission (EFCC) recently has so fare recovered over Nl 71,045,670,248 from the eight banks whose management teams were sacked by the Central Bank of Nigeria (CBN). The breakdown of the figure shows that the commission was able to recover about NlOO billion from debtors of the first banks, while the CEOs of these banks were arrested, detained and later arraigned in court. The second phrase of the recoveries included five banks - Fin Bank Pie, Bank PHB, Unity Bank, Wema Bank Pie and Equatorial Trust Bank (ETB) Pie.

69

-=

and

in

: = =ormer ead of

According to Femi Babafemi (2009, the commission has been able to recover N59,230,000,000 billion from debtors of Intercontinental Bank Pie, N35,389,000,000 from debtors of Oceanic Bank Pie, N33,385,166,949.20 from Afribank debtors; and N30,422,906,448 .39 from Union Bank debtors respectively. Others are Fin Bank Pie, U0, 745, 170,462.34, Bank PHB, N.1 ,210,600,441,63 billion and Spring Bank Pie with 57,735,947.21. Thus, all these recoveries were made possible as a result of budgetary reforms put in place by the establishment of this act. PRIVATIZATION AND COMMERCIALIZATION OP PUBLIC

ENTERPRISES -:-= all eged - ;,...amme. · aste in = ='Jending

-==,...C) - '- was ::;ency to monly -- wealth !!.:-ate such - at the -2s so fare whose == ·a (CBN). ·.as able to - . - vhi le the - ~-r-aig ned in ;: :lanks - Fin : _a.-ori al Trust

Public enterprises are government business enterprises set up primarily to provide econom ic and social services to the general pub lic. Among the enterprises, however, there are those that produce main ly the core economic infrastructure called public utilities. Publ ic enterprises are of econom ic and s9cial significance. This because t hey have direct impact on the standard of living of the people and have a bearing on the internationa l competitiveness of the economy. In Nigeria, like most developing countries, the ownership and co ntrol of key public activities have virtually been the responsibility of t he government. By the end of 2002, a t otal of 88 parastatals had bee n fully privatized, CBN (2003) . PROSPECT / PROGRESS ES AND CHALLENGES MADE SO FAR ON BUDGETARY REFORMS I N NIGERIA From the foregoing, it is evident that budgetary reforms implemented in Nigeria government ministries, agencies, department, parast atals, institutions etc has made t he following progresses. These include: 1.

Transparency in the award of government contracts which allows the public to evaluate policy makers and thus hold them accountable which create openness .

2.

Accountability in the management of government reve nue, project planning, and implementation by government officials . 70

'\I

3.

Principle of due process mechanism in the procurement and execution of government projects.

4.

The creation of the Niger Delta Ministry to bring development, youth empowerment and create employment in the region resulting to post amnesty supplementary budget of about N358 billion been proposed by the present administration to bring developmental needs of the oil rich Niger Delta region.

5.

The issue of shore up governance and institutional strengthening and accelerated privatization and liberalization.

6.

All projects must undergo cost-benefit analyses study with respect to technical feasibility, cost effectiveness 'and economic viability. This encourage prudent public expenditure and public service reforms

7.

i

The issue of striving to minimize corruption.

8.

The issue of achieving macroeconomic stability and double digit Gross Domestic Product (GDP growth rate.

9.

The law also provides for open tendering and competitive bidding by contractors for all government contractors., The procedure for the selection of contractors will make it impossible for political parties to distribute contract patronage to unqualified partly members, who in the past collected huge mobilization fees and vanished without trace.

10.

It also ensures the rating of projects to be implemented in the descending order of priorities. The highly rated projects which will guarantee greater benefit to the populace come first in the funding. The projects are then implemented in the descending order to priorities until funds are exhausted.

,71

=.....,ent and

In line with the above progresses made so far, it is also glaring to note that the budgetary reforms implemented in Nigeria government have also had some daunting challenges. These include: 1.

opment, - e region ut N358 o bring

2. 3. 4.

_ gthening

5.

dy with - ... economic : a d public

6.

2

:h

The increasing rate of poverty. The growing rate of inequality and income redistribution. The increasing graduate unemployment rate in the country The escalating youth unrest in the oil rich Niger Delta region resulting to decrease in the Nigeria's production (output) quota of crude oil in the international market. The continuous dwindling price of crude oil in the international market as a result of the global financial meltdown been experienced all over the globe. The issue of militants amnesty resulting to post amnesty challenges in the oil rich Niger Delta region.

1-erspt:t."'t°wt:S t>\ 'GtwemrrreTit 'inn~gf!ts According to Ariyo (2000) in Adeyemi and Arowomole (2004 ), in theory, the principal - agent principle governs the relationship between government and the governed. Consequently, budgeting process under democracy should satisfy the ·conditions of broad based real participation and consultation, transparency, and accountability, if the government must truly act as the honest agent of the people. Oisiyemi (2005) opined that budgets are monetized expressions of targets to be accomplished in a given year by an individual, organization or nation. It is a deliberate attempt to achieve superior targets over time with available and expected resources. Such targets are influenced by the experiences of the past and expectations of the future. Agusto (2005), also said budgeting could be de'scribed as the annual statement of income and expenditure at the National, State and Local Government Levels. He further noted that budget serves or should serve three man purposes as follows: (i) As a tool for accountability and control of government finances ; (ii) As a tool for planning and management; and (iii) As a tool for economic policy descriptions.

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ble digit

--=""'ted in the :-,_, ~ects which - 2 !irst in the 2 escending

72

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Similarly, Omolehinwa (2001) opined that budget in government is the statement of expenditure preferences of government expressed in monetary terms and subject to the constraints imposed by the environment, including how the available resources may be utilized to achieve whatever the dominant individuals within the political leadership agree to government priorities. In the same vein, Adelowotan (2003) said in a growing economy like that of Nigeria, budget is being used as a dynamic instrument to accomplish a number of objectives. These include: (i) To raise revenue for the government; (ii) To achieve overall macroeconomic stability; (iii) To control inflation: this can be done through surplus budget; (iv) To ensure prudent management of internal and external debts; (v) To bail out an economy from depression is deficit budget; (vi) To reduce inequality in income distribution; (vii) To correct disequilibrium in the balance of payment; viii) To reduce the level of unemployment; (ix) To ensure efficient utilization of resources (x) To plan the economy by encouraging or Discouraging activity in the relevant sectors of the economy. Anyanwu (1997) described budget as the financial statement of the government's proposed expenditure and expected revenue during a particular period of t ime usually a year. Such budgets are usual ly employed to attain the objectives of full employment in the economy, price stability, rising growth in national output, balance of payments equilibrium, and equity in income distribution. He further argued that the budget is not only an instrument of economic and social policy but also as a planning tool, instrument for coordir:iation, and instrument for communication.

The 2008 Federal Budget The 2008 Appropriation Act authorized aggregate expenditure of N2. 745 trillion representing a 31.6°/o increase on expenditure budgeted in 2007. This is made up of Statutory Transfers of N 162.6 billion, Debt Service payments of N 372.2 billion, and MDA expenditure

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igeria, u mber

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of N2.2 trillion. MDA expenditure grew from Nl.8 trillion in the 2007 Appropriation to N2.2 trillion in the 2008 Appropriation due to the fact that recurrent expenditure increase from Nl.26 trillion actual spending in 2007 to Nl.35 trillion in 2008, representing a 7.2% increase. The increment was due to full implementation of the consolidated salary structure in the Federal Public Service. The Capital Expenditure amounted to N860.4 billion which includes N110.0 billion allocated in 2008 specifically towards expenditure on achieving the Millennium Development Goals (MDGS). Correspondingly, the Debt Service payment rose from N326.0 billion in 2007 to the N372.2 billon appropriated in the 2008 Budget. This was due mainly to the increase in Domestic Debt Service payment from N265 billion in 2007 to N30 6 in 2008.

---· = =-1 The 2009 Budget Framework

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economy, :: "Jay ments - :::"" ed that ooli cy but ent for

Based on the Medium-Term Revenue and Expenditure estimates detailed in the 2009 Fiscal Strategy Paper, the ~aggregate expenditure level for 2009 is projected to be N2.676 trillion, This will be made up of Statutory Transfer of N164.3 billion, Debt Se.~ice of N436.2 billion , spending of N2.07 trillion, including the Multi- Year Tariff and MDA, $¢~'1 Order (fll'ITO) of N60 billion. This represents a decline of 2.6% i Aggregate Expenditure, and a decline of 6.2°/o in MDA allocatio relative to 2008. This is due to two factors (I) the total availab le resource base is smaller as a result of the fact that oil production used for the 2009 Budget is at a more realistic level of 2.3 Mb/d vs. 2. 4 5 Mb/d used in the 2008 Budget but actual output in the first half of 2008 ~s just 2.02 Mb/d, followi,ng continued disruption to productio n; (ii) the oil price has been declining in recent months-from a peak o ~ about SlSO/b in June to 5112/b in August.

=. :Jen diture

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e

162.6 enditure

74

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Revenue Expenditure Statutory transfer Debt service Recurrent (Non debts Capital . Total Expenditure Year on year growth Surplus/deficit

2008

2009

N Billion 2,592.5

N Billion 1,984.0

162.6 372.2 1352.9 860.3 2,748.0 -0.5°/o (155.5)

164.3 436.2 1,523.9 552.2 2,676.6 -2.6°/o (692.6)

- 18528.0

20286.0

GDP

-2.1 O/o ;..2.5°/o Deficit. GDP ratio Sources: Federal Government of Nigeria 2009 Budget Call Circular. The Statutory Transfer of N 164.3 billion are made up of N89. 7 billion to the National Judicial Council (NJC), N34. 9 billion to .the Niger Delta Development Commission (NNDC) and N39. 7 billion for Universal Basic Education Commission (UBEC).

2008

2009

N Billions

N Billions

National judicial council

78.0

89.7

Niger Delta Development

40.6

34.9

Universal Basic Education

44.0

39.7

Total

162.6

164.3

Statutory Transfers

Source. Federal Government of Nigeria 2009 Budget Call Circular.

75

The N436.2 billion in respect of Debt Service is made up of N387 .8 billion for Domestic Debt (as against N306 billion in 2008) and N48.4 billion in respect of foreign debts (as against N66 billion in 2008 ) . The increase in the amount provided for domestic debt service reflects t e increase in the domestic debt stock in 2006-2008 as c. contingent liabilities of government were crystallized. The decrea-e- the amount provided for foreign debt service reflects, in -z-

-=

payments made on commercial debt linked to high oil warrants).

Table 3: Debt Service

I I

1200s

12008 2009

~~b\. S~N\~~ "~\\\\()l\ "

~\\\\ons " ~\\\\ons

Domestic Foreign

306.2 66 .0

387 .8 48.4

Total

372.2

436.2

Source: Federa} Government Circular.

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iger Delta

· ersa 1 Basic

s

Table 4: Capital Allocation including MDG =N=bns MDA Presidency 3.8 Office of SGF 5.6 Youth Development 2.6 Women Affairs 0.8 Agriculture and Water 70.9 Resources Auditor General 0.5 ICPC 1.0 Defence/MOD 27.7 Education 13.8 FCT 30.6 Foreign Affairs 4.9 Finance 2.5 Health 12.0

Funds in the 2009 =N-bns =N=bns

0.5 10.0

10.0

3.8 5.6 3.1 0.8 80.9 0.5 1.0 27.7 23.8 30.6 4.9

2.5 22.5

34.S

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Commerce & Industry Information comm .. Interior Head of Service Justice Labour & productivity Science & Tech. Transportation Energy Mines & Steel dev. Nat. Salaries & Wages Comm. Environ. & Housing Tourism, culture & national orientation National planning commission National sport Office of National security adviser Total executive Total federal executive bod ies Total national assembly Capital supplementation Total capital expenditure Supplementary of Niger Delta Source: Federal Government of

2.8 1.4 2S.6 1.3

2.8 1.4 2S.6 1.3

1.0

1.0

0.7

0.7

6..4

6.4

114.2 92.3 1.1 0.1 4.3 4.2

114.2 110.3 1.1 0 .1 4.3 4.2

18.0

1.0 0.8 0.6

1.0 0.8 0.6

434.S 3.3 7.0 71.7 Sl6.S

61.0

61.0

49S.S 3.3 7.0 71.7 S77.S

so

-

so

Nigeria 2009 Budget Call Circular

THE GOVERNMENT BUDGET It is important to know that of all institutions in an economy, the one least subject to budget constraints is the Federal Government. The Federal government can raise its needed funds in a variety of ways. It can through a vote in the senate raise taxes and sell bonds. In order to cover a deficit, it can also print money. The Federal Government unlike the State and Local Governments which can sell bonds and raise certain type of taxes has more functions than either businesses or households in determining a budget. When we talk of Government 77

Finance, we attempt to analyze trends in government fiscal operations • within a given period. Specifically, we analyse the sources of government revenues and expenditures respectively. How does the government spend its realized revenues? We shall provide an answer to this question in a later chapter if the text.

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order := ern ment -sand raise _:·1esses or ern ment

A budget is defined as a financial plan which usually contains a detailed estimate of expenditures, revenues and surpluses or deficits for the present succeeding fiscal year. The budget is not just an accounting statement of proposed expenditures and estimated revenues. It also contains conscious. Government efforts which aim at keeping the economy always on course. To this effect, budgetary policy is fiscal policy directed documents. We can also refer to the government budget as an important instrument of national economic management. Apart from being the legal authority for public spending, it also serves as the meeting point of most other policy instruments and operational expression. Specifically, the budget provides the framework for implementing the . short-term components of the medium term national development programmes. In addition, it " provides not only the policy framework for economic activities for a fiscal year, but also highlights th~ resources profile and investment programmes of the government, Gbosi (2002). Generally, there are three major categories of the budget. They are balanced budget, surplus budget and deficit budget. As a matter of fact, the budget therefore, has to be analysed from the accounting perspective. Hence, the budget is one in which the expected revenue receipts are equal to the estimated expenditures, within a given period. An example is given below to highlight the point. Let us assume that in fiscal year 2000, the realized revenue was N900 billion and total expenditure was N900 billion. When this situation occurs, we can say we have a balanced budget. A surplus budget is one in which expected revenue receipts exceed estimated expenditures. As earlier mentioned, in fiscal year 2000, total revenue receipts was equal projected expenditures. But if in that same year, the government spent a total of N850 billion, a deficit has occurred in the budget. This is found by subtracting N850 billion from N900 billion (N900 - N850 78

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billion = 50 billion). On the other hand, a deficit budget is one in which revenue receipts fall short of projected expenditure, lyoha, Oyefusi, and Oriakhi, (1998). If in that same year 200, the government spent N980 billion but of the total revenue receipts of N900 billion, we then have a budget deficit in government budget in Nigeria. To this effect, there is always the need to see that the difference between expenditures and revenues must be bridged, CBN (2000). CONCLUSION AND RECOMMENDATIONS Budgets are monetized suspension of target to be accomplished in a given year by an individual, organization, nation or continent. It is a deliberate attempt to achieve superior target over time with available and expected resources. But as a result of the budgetary reforms implemented in Nigeria from 1999 - till date, the broad goal is expanding the economics productive base, stimulate agricultural production, solid minerals and boost the external value of the naria and above all the attainment of vision 20:2020 of Nigeria and the Africa's (Vision 20:20) Millennium Development Goals (MDG's). The Minister of Finance in Nigeria put it this way: There is no doubt that, we are going to a significant global slow down in the economy all over the world. When the budget was being put together, the lowest crude oil price at the international market was $85 per barrel and people thought we were ultra conservative by using $45 per barrel as a bench mark but January when the price q~me down to $40 per barrel everybody said that we should have pegged it at $30 per barrel.. All the countries ·that we actually look at like Russia, Indonesia, etc actually, used far higher rate than · Nigeria used for its budget in 2009. The truth is that with the way budget is structured and the budgetary reforms put in place, we have said it many times that even if crude oil prices comes to $30 per barrel, ordinarily the way we have worked it out, it should not affect budget implementation. But in terms of exchange rates, interest rates, inflation rate, crude oil price, capital market foreign inflows or foreign reserves etc. there are downside risk to the budget."

In the view of tne above, scenar10, gwen 't'n~ 1-at.'t t)1 t~1wti\\l'l~ \~"i~\~l'l earnings, with budgetary reforms in Nigeria properly implemented, we 79

Oyefusi, -e t spent e t hen -- ·s effect, - oetween ?.,

refo rms _=.: goal is -==:... ·cultural := : e naria and the

: -=

- ·.est crude 2 d people 2s a bench : :)er barrel :.- arrel.- All esia, etc --:::-::>.'" in 2009. -= udgetary :- · ~ crude oil e worked it . -.., t erms of ·ce, capital nside risk

have to apply certain financial stringencies, we need to discourag e waste and put in place effective cost cutting measures. We also need to revisit the imperatives of economic, industrial competences and budgetary reforms agenda. To achieve this, we have to deepen t he with coordinated strategy anchored on structural reforms transformation. The government should as a matter of urgency reduce the dependence on crude oil and pay more attention on agriculture, tourism, mining, solid minerals etc. that is diversification of the economy. Also, the budget should be based on targets that can be achieved with time frame, the International Monetary Fund (IMF) said in responding to the international financial meltdown, nation should strive to maintain stability and consolidate their hard worn gains while being mindful of general development goals, countrie~ should also seize the opportunity to advance their structural reform agenda in order to boast prospects for growth. We recommend that the government should create a relatively stable economic and political environment that will help attract foreign investors, budgetary, economic . political, social and institutional reforms, the monetary authorities and other supervising authorities should ensure that the activities of institutions, ministries, commission, agencies, paratatals, departments etc are closely monitored and supervised on a regular basis as a way of promoting reforms so as to achieve the Nigeria's sustainable development agenda.

- : ing foreign e ented, we

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REFERENCES Adelowotan, M.O. (2008) An Appraisal · of the Nigerian Federal Government Budgets for year 2000-2005. Nigerian A~countant. Vol. 41, No. 1 20-2 1. · Adeyeni, S.B. and Aromowole, S.S.A. (2004) Federal Budget Performance in Nigeria: A critical Review of 2001 and 2002. Nigerian Accountant. Vol. 37, No. 1 24 -36. Agusto, O.M.(2005) The New Budgeting System as a Strategy for Empowerment and Development iii Nigeria. Nigerian Accountant. Vol. 38 No. 1 Akani, H.W., Uzobor, C.C. and Anyamaobi C. (2009) Global Economic Meltdown, Causes and Consequences on the Nigerian Economy: A Holistic Approach the university advanced research journal Awka. Akani, H.W., Uzobor, C.C. and Macjume J.V (2009) Fiscal Transparency and Accountability: Panaces to Global financial Crisis in Nigeria, International Research and development institute conference on Research and Sustainable Development in Africa, Enugu Vol 4 No.2, Anyanwu, J.C. (1997) "An Analysis of the 1996 Budget and the Highlights of the 1997 Budget", NCEMA Policy Analysis series. Vol. 3, Nol., 1 -16. Bajorno, F.K. (2003): 2002 Federal Government Budget: Promoting Transparency in Public Governance. Nigerian Accountant Vol. 36, No. 3 25- 26. CBN

(2003): Nnanna, O.J. et al (eds.), Fiscal Federalism and Macroeconomic Governance; in Contemporary Economic Policy Issues in Nigeria Abuja: CBN.

CBN (2007), "Emerging Financial Market: Issues and Challenges", CBN Abuja CBN (2007). Capital Market Dynamics in Nigeria Structure, Transaction Cost and Efficiency, 1980-2006. Abuja: CBN.

CBN (2008) "A Blue Print fo r the Nigerian Financial System Strateg y for 2020", CBN , Abuja - =::::cieral - __ - ant.

CBN (2008). A Blue-Print for the Nigerian Financial System Strategy for 2020. Abuja: CBN.

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Central Bank of Nigeria (2009). Contemporary Economy Policy issues in Nigeria. Abuja: CBN. Daily Trust Newspaper 20th December, 2008

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Daily Trust Newspaper 26th December, 2008 EFCC (2008): "Transparency and Accountability in the Public Service" Abuja

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Enuice Sampson (2008), Global E~onomic Outlook for 2008 and fea rs of U.D. Recession. Zenith Economic Quarterly, Vol. 3 No. 1. Gbosi, A.N (2008). Modem Public Finance and Fiscal Policy. Port Harcourt: Harley Publications Lt d.

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Gbosi, A.N (2009). Economics for all Professionals, Port Harcourt: Harley Publication Ltd .

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http:/ /www,efieniger. org http://www.allafrica.com http:/ /www.ecno.gov .ng http://www. icpc. org. http: I I www.nigeria.org http: www. afdevi nfo. com http :www.en.wikipedia .org http: www.thenationonlineng.com

~ ges", CBN

ICPC (2000) "Nigeria Independence Corrupt Practices and othe r Related offences Commission" - a Brief Overview. Abuja . _ . .,. . ransaction International Monetary Washington, D.C.

Fund (2008). of 2008.

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Okwuosah, U. (2009) "Challenge of Meeting Ghana 's 2009 Budget Target, March 18", Business Day. March 18. Olasis, A and Ojeme, S. (2009) Threat to 2009 budget rises as crude below $35. January 16. The Punch. January 16. oil falls Osiyemi, LM. (2005) Budgeting & Financial Reporting for Efficient Economic Management in . the Public Sector Nigerian Accountant Vol. 38 Nol. 4246. Thisday Newspaper 11th September, 2008.