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PROJECT TOPIC AND MATERIAL ON AN APPRAISAL OF THE 2016 NIGERIAN BUDGET
The Project File Details
- Name: An Appraisal Of The 2016 Nigerian Budget
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Background of the Study
A budget is a quantitative expression of a plan for a defined period of time. It may include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows. It expresses strategic plans of business units, organizations, activities or events in measurable terms.
Government budget is a government document presenting the government’s proposed revenues and spending for a financial year that is often passed by the legislature, approved by the chief executive or president and presented by the Finance Minister to the nation. The budget is also known as the Annual Financial Statement of the country. This document estimates the anticipated government revenues and government expenditures for the ensuing (current) financial year. For example, only certain types of revenue may be imposed and collected. Property tax is frequently the basis for municipal and county revenues, while sales taxand/or income tax are the basis for state revenues, and income tax and corporate tax are the basis for national revenues.
The practice of presenting budgets and fiscal policy to parliament was initiated by Sir Robert Walpole in his position asChancellor of the Exchequer, in an attempt to restore the confidence of the public after the chaos unleashed by the collapse of the South Sea Bubble in 1720.
Thirteen years later, Walpole announced his fiscal plans to bring in an excise tax on the consumption of a variety of goods, such as wine and tobacco, and to lessen the taxation burden on the landed gentry. This provoked a wave of public outrage, including fierce denunciations from the Whig peer William Pulteney, who wrote a pamphlet entitled The budget opened, Or an answer to a pamphlet. Concerning the duties on wine and tobacco – the first time the word ‘budget’ was used in connection with the government’s fiscal policies. The scheme was eventually rescinded.
Budgeting process is the continuum of budget preparation, approval,execution, reporting, Audit and review (Jouhson, 1979). This process revolvesround the executive and legislative structures in a democratic system.In a capitalist economy like Nigeria, government plays an essentialcompensatory function; that is, it performs those functions that the marketeconomy does not do efficiently or lacks the incentive to do at all.
Thesefunctions have been classified as allocation, distribution and stability(Musgrave and Musgrave, 1979). In a federal system, federal, state, and locallevels of government perform these functions in varying degrees. TheFederal government is more heavily engaged in economic stabilization andredistribution functions than are state and local governments, and controlslarger budgetary allocations.One of the main functions of government is to collect various forms of revenue and to utilize these revenues to provide social services to thepeople in an efficient manner as possible. In order to achieve this, then government annual budget, which has become one single most importantand pervasive instrument for resource allocation, management and controlcomes in.Governmental budgets provide the legal authority for taxing citizensand spending public monies (Brooks, 1992:40). Federal budgets, from ageneral point of view are a tool of economic planning, making reasonableestimates and projections based on prevailing socio-economic indicators(Johnson, 1996:37). Broadly, the purposes and associated features of thepublic sector budget may be considered in terms of three aspects: As a toolof accountability, as a tool of management, and as a tool of economic policy.Budgeting as an instrument of economic policy has more variedfunctions(Anyafo, 1996:177).
Firstly, in policy terms, it indicated thedirection of the economy and expresses intentions regarding the utilizationof the nation’s resources. In operational terms, it leads to the determinationof growth and investment goals. Secondly, the budget is concerned withmacro-economic balance in the economy. The policy choices in this regardinclude specification of the amount of growth that is compatible with factorssuch as employment and price stability.
Appropriation Acts are enacted annually for the purpose, not only forregulating financial and accounting matters, but principally to provide for theissue from the Consolidated Revenue Fund such sums of money asconsidered justifiable for the recurrent expenditure including contribution tothe Development Fund for capital projects for the service of the federation.Section 81(2) and 120(2) of the constitution authorizes the President of theFederation and Governor of a State to make Withdrawals from theconsolidated Revenue Fund of the Federation and States, respectively, of theSum necessary to meet that expenditure and the appropriation of thosesums for the purpose specified therein.In Nigeria, the 1999 constitution (section 80 subsection 1-4) is expliciton the unlimited authority of the National Assembly to determine thecontents of the budget, and section 81(1) authorizes that “the president shallcause to be prepared and laid before each House of the National Assembly atany time in each year estimates of the revenues and expenditures of theFederation for the next following financial year.” It is clear that it is thepresident that initiates the annual budgets, which goes through the NationalAssembly appropriation processes. Accordingly the only restriction mustapply to the budget process, is that the budget must be finance-able. The basis of government budgets has been questioned in recent times.With respect to the mandatory use of cash basis of accounting as prescribedby the Finance (Control and Management) Act 1958, Chan (1992:1) agreesthat a strong and enduring relationship exists between governmentalaccounting and budgeting. Thus, submitting that the accrual basis of accounting, which takes into account the long-term consequences of currentbudgetary decisions, should be adopted in the short-term in formulatingannual budgets. The wide acceptance of this view would have a profoundimpact on government budgets and budgetary processes. Under this view,accounting will still follow this period’s budget; but accounting will also leadthe budget of the next period. However, the National Council onGovernmental Accounting (NCGA, 1979:11) opines that while the accrualbasis is the superior method of accounting for the economic resources of anyorganization, it agrees that the cash basis accounting is adjudged useful forshort-term fiscal control. Accordingly, the NCGA recommends use of theaccrual basis to the fullest extent practicable in the governmentenvironment. The most difficult challenge that the federal government and stategovernments are facing in budgeting is the challenge of budgeting in adeclining economy; with dependence on crude oil as major revenue base. The challenge, therefore, is to reverse this trend of budgeting process and togrow the economy, as Alan Schiok said in his book ‘The Federal Budget:Politics, Policy, and Process’(Udoma, 2002:16): “Every budget is a hostage toeconomic performance, congress and the president cannot balance thebudget when national output is declining and unemployment is soaring”. Oneof the most important tools to drive the economy and reverse this declining rend is the budget mechanism. How we allocate our resource today willdetermine what our tomorrow will look like.
Anyafo (1996:244) reported that Chairman Mao Tse-tung (1893-1976)declared to the Chinese “thrift should be the guiding principle in ourgovernment expenditure”.Anyafo (1996:245) posits that the principle of strict budget discipline is a nationally acclaimed principle of publicexpenditure, which stipulates that all levels of government should confinethemselves to the limit of expenditure in the approved estimate orsupplementary estimate. This principle advocates for a balanced budget asan important cornerstone of budget discipline. It requires that aggregateexpenditure should be equal or preferably less than prudently determinedaggregate revenue.
Statement of the Problem
There are serious problems in the Nigerian budgeting process and this is indicated by the magnitude of budget variances recorded over the years. There are observed problems of bribe-for-budget syndrome, budget passage delays, oils windfall crisis, disagreement on oil price benchmark for budgeting between executive and the legislature, lack of definite economic objectives and commitment to delivering the objectives, non-alignment of economic objectives with budgetary allocation of economic objectives with budgetary allocations and series of cases of non-implementation of appropriation Acts and supplementary appropriation Acts. These observations above have several implications. A foremost implication is that the existing budgeting process has not been effective in promoting the desired culture of budget discipline, balanced budget, quantity and/or quality budgeting for national economic development.
1.3 Objectives of the Study
1. To ascertain whether there is an improvement of the 2016 Nigerian budget from the previous years’ budget.
2. To know if 2016 budget have any significant impact on the Nigerian populace.
1.4 Research Questions
1. Is there an improvement of the 2016 Nigerian budget from the previous years’ budget?
2. Will 2016 budget have any significant impact on the Nigerian populace?
1.5 Research Hypotheses
Ho: The 2016 Nigerian budget has not improved from the previous year’s budget.
Hi:The 2016 Nigerian budget has not improved from the previous years’ budget.
Ho: There is no significant effect of 2016 budget on the Nigerian populace.
Hi: There is significant effect of 2016 budget on the Nigerian populace.
1.6 Significance of the Study
Budget helps to aid the planning of actual operations by forcing managers to consider how the conditions might change and what steps should be taken now and by encouraging managers to consider problems before they arise. It also helps co-ordinate the activities of the organization by compelling managers to examine relationships between their own operation and those of other departments. Other essentials of budget include:
- To control resources.
- To communicate plans to various responsibility center managers.
- To motivate managers to strive to achieve budget goals.
- To evaluate the performance of managers.
- To provide visibility into the company’s performance.
- For accountability.
1.7 Scope of the Study
The study focuses on the analysis of the 2016 Nigerian budget and its implications on the Nigerian populace.
1.8 Limitations of the Study
This study has some limitations most especially in the area of data collection. Financial constraints as well as time available for the completion of the study are among other factors that would limit the scope of the study.
1.9 Definition of Terms
Budget:An estimate of income and expenditure for a set period of time.
Revenue:The income of a government from taxation, excise duties, customs, or other sources, appropriated to the payment of the public expenses.
Expenditure:Payment of cash or cash-equivalent for goods or services, or a charge against available funds in settlement of an obligation.
Anyafo, A.M.O (1994), Public Sector Accounting, UNEC Publications, Enugu-Nigeria.
Central Bank of Nigeria (2002), Central Bank of Nigerian Statistical Bulletin, December, Vol. 13, Abuja.
Fiess, N. (2002), “Chile’s New Fiscal Rule.” World Bank Washington, D.C.
Lawal, M.S. (2004), “Missing Point in Budget 2004:. The Market: A monthly Business and Economy Magazine Vol. 1 No. 1, February edition, Cavelet Publications Ltd, Kaduna, P.40.