IMPACT OF BUDGET REFORMS ON BUDGET IMPLEMENTATION IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

According to Abdullahi (2007), a government budget is a political and administrative instruments by which the executive and legislative bodies endeavour to allocate scarce resources among the various organs of government either at state levels or federal level. It is basically a tool for selecting a particular mix of public and private goods and services. In the public sector, budget performs the same allocative functions that the price mechanism performs in the private sector (Abdullahi, 2011).

The budgetary reforms objectives of the federal government of Nigeria adopted in 1999 was aimed at reducing the excessive share of the budget being allocated to the public service by way of personnel and overhead costs (estimated at over 60%), reducing the cost of governance in general, improving resource management by curtailing wasteful expenditure and increasing the level of productivity and efficiency through budget discipline. Paradoxically, the government expenditure has lost its objective as it becomes more concerned with recurrent expenditure and less concerned with capital expenditure (Ige, 2004). The habits of contractors making remobilization claims before reviving abandoned projects also contributed to high cost of governance and poor budget implementation in Nigeria. The result of this, was that large sums of money were released and the economy overheated with cheap money resulting in lack of any real progress in project implementation (Nzewi, 2011). In terms of ensuring good budget implementation in Nigeria, public officers in Ministries and extra ministerial departments are yet to imbibe the culture of incurring expenditures only for essential purposes, in order to control costs. Public officers instead see government resources (money) as a “national cake” (Abubarkar, 1999). Budget failure is not new in Nigeria and it cannot be blamed on the global economic crisis experienced in 2008-2009. The reason June be that the executives both at the federal and state levels have often diverted public funds into their personal foreign and local banks accounts.

A budget is also a tool for management direction and control of the work which an agency or department plans to do. A budget has four characteristics; equilibrium, comprehensive, unity, periodicity (Abdullahi, 2011). In Nigeria, budget implementation has been a major issue of concern. Issue of poor implementation has constrained achievement of most spelt-out development goals and objectives. This are manifested in many abandoned development projects. Poor implementation has also made execution a weak link in the budget process.

According to Abogun & Fagbemi (2011), challenges to the full implementation of the annual Federal Government Budget has been of major concern to the Federal Government in recent years. This necessitated the Government implementing several policies aimed at improving on its revenue generation and collection, and spending effectiveness and efficiencies. In this regard, the Government through the Federal Ministry of Finance/Budget Office of the Federation has been engaging key stakeholders to workout optimal budget implementation strategies. These included engagements through Workshops (including “Strengthening budget implementation for enhanced project execution & service delivery”; and “Enhancing Internally Generated Revenue (IGR) generation, collection & remittance system in the federal public service”.

Budget reforms involve making changes to the ways and manner in which the budget is formulated, implemented and evaluated for the purpose of facilitating effectiveness, efficiency and economy (World Bank, 2011). It is about restructuring the process and/or management of a nation’s budgeting system in order to improve its feasibility as a fiscal policy vehicle. By implication, therefore, budget reforms must have direct impact on the level of implementation, otherwise it would be unnecessary.

1.2   STATEMENT OF THE PROBLEM

The main objective of this study is to analyze the impact of budget reforms on budget implementation in Nigeria.

The budget process in Nigeria before 2005 had been facing numerous challenges and had come under different reforms from one government to another. The main challenges have been lack  of political will and commitment to abide by stipulated rules and budget guidelines; inability to develop a macro-economic framework for budget formulation and ambiguities in the roles of various agencies involved in the formulation and monitoring of budgets; periodic changing of budget line items classifications, which inhibited the formulation and monitoring of the budget. This has continued to affect budget implementation. All these has made it necessary to determine the influence of the reforms on implementation which is being focused upon in this study.