Anda di halaman 1dari 13


Temitope A. Osanyintuyi

Learning Objectives
(a) define budgeting and explain its links to the development process;
(b) outline the budget process in Nigeria and discuss its shortcomings;
(c) relate elements of recent budget reforms in Nigeria; and
(d) articulate the need for greater inclusiveness in budgeting

Budgeting could be viewed as the chain of activities and processes through the
gamut of identifying expenditure needs, and mobilization and allocation of
resources to meet the needs. It also covers the monitoring and control of
expenditure. In this regard, budgeting serves directly as a tool of development
policy since it is the means through which governments allocate resources to
provide the goods and services – health, education, infrastructure, security etc
needed to improve the well-being of people.
Budgeting can also be conceived of as the process of formulating and
implementing a budget, which in its simplest conception, refers to a statement
of intended expenditure and its sources of finance over a definite period. In
this regard, Olaloku (1994) states that government budgeting is essentially an
exercise in the planning of government revenues and expenditure. To put this
definition of budgeting in proper context however, it is important to note that
a budget represents a statement of both the resources to be made available to
the budgeting entity and the priorities of those who manage it. This implies
that budgeting goes beyond ‘mere’ revenue and expenditure projections and
relate to the plans, goals and objectives of the budgeting entity, and how
these are to be achieved. Seen in this broader context, government budgeting
represents an important aspect of economic management, and the budget can
be regarded as a tool of government policy. In its capacity as a policy tool, the
ultimate goal of budgeting is to improve the lives of the people.
The stated objectives of government budgets in Nigeria have in some way or
other, always reflected the nation’s development challenges and aspirations.
Consequently, annual budgets have been given names such as “Budget of
Reconstruction and Development”. For the most part, however, it is felt that
budgeting in Nigeria has not successfully served as an effective tool of
development policy in terms of actualizing stated policy goals. Several factors
related to the budgeting process have been responsible for this. This paper
therefore examines the budgeting process in Nigeria and highlights recent
reforms in the budget process. In doing this, it identifies perceived
shortcomings in the budget process and examines the role of greater
participation in the budget process.

The Traditional Budget Process in Nigeria

The budget process in Nigeria has traditionally followed a series of steps as
outlined below:
a. Determination of the financial resources available in the next fiscal year
(FMF, NPC, CBN, FEC) to take final decision on total expenditure and
sectoral ceilings. The four institutions should review economic
conditions and make forecasts.
b. Determination of level of government expenditure (FMF and NPC).
c. Setting general priorities among and within various sectors to be done by
the NPC.
d. Preparation of proposals for the capital budget and rolling plan if any to
be done by the operating ministries and agencies within the limit set and
pass same to the NPC. This stage starts with the issuance of the budget
call circular by the FMF
e. Review of financial estimates of the projects for inclusion in the budget
to be done by the Budget Office of FMF. Collaboration between the FMF
and NPC required to harmonise position.
f. Scrutiny of the financial estimates of budget proposals, especially of
approved capital budget proposals to be done by the Budget Office
g. Budget Hearing/Defence – Ministries, Budget Office and NPC
h. Draft Final Budget: Putting together the reviewed estimates in final
form to be done by the Budget Office (FMF).
i. Consideration of the final budget by the FEC – FMF, NPC.
j. Authorisation of the budget – NASS, FMF, NPC and ministries and
k. Budget Execution – Executive arm of the government, with specific
reference to Due Process Compliance.
l. Budget Monitoring and Evaluation/Audit

The traditional budget process in Nigeria suffered from several shortcomings.

These include:
Lack of plan budget link and coordination: a budget is a financial plan, and
government budgets at all levels should ideally derive from, and be linked to
larger development plans at those levels. Though Nigeria started development
planning from 1962, utilizing five-year development plans from 1970 – 1985 and
3-year rolling plans from 1990 to 1999, the linkage of developments plans to
annual budgets has never been attained (Ubani and Akiode-Afolabi, 2005)
Poor Fiscal Management: For the most part, fiscal management in Nigeria was
characterized by a lack of fiscal discipline. Public spending was pro-cyclical
(following a boom-bust cycle), while fiscal deficits predominated. High levels
of extra-budgetary expenditure, particularly between 1991 and 1993, resulted
in actual expenditure levels that bore no semblance to the budget
Weak Monitoring and Evaluation: The monitoring and evaluation/audit aspects
of the budget cycle have not been given the required prominence and
attention. In practice, budgeting was operated as if it ended with the
authorization stage. This has resulted in poor budget implementation and given
room for widespread corruption in budget implementation.
Input Focus: The budgeting approach in Nigeria was line-item based and
possibly incremental. The focus has thus been on inputs in terms of amounts
spent rather than on outputs, outcomes and impacts.
Non-Participatory Nature of the Budget Process: It has been noted that the
budgeting process in Nigeria is still non-participatory. According to UNIFEM
“The budget process in Nigeria is non-participatory. It is mainly a
government exercise. It focuses on government rather than
national programmes. Budget democracy is still a strange concept
to policy makers. Legislators at all tiers are yet to cultivate the
habit of cultivating the needs and preferences of their
constituencies as a guide to their approval and oversight functions
over the fiscal operations of government. Planning and budgeting
processes are yet to become broad based activities in Nigeria. The
civil society has been involuntarily incapacitated from engaging
effectively in national budgeting processes effectively for reasons
which include lack of relevant information and knowledge of
budgetary processes.”

Though civil society, the organised private sector and the media have some
opportunities to attend budget readings and hearings during the legislative
phase, there is currently no real scope or time for these role-players to make
substantial contributions to the budget debate within the Legislatures.
Poor access to and quality of budget information further also undermines the
ability of civil society and the media to research, monitor and comment on
government budgeting.

Recent Reforms in the Budget Process

Since 2005, the budget process has witnessed some changes meant to correct
observed lapses. In particular, budgeting has been dome within a medium term
(3-year) perspective in Nigeria. The use of a Medium Term Expenditure
Framework (MTEF) helps to improve consistency in budgeting as well as
enhances plan-budget coordination. Budget reforms have also witnessed the
introduction of an oil price based fiscal rule, whereby revenues projections are
based on a benchmark rice for crude oil and any excess revenue arising from
higher-than-benchmark prices are saved in an Excess Crude Account. In
addition, there is also a fiscal rule that limits the budget deficit to no more
than 3 percent of GDP. This is primarily to ensure that budget deficits are
sustainable and that government spending does not result in inflation

Budget Process under MTEF

The budget process under the MTEF follows a sequence of steps as follows:
1. Preparation of Medium Term Revenue Framework: The first step is the
estimation of expected revenues over the medium term. This is done by
the Budget Office in consultation with relevant agencies of government.
2. Preparation of Medium Term Expenditure Framework (MTEF): This
involves determining the maximum amount to be spent (Aggregate
Expenditure Limit) over the medium term and how it is to be allocated
among major expenditure heads (statutory transfers, debt service and
spending by Ministries, Departments and Agencies (MDAs)).
3. Stakeholder Consultation: The Medium Term Revenue and Expenditure
Frameworks are presented at a one-day open interactive forum usually
involving the private sector, civil society, public sector and the political
class. Consultations are also held with the National Assembly. The
consultations are meant to obtain stakeholder input for the budget.
4. Determination of MDA Envelopes: This stage involves sub-allocating the
total MDA Expenditure Envelope among the various MDAs. An Expenditure
Envelope is then allocated to each MDA, which provides their maximum
spending limit over the medium term. Allocation is guided by factors such
as payroll size as well as the priority accorded to the service provided by
each MDA against the background of government’s policy goals. MDAs are
also expected to develop Medium Term Sector Strategies (MTSS), which
articulates their goals and objectives, identifies programmes and
projects to be carried out, provides cost estimates and an
implementation time-table and defines expected project outcomes.
5. Preparation of a Fiscal Strategy Paper: All the items prepared previously
are used to provide a Fiscal Strategy Paper which is presented to the
Federal Executive Council for consideration. Once it is approved by the
FEC, it is shared with the National Assembly for their information.
6. Traditional Stages: Following the completion of the above stages, the
traditional budget preparation phases of Budget Call Circular issuance,
submissions by MDA and its subsequent evaluation and consolidation by
the Budget Office, presentation for Presidential Approval, presentation
of the Appropriation Bill to the national Assembly, and final Presidential
Approval after passage by the legislature. At the National Assembly,
committee hearings on the budget provide another opportunity for civil
society contribution into the budget.

In addition to these, the award of contracts for the execution of projects under
the budget is expected to pass the test of Due Process Certification. Budget
reforms have also included elements of performance budgeting (by requiring
MDAs to specify the exact targets that they want to achieve and costing these)
as well as improving the accessibility of budget information through budget
publications and publishing of budget estimates and allocations. Such
publications are now readily available through the websites of the Federal
Ministry of Finance ( and the Budget Office of the Federation

Policy Focus of Recent Budgets

The Nigerian National Budget in recent years has been prepared within the
framework of the policy thrusts, strategies and goals contained in the National
Economic Empowerment and Development Strategy (NEEDS), the Millennium
Development Goals (MDGs) and specific sector strategies (Budget Office, 2006).
NEEDS and the MDGs provide the high-level policy that guides budgetary
expenditure allocations (Obasanjo, 2006; Agusto, 2005).
The NEEDS may be regarded as Nigeria’s current development plan. It is also a
plan for attaining the Millennium Development Goals (MDGs) and also serves as
the nation’s Poverty Reduction Strategy Paper (PRSP). NEEDS was initially
formulated as a medium-term development plan to span the 2004 - 2007
period. Currently, government is in the process of harmonizing the second
phase of NEEDS (NEEDS II) with the Seven-Point Agenda of the current
administration. NEEDS has four main goals, which are:
i. Wealth creation;
ii. Employment generation;
iii. Poverty reduction; and
iv. Value reorientation
The Seven-Point agenda focuses on the following priority areas:
a. Development of the Power and Energy Sector;
b. Food security and poverty reduction;
c. Improving wealth creation and employment generation through
d. Development of mass transportation;
e. Land Reforms aimed at encouraging commercialised farming;
f. Provision of adequate security of life and property; and
g. Strenthening human capacity through qualitative and functional
The Millennium Development Goals (MDGs) comprise a set of eight time-bound
goals and associated targets to be achieved by 2015. These goals and targets
are to:
1. Eradicate extreme poverty and hunger: Halve the proportion of people
living on less than one US dollar per day; Halve the proportion of people
who suffer from hunger
2. Achieve universal primary education: Ensure that all boys and girls are
able to complete a full course of primary schooling
3. Promote gender equality and empower women: Eliminate gender
disparity in primary and secondary education
4. Reduce child mortality: Reduce the death rate of children under five by
two thirds.
5. Improve maternal health: Reduce the number of women who die in
childbirth by three quarters
6. Combat HIV/AIDS, malaria and other diseases: Halt the spread of
HIV/AIDS and malaria and start to reverse it
7. Ensure environmental sustainability: Reverse the loss of environmental
resources; Halve the proportion of people without access to safe
drinking water and basic sanitation; Improve the living conditions of 100
million slum dwellers by 2020
8. Develop a global partnership for development: Develop an open rule-
based non-discriminatory trading and financial system; Address the
special needs of the least developed countries

In line with these high-level policy directions, recent national budgets in

Nigeria have focused on issues of poverty reduction, job and wealth creation
through investments in human and physical capital. The 2005 Budget had has
its theme, “Building Physical and Human Infrastructure for Job Creation and
Poverty Eradication”. The 2006 and 2007 budgets were also developed along
these lines with the themes of “Accelerating the Building of Physical and
Human Infrastructure for Job Creation and Poverty Eradication” and
"Accelerating Physical and Human Infrastructure for Wealth Creation and
Poverty Reduction" respectively.
Given the policy thrusts provided by NEEDS and the MDGs as well as the budget
themes, it should be expected that government spending will accord priority to
the areas of physical infrastructure investment (especially power, transport
and communications), human capital investment (education and health),
gender issues, agriculture and rural development and the provision of social
safety nets. Health spending will be expected to pay attention to combating
HIV/AIDS and malaria as well as issues of maternal health and infant mortality.
The national budgets over the 2004 – 2006 periods listed the priority areas as
roads, water supply, power, agriculture, education, health and security while
the 2007 budget focused on improving the quality of education, healthcare and
social services (Okonjo-Iweala, 2004; Usman, 2007).
With respect to the MDGs, the debt relief gains (DRGs) arising from the debt
relief granted Nigeria by the Paris Club of Creditors in 2005 is supposed to be
channeled into social spending aimed at achieving these targets. In 2006, the
Federal Government allocated N100 billion from debt relief funds for spending
on the achievement of the MDGs. The resources go to 10 key ministries:
Agriculture, Health, Education, Water Resources, Power and Steel, Works,
Women’s Affairs, Intergovernmental Affairs (for spending on youth projects),
Housing and Urban Development and the Environment. For 2007, the amount
was increased to N110 billion.
The table below shows sectors with the highest budgetary allocations over the
2005 – 2007 period.



Education 120,035,527,79 8.86% 6.67%
Defence/MOD/Army/Airforce/Navy 111,868,968,87 8.26% 6.22%
Works 109,563,456,02 8.09% 6.09%
Power and Steel 93,294,415,519 6.89% 5.18%
Police Formation & Command 80,719,812,145 5.96% 4.48%
Water Resources 73,074,011,548 5.39% 4.06%
Health 71,685,426,092 5.29% 3.98%
Presidency 69,748,749,844 5.15% 3.88%

Education 166,621,653,75 10.97% 8.77%
Health 106,940,000,00 7.04% 5.63%
Defence/MOD/Army/Air Force/Navy 101,451,944,76 6.68% 5.34%
Works 91,075,000,001 6.00% 4.79%
Police Formation & Command 85,983,000,000 5.66% 4.53%
Water Resources 80,245,530,703 5.28% 4.22%
Power and Steel 78,093,004,102 5.14% 4.11%

Works 191,435,617,22 10.41% 8.45%
Education 185,771,774,92 10.11% 8.20%
Health 122,399,999,99 6.66% 5.40%
Defence/MOD/Army/Airforce/Navy 117,314,507,40 6.38% 5.18%
Power and Steel 104,651,569,54 5.69% 4.62%
Police Formation & Command 95,500,000,000 5.20% 4.21%
Water Resources 94,896,811,319 5.16% 4.19%
Source: Appropriation Acts, various years

Improving the Budget Process through Greater Participation

The emphasis of present day planning and budgeting processes is that of
involving all segments of the society. While the reforms of the budget process
have resulted in greater fiscal discipline, better plan-budget linkages and
perhaps, better budget implementation, expected outcomes in terms of
greater employment, improved health service delivery, wealth creation and
poverty reduction, better quality of education and security of life and property
are yet to materialize. It is thus believed that the budgeting process in Nigeria
may still benefit from greater inclusiveness of stakeholders in the development
planning and budgeting process.
A number of advantages arise from making planning and budgeting processes
more inclusive and participatory. Firstly, involving the intended beneficiaries is
necessary if the well being of the people is to be guaranteed by the planning
and budgeting process. Inclusive and participatory budgeting will help to
ensure that the needs and interests of intended beneficiaries are taken into
cognizance and form the basis for the articulation of plans, policies and
allocation of resources. In other words, planning and budgeting will reflect the
people’s needs and this can be expected to make the budget process a better
tool of development policy since development is simply a change in the quality
of life of the people within a nation
Secondly, stakeholder participation in the planning and budgeting process
enhances openness, transparency and accountability, which form the hallmarks
of good governance. Thirdly, stakeholder involvement can also be expected to
strengthen implementation, monitoring and evaluation as this implies that
people become better informed about plans and budgets and are more likely to
ensure that implementation goes as planned.
Fourthly, inclusive and participatory budgeting helps to redress socio-economic
imbalances and marginalization of weaker or vulnerable groups in society. The
involvement of different segments of the society - retirees, decision makers,
men, women, public servants private sector operatives, youths, community
leaders, professional groups, distinct production communities, Non-
governmental organizations (NGOs), Community Based Organizations (CBOs),
prominent personalities, political leaders, farmers, traders, academic and so
on – help to ensure that various interests and special needs are taken care of in
planning and budgeting.

Budgeting in Nigeria has, for the most part, failed to serve as an effective tool
of implementing development policy. The reasons for these are varied and
include poor plan-budget link and coordination, lack of fiscal discipline,
ineffective monitoring and evaluation, corruption, a focus on inputs and non-
participatory planning and budget processes. While recent reforms have tried
to correct the observed lapses to varying degrees, greater inclusiveness is still
needed to promote a more effective planning and budgeting process and
ensure that budgeting results in an improvement of the living standards of the
people. Budgeting can also be improved through a greater focus on
performance, rather than inputs.

Agusto, Olabode M. (2005). “The 2005 Budget and its Implications for Business
and Investment”, Presentation by the Director-General, Budget Office at the
Nigerian-British Chamber of Commerce Business Luncheon, 22 April, 2005

Budget Office of the Federation (BOF) (2006). “”Linking High-Level Policy to

Detailed Spending Plans”, Presentation for the 2006 Service-Wide Training for
Budget Officers on Public Sector Budgeting.

Obasanjo, Olusegun (2006). “2007 Budget Speech”, Presentation by His

Excellency, President Olusegun Obasanjo at the Joint Session of the National
Assembly, Abuja, October 11, 2006.

Okonjo-Iweala, Ngozi (2004). Ministerial Briefing on Budget 2004

Ubani, Chima and Abiola Akiode-Afolabi (2005). “Policy and Legal Framework of
Budgeting” in Centre for Democracy and Development (CDD). A Handbook on
Budgeting: A Guide to the Due Process Approach (Lagos: CDD). Chapter 2.

UNIFEM (2002), The Budget Process in Nigeria: Issues and Challenges for
Gender Responsive Budgeting. (UNIFEM)

Usman, Nenadi, E. (2007). “The 2007 Federal Budget”, Presentation on the

2007 Federal Budget by the Honourable Minister of Finance at the International
Conference Centre, Abuja, January 8, 2007.