EFFECT OF BUDGET IMPLEMENTATION ON THE ECONOMIC GROWTH OF NIGERIA.
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EFFECT OF BUDGET IMPLEMENTATION ON THE ECONOMIC GROWTH OF NIGERIA.
Chapter one
INTRODUCTION
1.1 Background for the Study
A budget is a structure for revenue and expenditure outlays over a set time period, often one year (Olurankise 2012). The importance of budgets in an economy cannot be overstated. Olomola (2009). It is an important economic aspect in supporting and realising the government’s vision for the fiscal year.
According to Olomola (2009), the budget process has never been without flaws. The most evident constraints are related to budget implementation. Frequently, the complaint is over non-release, incomplete release, or delays in delivering approved monies for budgeted expenditures.
It has been noticed that a quarter may conclude before the necessary monies are made available. Clearly, this has negative implications for institutional planning and management, as well as the total budget’s impact on human growth and welfare.
Nigeria has not participated in annual budgeting as an independent state for nearly five decades. A review of Nigeria’s prior and present budgetary forecasts reveals that they have not helped the country attain or maintain a better economic climate.
The country’s consecutive budgets have mostly been deficits. Even when they were projected to have a balanced or surplus budget, they disappoint their operators and economic observers by reporting deficits.
This significantly worsens Nigeria’s socioeconomic problems. Such issues include high inflation, poverty, unemployment, income inequality, a negative balance of payments, a low standard of living, and so on.
However, it should be noted that any government may deliberately engage in deficit financing in order to stimulate economic activity in the country under its control, establish more industries to absorb those who are unemployed, provide more social amenities to the people, and, ultimately, improve the general well-being of the populace. However, in Nigeria, the opposite is true. In reality, it harms Nigerians more than it benefits.
Budgeting and its process in Nigeria continue to be challenging, both in terms of preparation and implementation, necessitating proper management aimed at enhancing effective resource utilisation during budget implementation.
Fiscal policy is an important tool for mitigating short-term swings in output and employment. Meanwhile, in macroeconomic challenges such as high unemployment, insufficient national savings, unsustainable budget deficits, and massive public debt loads, fiscal policy has been recognised as central to policy debate in both developed and emerging economies.
During the 1930s worldwide economic slump, governments in both rich and developing countries played critical roles in supporting economic growth and development. In such times, every economy seeks to stimulate economic growth by increasing government spending and lowering taxation.
Public expenditure is a critical tool for influencing the sustainability of public finances through effects on fiscal balances and government debt.
Budgeting has typically been viewed as a phenomenon of decreasing goal income and increasing budget expenditure. This effect helps to explain why the target revenue will be reduced if the area achieves success in its realisation.
In Nigeria, before ministries and government spending agencies can incur a financial obligation, they must obtain spending authorization from the Ministry of Finance via warrants. This warrant authorises officers in charge of votes to incur expenses in line with the authorised estimates, subject to any reserved items.
If the Appropriation Act does not go into effect at the start of the year, a provisional General Warrant may be issued to assure the continuity of government services at a level not exceeding that of the previous year.
During the budget implementation phase, there are several opportunities for interventions and manipulations because officials have significant discretionary power in deciding which spending ministry or agency will be awarded spending authorization.
Regardless of the precise form of appropriation regulations, the commitment phase of the expenditure process provides an ideal environment for fraudulent operations. However, this study will look at the impact of budget execution on Nigeria’s economic growth.
1.2 Statement of Problem
Government initiatives to promote economic development and growth have received widespread attention, notably in the area of expenditure and its impact on economic growth.
According to Al-Shatti (2014), Nigeria’s recurrent expenditure outpaced capital expenditure, implying that capital investment enhances the growth rate.
This simply indicates that the difficulty of economic growth and development in Nigeria is linked to the expenditure process as a result of the government’s annual excessive spending and the economy’s performance remains below target (Tukur and Sabi’u cited Soludo, 2007).
That is, Nigerian expenditure management has been underwhelming (Akpan, 2006). The 2016 budget showed that more of the allocation are on recurrent expenditure than capital expenditure, with only the infrastructure sector having more allocation for capital expenditure of 87% and recurrent expenditure 12.2%.
Other sectors are; social sector capital expenditure 11.4% and recurrent expenditure 88.6%, economic sector capital expenditure 40.1% and recurrent expenditure 59.9%, security sector capital expenditure 23.3% and recurrent expenditure 76.7%, administration
This could explain why Nigeria is widely seen as wealthy, despite the fact that its population have extremely low per capita incomes. This demonstrates that something is amiss somewhere, because despite being a wealthy country with many people and natural resources, many of its citizens live in abject poverty.
Otherwise, the annual budget increase and previous increases in government expenditure should have a favourable impact on the country’s poverty rate, economic growth, and development.
This, however, resulted in the disaggregation of government expenditure, which disaggregated the country’s economic growth, allowing for interference in economic performance due to widespread corruption; thus, the root of the problem will be traced to empirical research rather than mere discussion in order to determine the effect of budget implementation on Nigeria’s economic growth.
1.3 Objectives Of The Research
The overall or primary goal of this research is to look into the impact of budget execution on Nigeria’s economic development. The precise aims include:
i) Determine the relationship between government spending and economic growth.
ii) Determine the impact of recurrent expenditure on economic growth in Nigeria.
iii) To investigate the impact of capital expenditures on economic growth in Nigeria.
1.4 Research Questions.
The following are some of the questions that this study aims to answer:
i) How is the relationship between government spending and economic growth?
ii) How does recurrent expenditure affect economic growth in Nigeria?
iii) How does capital expenditure affect economic growth in Nigeria?
1.5 Research Hypotheses.
The following hypotheses were proposed to guide the conduct of this investigation.
i) Government recurrent expenditure has a considerable association with economic growth in Nigeria.
ii) There is no significant relationship between government capital expenditure and economic growth in Nigeria.
iii) Government expenditure has no substantial association with economic growth.
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