Project Materials

CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

A major policy challenge confronting both developed and developing economies is the process of determining how to raise, allocate and spend public resources and the ways the resources are utilized goes a long way in determining how public policy objectives are achieved.

In addressing these challenges of the country, the budget is often designed focusing on the preferred sectors of the economy.

Budget deals with income and expenditure, thereby combining public expenditure plans, revenue and tax legislation. A national budget is a public finance management instrument reflecting government policy, priority, planning and implementation processes for the delivery of public goods and services.

Budgeting therefore means the process of making document which contain estimates of revenue and expenditure of a country usually for the fixed period of time usually for one year. It carries with it the message of an estimate of resources expected for an entity both in value and source and how the resources will be spent for an identified period of time.

All entities, individuals, corporations’ organizations and governments can make budgets. This is the reason why in formulating the budget, government makes a number of choices regarding its financing and how available resources are allocated to existing or new programmes and institutions (Adrian, 2012; ODI, 2010).

With the budget, a clear statement of intent can be provided, often more accurate than the policies or plans on which they are based so as to attain the overall development of the country. As enunciated by Premchand (2009), a new dimension in public budgeting have been planning for economic development through economic growth, employment and more favourable income redistribution, and thus provide an operational framework for the attainment of macroeconomic as well as microeconomic goals of the country.

This approach was adopted because it was observed that that planning models adopted in the 19070s did not generate the expected benefits due to its rigidity and inability to yield resources, thereby contributing to a increased fragile state of public finances.

To acquire the desired economic development, attention was thus focused on long-term budgeting strategy that would enhance the integration and proper get together of multi-year programmes with public budgets. That approach has been so substantial that it is tough to consider budgeting for economic development without a consideration of arranged economic planning and associated formulation of medium-term and long-term goals (Premchand, 2009).

It has been noticed that in majority of developing countries, yearly budgets have little or no relationship with development plans. As highlighted by Lacey (2009), in most developing countries as well as Nigeria, there is constantly a disjoint between broad objectives of the plan and inter-connection in budget formulation.

Empirical evidences from Nigeria and Ghana suggests that public budgets possess the principal features of repetitive budgeting and whose source of financing is unpredictable. This unpredictability of resource flows creates uncertainty in resource allocation and capital budget implementation (Omelehinwa and Roe, 2009; Nwagu, 2013).

Other studies have also shown evidence that the manner in which new projects have been planned, appraised, approved and included in the budget are not in tandem with the laid down guidelines designed to facilitate the linkage between development plans and public sector budget.

The public sector budget of a country is seen as a vital tool of in the provision of capital investment, and it is often more directly related to development because it contributes to the capital stock of economy needed to drive the growth process.

But in Nigeria, available evidence reveals that public budgets over the years have not contributed significantly to the development process of the economy due to weak implementation of capital budget (Obadan, 2009; Oke, 2013).

As asserted by Kwanashie (2013), the budget is one of the series geared towards obtaining the targets of the country’s goal of becoming one of the 20 leading economies in the world. Towards achieving this dream, the government has introduced variety of programs, and the main vehicle for achieving the targets of the transformation agenda is the various public sector budgets embedded within a medium term expenditure framework.

Although since the mid-2010s, government have introduced economic reforms to make the economy market based and make the contribute more to accumulation of capital, government still plays a major role Edeme and Nkalu in enhancing the pace of capital accumulation in the economy.

In essence, the economic reform agenda intends to make Nigeria a high income country, knowledge-based market economy and provide quality of life to all Nigerians (NFG, 2009).

According to Chika Njide Oguonu (2009) “A budget is the forecast by a government of its expenditures and revenues for a specified period of time usually a year. It is a financial statement of estimated income and expenditures covering a specified future period of time” According to Ekhator and Chima (2015) the primary planning role of the budget is that of efficient and equitable allocation of resources among users.

Planning starts with the articulation of objectives. Once the objectives have been articulated, the alternatives available for achieving these objectives should be examined for cost effectiveness. The objectives and the cost effect alternative are also generally considered within the framework of the resources available for the attainment of the chosen alternative action.

The planning function of the budget also helps to specify concrete achievement target over the budget period and demonstrate how these are to be attained. Therefore, the study seeks to examine the role of public sector budgeting in economic development, a case study of Enugu State.

1.2 STATEMENT OF PROBLEM

The term Public sector simply refers to the part of the economy that is controlled by the government for the purpose of providing basic government services (Obara et al. 2013). These services that the government need to provide are so enormous due to increase number of people they service. As economist would put it “human wants are unlimited, but the means to satisfy them are limited”, this therefore calls for the use of an efficient management tools that will harness the limited resources for optimal use. One of the machineries of government that can be used for this purpose is budget. While the definition of budget and the need of budgeting are clear as cited from the scholars above the execution of budget to achieve economic development has been a concern in Nigeria. Budget are more like rituals without utmost care for details, they are always delayed for presentation to legislators by the president, it takes about a quarter to pass by the legislators, implementation is largely less than 80 per cent and funding the budgets is becoming increasingly difficult with fluctuation volume of oil produce and international price of oil. Oil has been the main revenue driver of the country economy. To grow our economy, our budget must be such that it is development focus as that is the responsibility of budget.

1.3. AIMS AND OBJECTIVES OF THE STUDY

The major aim of the study is to examine the role of public sector budgeting in economic development, a case study of Enugu State. Other specific objectives of the study include;

1. 1. To examine the role of public sector budgeting in economic development in Enugu State

1. 1. To examine ways in which public sector budgeting can bring about economic development in Enugu State.

1. 1. To examine the impact of public sector budgeting on economic development in Enugu state.

1. 1. To examine the effective budget management and budget process in Enugu state

1. 1. To examine the relationship between public sector budgeting and economic development in Enugu State

1.4. RESEARCH QUESTIONS

1. 1. What is the role of public sector budgeting in economic development in Enugu State?

1. 1. What are the ways in which public sector budgeting can bring about economic development in Enugu State?

1. 1. What is the impact of public sector budgeting on economic development in Enugu state?

1. 1. What is the effective budget management and budget process in Enugu state?

1. 1. What is the relationship between public sector budgeting and economic development in Enugu State?

1.5. RESEARCH HYPOTHESES

Hypothesis 1

1. 1. : There is no significant impact of public sector budgeting on economic development in Enugu state.

1. 1. : There is a significant impact of public sector budgeting on economic development in Enugu state.

Hypothesis 2

H0: There is no significant relationship between public sector budgeting and economic development in Enugu State.

H1: There is a significant relationship between public sector budgeting and economic development in Enugu State.

SIGNIFICANCE OF THE STUDY

The study will be useful source of information particularly to Nigerian government for evolving means/strategies to rigorously monitor the implementation of her budgets in order to propel growth in the economy. Policy makers and the governmental agencies will find this study relevant, since it provides insight on the interaction between an effective budgeting and development index, and the factors inhibiting budgetary process and management in Nigeria. This understanding will help the government to be more result-oriented in enhancing economic development. The study would also be of immense benefit to students of hospitality department, researchers and scholars who are interested in developing further studies on the subject matter.

SCOPE AND LIMITATION OF THE STUDY

The study is restricted to the role of public sector budgeting in economic development, a case study of Enugu State.

LIMITATION OF THE STUDY

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview)

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

DEFINITION OF TERMS

Public Budget: It is a comprehensive statement of government finances, including spending, revenues, deficit or surplus, and debt which indicate how the government plans to use public resources to meet policy goals.

Budget Process: This connotes the series of activities involving budget conceptualisation, budget preparation, approval, implementation, monitoring and evaluation. It is simply the process of producing a budget and implementing the budget to achieve the budgeted objectives