BUDGET SYSTEMS, REFORM AND PERFORMANCE1

Temitope A. Osanyintuyi

1. INTRODUCTION

Budgets play a number of crucial roles in modern economies. Most essentially, as financial
plans, they provide the basis for expenditure decision making and the subsequent control of
expenditure. Caiden (1989:58) lists some of the purposes of public budgeting to include the
enforcement of honesty in financial transactions, maintenance of control and accountability,
planning and management of resources, providing a balance between income and expenditure
and efficiency in the allocation of resources. Beyond being a financial plan, national budgets also
represent a tool of macroeconomic (fiscal) policy by which governments strive to influence the
magnitude and direction of key macroeconomic variables. Furthermore, budgets serve as the
means through which governments mobilize resources and commit expenditures towards the
provision of various goods, services and economic infrastructure, which are crucial for the
development process.
The ability of public sector budgets to effectively fulfil these roles depends, in part, on the
organization of the budget process in terms of how budgets are formulated and implemented.
Globally, dissatisfaction with budget outcomes and the desire to continually improve on these
have led to the development and adoption of a number of alternative budgeting systems (Caiden,
1989; Joyce, 1993). Budget system reforms have generally sought to shift the focus from inputs
to the outcomes and impacts of government spending, reduce fiscal deficits and to more
effectively link the planning and the budgeting processes.
Nigeria has been no exception to the issues and problems that brought about a need for reforms
of budget systems and the general experience with the countrys budgeting is that budgets have
failed to achieve fundamental objectives of providing the public goods, infrastructure and
services that are necessary to ensure economic development and improve the well-being of the
populace. In spite of decades of public sector budgets that often promise socio-economic
transformation, the nations development indices do not reflect an effective and efficient use of
the funds that have been mobilized and appropriated through the budget over the years. Even in
its macroeconomic management role, budgets in Nigeria have, for the most part, not succeeded
in ensuring macroeconomic stability. On the contrary, fiscal dominance has often been cited as a
major factor hindering the effectiveness of monetary management in Nigeria. Obadan (2003:150)
observes that Nigerias budgeting experience has been characterized by the following features:
poor fiscal management, non-observance of budgetary targets; lack of transparency and
accountability; indiscipline; absence of multi-year budgeting, weaknesses in the institutional
framework and insufficient links with plans; lapses in budget formulation arising from deficient
techniques; and poor budget implementation.
In order to address some of the observed lapses, budget reforms were recently carried out in
Nigeria as part of a broader range of reform measures under the National Economic

1
Unpublished paper originally prepared as a chapter for a Book of Readings on Leading Issues in Economic
Management. 2009

1
Empowerment and Development Strategy. These reforms, which effectively commenced in
2004, included the preparation of fiscal strategy papers, improved management of government
finances by a Cash Management Committee, the use of medium-term sector strategies (MTSS),
adoption of a medium-term expenditure framework (MTEF), and preparation of annual budget
implementation reports (Okonjo-Iweala and Osafo-Kwaafo, 2007:11).
The reforms represented a departure from the erstwhile budgeting process in that it moved
budgeting from an annual exercise to a three-year framework, strengthened control of public
expenditure through the use of expenditure envelopes, linked budgeting to development plans
and promoted greater public accessibility to the budget. However, the effectiveness of Nigerias
budget reforms, as with many other countries, remains open to debate. It has been argued (Joyce,
1993:36) that budget process reforms are severely limited in their ability to bring about
fundamental change in budget outcomes Given this apparent contradiction, certain pertinent
issues need to be examined with respect to Nigerias budgeting and budget reforms. These
include: the nature of the problems associated with the budget system; the appropriateness and
comprehensiveness of the budget reforms embarked upon as manifested in the extent to which
reforms have been able to address these problems and improve budget performance; and finally,
an identification of the gaps that remain to be filled.
This paper examines these issues (focusing primarily on the expenditure side of the budget) with
the overarching objective of enhancing the process of national economic management in Nigeria
through improved budget performance. The rest of the paper is structured into five sections as
follows: section two reviews the development of alternative approaches to budgeting so as to
provide a conceptual background to the subsequent evaluation of the Nigerian situation, while
section three examines Nigerias budget process, problems and performance pre-reform. Section
four describes the budget process reforms carried out under NEEDS, while section five discusses
issues of budget performance under reforms and identifies major weaknesses and gaps that
remain to be filled. Section six concludes the paper.

2. BUDGET SYSTEMS

2.1 The Development of Modern National Budgets

Caiden (1989) provides a brief history of budget reforms that gave rise to alternative budget
systems in the Western world. According to the account, France provided the first real national
budget in Europe and the formulation of budgets as a cycle that moved through phases of plan
through audit began in 1814 under Louis XVIII. Budgeting was characterized by four main
elements annuality, which implied an annual decision making cycle; unity, in terms of single
decision making about appropriation from a common pool; appropriation, that is legislative
backing for the use of funds and the requirement of spending only appropriated funds; and audit,
which served to ensure compliance with appropriations. The budgets themselves were classified
based on objects of expenditure and this system, known as line-item budgeting, served basically
to provide control and accountability over public funds (Caiden, 1989:55). The introduction of
line-item budgeting was itself a reform of the previous system of budgeting which was
characterised by weak executive power, little central control and processes that were
idiosyncratic (World Bank, 1998:11). The desire to have budgets in a format that could better

2
satisfy management purposes formed the basis for subsequent budget reforms. Attempts to re-
classify budget items on the basis of activities culminated in the introduction of performance
budgeting, which aimed to facilitate efficiency measurement. Budget reforms that followed this
produced the Planning Programming Budgeting System (PPBS) or programme budgeting. The
system entailed a reclassification of budget expenditures based on programmes. It also specified
objectives for the programmes and measured the extent to which these were attained. A later set
of reforms produced Zero-Base Budgeting (ZBB). These approaches to budgeting are examined
further below.

2.2 Approaches to Budgeting

2.2.1 Line Item Budgeting

The traditional line-item budget classified expenditures based on organisations and objects of
expenditure (line items) within each organisation, such as salaries and wages, security services,
furnishing of offices. The line items usually comprise a number of expenditure categories which
are further subdivided into other sub-categories with associated line item codes and may thus be
very detailed. Line item budgeting essentially serves the function of financial control or
compliance as it provides a spending limit or ceiling for different objects of expenditure and
enables budget control and monitoring bodies to ensure that agencies do not spend in excess of
their allocations (Schaeffer, 2000, World Bank, 1998:11). Such spending controls could be
exercised through the specification of rigid ex-ante rules or procedures aimed at ensuring
compliance such as rules against virements (Schiavo-Campo and Tommasi, 1999). The major
advantages of line-item budgets lie in their ease of preparation, lack of ambiguity and the
potential for control of expenditure through comparison with previous years and the ability to
provide a detailed specification of inputs (World Bank, 1998:12).
The input focus of traditional line-item budgets however implied that they provided little
information on issues such as the effectiveness and efficiency of budget allocations and on the
objective or reason for government expenditure (World Bank, 1998; Schiavo-Campo and
Tommasi, 1999). In other words, the budgets did not make it possible to tell why some amount
was being spent, whether the goal was achieved and if the spending provided the best value for
money relative to the desired goals. Furthermore, line item budget systems were generally
associated with a short time horizon, leading to the neglect of longer term costs, and also tended
to promote the micromanagement of budget implementation by central budget offices (World
Bank, 1998:12). It may also be argued that line-item budgets tend to promote incrementalism,
where present allocations are decided on the basis of past allocations, taking into consideration
issues such as previous levels of budget execution, justification for new projects and the need for
an increased or decreased level of expenditure for existing projects (Fozzard, 2001: 24)
2.2.2 Performance Budgeting

The need for budgets to serve management purposes as the size and scope of government
activities increased produced another round of budget reforms. The initial changes, which
resulted in performance budgeting, sought to address the issue of why money was being spent
and involved attempts to provide an activity-oriented budget format rather than the object

3
expenditure focus of line item budgeting (Caiden, 1989). Performance budgets aimed to
integrate information about government activities into the budget process so that budget
decisions could be based to a greater degree on the relationship between what government did
and how much it cost (World Bank, 1998:12). Performance budgets involve the division of
expenditures based on activities within an organization and the establishment of efficiency
measures to relate activities to cost. This system allows budgets to be built on the basis of
anticipated workload (activities). A major advantage of performance budgets is that they indicate
the activities and service levels to be provided by government (Schaeffer, 2000). However, while
performance budgeting emphasises efficiency in terms of the costs of carrying out stipulated
activities this does not provide a sufficient basis for allocating resources among competing
alternatives nor does it address the issue of the outcome of activities or the effectiveness aspect
of public spending (World Bank, 1998). Subsequent reforms, aimed at incorporating the
effectiveness aspect led to the introduction of programme budgeting. 2
2.2.3 Programme Budgeting

Programme budgeting includes what is generally referred to as the Planning-Programming

Budgeting System (PPBS) and related approaches. These approaches focus explicitly on
addressing the issue of making budgetary choices and seek to budget for the achievement of
government policy objectives (programmes). Consequently, they represent a system of resource
allocation (World Bank, 1998). According to Fozzard (2001:26):
from the 1950s many countries introduced classifications based on programmes,
comprising a set of activities intended to achieve a specific objective. In its most
sophisticated form, the Planning, Programming and Budgeting System (PPBS)
introduced in the USA in the mid 1960s, resources would be allocated between
programmes on the basis of their contribution to stated policy objectives. These
allocations would be projected over a multi-year period so as to reflect the
financial implications of policy decisions. Allocations would then be revised
annually, taking into account the results of programme monitoring and evaluation
(Premchand, 1983: 323 327)

The PPBS in its pure form used quantitative techniques such as cost-benefit analysis and
operations research in budgetary decision making. Programme budget consists of several
elements, including: the programme (or policy objective) to be achieved, a series or group of
activities (projects) needed to achieve the programme, the cost elements or inputs needed to
carry out the activities and the expected outputs and outcomes of the activities as defined by
output / outcome measures (Mercer, 2002; Schiavo-Campo and Tommasi, 1999; World Bank,
1998). Policy objectives usually cut across different governmental agencies and also span more
than a fiscal year.

2
Programme budgeting is regarded as a culmination of the reforms that started with performance budgeting. As
such, some authors combine the two. See for example Schiavo-Campo and Tommasi, (1999:10) and their footnote
on the categorization. Fozzard (2001) provides a two-way categorisation into administrative budgeting and rational
budgeting to distinguish between the traditional (line-item) approach and others that seek to integrate policy in the
budget process

4
While, conceptually, programme budgets provide several advantages over the line item approach
by allowing the linking of policy objectives with the budget, in practice, the approach has proved
difficult to implement. A major difficulty associated with programme budget implementation
arises from the complexity, lack of ownership and loss of accountability created by the cross-
organisational nature of programmes (Schiavo-Campo and Tommasi, 1999:10). Since different
government agencies or ministries might be involved in a programme, problems of coordination
and an apparent lack of ownership are likely to arise. Programme budgets have performed better
where the programmes are limited to an agency or sector (World Bank, 1998).
In addition to the foregoing, critics of the approach have argued against the notion of comparing
and choosing programmes on the basis of effectiveness since there is no common index or
measure of the worth of programs. Consequently, it is regarded as an exercise in futility to try
and reach a perfect and indisputable rational organization of government objectives and
activities (Schiavo-Campo and Tommasi, 1999:12). Others have faulted programme budgeting
on the premise that its successful application would require the existence of certain conditions,
which are often not easily met such as adequate information about programmes that would allow
an assessment of their relative priorities and performance, (World Bank, 1998). In general,
attempts to replace the traditional line item approach with programme budgeting on a wide scale
did not prove successful in both developing and developed countries (Fozzard, 2001:26). What
has generally occurred has been the advocating and adoption of budget reforms, followed by
their rejection or modification (Caiden, 1989:55; Rubin, 1990; World Bank, 1998; Schiavo-
Campo and Tommasi, 1999).
Given the difficulties associated with its implementation, national budgeting systems in most
countries hardly utilise the programme budgeting approach in its pure form, rather elements of
performance and programming have been introduced within a framework that substantially
follows a traditional line-item format (see Robinson, 1992:17).
2.2.4 Zero-Base Budgeting

The approach known as Zero-Base Budgeting (ZBB), introduced in the USA in the 1970s,
represented a direct attempt to address the perceived shortcomings of incrementalism. The two
fundamental questions to be answered in the ZBB process are whether current activities are
efficient and effective; and whether current activities should be eliminated or reduced to fund
higher priority new projects or to reduce the current budget (Pyhrr: 1977:1). ZBB thus focused
on an evaluation and justification from scratch of all programmes to be included in the budget
in any given year (including existing programmes) (World Bank, 1998; Schiavo-Campo and
Tommasi, 1999). The requirement to justify all existing programmes again naturally proved
extremely cumbersome and ZBB could not be implemented in this form by any government.
Rather, a variant of the system that required agencies to rank their programmes within stipulated
funding limits has been utilised. Even then, it was noted that this did not prove useful as an
annual budget tool, though there are examples where it has proved useful in specific instances
World Bank (1998:15).

3. Budgeting in Nigeria Pre-Reform

3.1 Planning and Programming Experiments

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Prior to the advent of the recent budget reforms, there had been little change to the budgeting
system in Nigeria, which, as inherited from the nations colonial masters, followed the traditional
line item / administrative approach to budgeting. Commenting on the budget system several
years after independence, Adeboye and Efiong (1977:1) write thus:
That [line-item] system was adequate for the colonial era when the main
concern was the maintenance of law and order and the provision of the barest
minimum of infrastructural services. The budget was not an instrument of rapid
economic development. Unfortunately, 17 years after the attainment of
independence, Nigeria is still stuck with that method of budgeting even when it
has been rendered inadequate by many other developments.
The ballooning of government revenue from oil in the 1970s led to a large expansion in the
scope and size of government activities, which the traditional budgeting process could not
adequately cater for. Even the concern for financial control and accountability proved difficult to
enforce given the high volume of activity as projects were approved without proper study and
implementation plans (Adeboye and Efiong, 1977:2).
Although, it was recognised early on that such a system did not adequately address the
requirements of the increasing role played by government, no major changes were actually made
to the budget system. A Public Service Review Commission set up in the 1970s recommended
the adoption of PPBS and the principle of Management by Objectives (MBO). Subsequently, the
Federal Ministry of Finance (FMF) sought the approval of the Federal Executive Council for the
implementation of the recommendation. While approval was granted in principle for the
introduction of the PPBS in stages at the Federal Level, it was recognised that it would take some
time before this could actually be implemented. The FMF in the interim sought the introduction
of expenditure ceilings but this attempt was not successful. A subsequent study team raised by
the FMF to study the nations budgetary process for the purpose of making improvements noted
that the budget system was not results oriented but emphasized objects of expenditure and even
when estimates were related to objectives, the relationship was not specified (Adeboye and
Efiong, 1977:3). Other issues highlighted by the team included poor coordination within and
among ministries; tedious and arbitrary processes for budget preparation, evaluation and
approval; and lack of relevant information. Nevertheless, the proposed PPBS reform was never
implemented.
While Nigeria did not adopt the PPBS, elements of policy planning and programming were still
expected to feature in budget formulation through the link with the nations development plan. In
the post-independence era, Nigeria operated four fixed medium term National Development
Plans spanning 1962 - 1985 as well as Rolling Plans in the early 1990s. The National
Development Plans essentially provided a series of broad national objectives, target growth rates
and estimates of the amount of investment expenditure required to achieve the growth rates
together with the programmes and projects to be undertaken during the plan period. The total
financial allocations for the projects were also included and an annual breakdown provided.
Ideally, this should have formed the basis of capital expenditure allocations in the budget.
In reality, however, the link between the plan and the budget was weak. Estimates of revenue
provided in the budget are usually obtained through one or a combination of pragmatic
approaches involving repeat of previous years estimates, use of arbitrary figures, and use of
percentages or extrapolation of previous years revenue (Olaloku, 1994). Other factors may also

6
be taken into consideration such as the opportunities for increasing revenue generated
(Akpobasah, 1990). Oil revenues, that constitute the major revenue source, are estimated based
on projections of oil production and an expected average price. The volatility of this major
source of revenue, however, renders such projections very difficult to make. Expenditure
estimates are divided into recurrent and capital expenditure components. The revenue component
comprises mostly of overheads and personnel costs.
The capital budget was derived from the recurrent surplus, (obtained by a deduction of recurrent
expenditure estimates from the expected revenue) and estimates of public borrowing. The
Finance Ministry obtained the weights to be used for allocation of the capital budget among
various sectors from the planning agency, and based on these, provided the capital sums
available to spending agencies for distribution among their programmes and projects
(Akpobasah, 1990). What this arrangement suggests is that the planning agency focused only on
the capital aspect of the budget and the likely overall cost of executing those projects over the
plan period without linking this to resources that might actually be available for execution. The
effective allocation to projects in any given year as contained in the budgets capital estimate
could thus differ (and sometimes markedly so) from the plan estimate after taking into
consideration expected revenue and the probable level of activity in implementing the project.
This problem was aggravated by the oft arbitrary nature of the allocations contained in not only
in the plan, but also the annual budgets, which were not based on up-to-date estimates of likely
resource availability (Ebong, 1977:30).
Furthermore, the process was also characterised by poor plan discipline, whereby new projects
were frequently introduced or the scope of planned projects changed (Ilugbuhi 1977; Ebong,
1977). The separation of, and failure to ensure proper coordination between the nations central
planning agency (at various times known as the Central Planning Office, Ministry of National
Planning, National Planning Commission) and the financing and budgeting agency (Federal
Ministry of Finance / Budget Office) has been the major factor explaining the weak plan-budget
link in Nigeria 3 (Ebong, 1977; Akpobasah, 1990; Kuye, 1990). Each agency saw itself as
handling distinct functions - the finance ministry managing financial resources and the planning
agency focusing on the attainment of development goals without proper cognisance of the
financial implications (Obadan, 2003:233).

3.2 The Budget Process

Nigerias budget formulation process follows the administrative budgeting format (see Fozzard,
2001). In this framework, budget preparation is decentralised to the spending agencies, who
prepare bids or estimates based on their assessment of resource needs to carry out their tasks.
These estimates are negotiated with the finance ministry and may be altered where necessary.
This process commences with the issuance of budget call circulars by the Federal Ministry of
Finance (FMF). The call circulars contain policy directions, guidelines and instructions to the
spending agencies on how to prepare and submit their expenditure estimates. The various

3
An attempt to address this issue once led to the transfer of the capital budget formulation function to the planning
agency. Also, as part of the 1988 Civil Service Reforms in Nigeria, the Finance and National Planning Ministries
were merged into a single Ministry of Finance and Economic Development. However, the Budget Department was
transferred to the Presidency. This arrangement was later reversed.

7
expenditure estimates are submitted and consolidated by the Budget Office of the FMF in a draft
budget, which is subsequently submitted to the Federal Executive Council for review and
approval. This is then forwarded to the legislature for enactment. A further process of legislative
review takes place at this stage with spending agencies required to defend their estimates 4.
Modifications are also introduced at this stage before the estimates are sent to the President for
assent. Compliance is achieved through detailed line item expenditure accounts approved for
each spending agency and backed up by a centralised fund release mechanism based on the
issuance of quarterly warrants for expenditure. Implementation is also subject to audits expected
to be carried out at the end of the fiscal year by the Office of the Auditor-General of the
Federation.
Certain institutional aspects of the budget process have had a negative impact on the
performance of budgets in Nigeria. While the legislative review stage is meant to provide some
degree of control over the executive in budgeting as well as provide a means of enhancing public
participation in the budget process, wrangling between the two arms of government have often
led to delays in budget enactment, which have adversely affected budget implementation. There
are unsettled legal questions as to whether the constitutional provision that vests appropriation of
pubic funds in the legislature implies that the legislature has powers to make significant revisions
to the estimates of revenue and expenditure laid before it by the executive arm as well as to
remove and/or introduce new programmes and projects to be funded in the budget. In addition to
late enactment, there have also been cases of late release or inadequate release of funds. Funds
are allocated for both capital and recurrent items through the issuance of quarterly warrants by
the Finance Ministry after due consultation with the treasury on the expected revenue inflow for
the quarter. While this helps to match expenditure with available revenue, it makes expenditure
difficult during periods of revenue shortfall and may effectively stall budget implementation
(Olaloku, 1994).

3.3 Budget Performance Pre-Reform

A comparison of federal government budget (expenditure) estimates with actual expenditure (see
Table 1) provides an indication of the strength of budgetary control in the country. The gap
between actual expenditure and budgeted expenditure expressed as a percentage of the latter over
the 1977 to 2003 period ranged from between -63.3 percent (indicating under spending) in 1979
and 164.6 percent in 1999 (indicating massive overspending as a result of elections conducted in
that year). Broken down by periods, The total expenditure gap ranged between 63.3% and 0%
in the 1977 1984 period, was 8.8% in 1985 and ranged between 14.2% and 80.3% in the SAP
era. In the post-SAP era, the gap ranged between 32.4% and 164.6% of the budget over the
1994-1999 period but fell to 5.5%, 8.7%, -6.8% and 3.1% in 2000, 2001, 2002 and 2003
respectively. There were large sustained positive gaps (overspending) particularly between 1986
and 1999, with the actual expenditure averaging 55.3 percent of budgeted expenditure.
Another way of examining budgetary performance especially with regards to the budgetary
control function is to examine the overall budget balance position. Over the years, government
fiscal operations in Nigeria have been characterized by a preponderance of deficits. While a
budget deficit need not be inimical to economic performance, it is generally thought that

4
This stage was absent under military governments

8
persistent budget deficits, particularly when they exceed about 3 percent of GDP are harmful to
the economy. Other factors that determine the impact of deficits on an economy are the means by
which the deficit is financed and the allocation of expenditure (Phillips, 1997).
Table 1: Federal Govt Actual and Budget Expenditure Estimates, 1970 - 2007 (N'm)

Year Total Expenditure Total Expenditure Gap Gap Growth in Total

(actual) (budget) (as % of Expenditure (%)
budget)
1970 903.9 n.a n.a n.a
1971 997.2 n.a n.a n.a 10.3
1972 1,463.6 n.a n.a n.a 46.8
1973 1,529.2 n.a n.a n.a 4.5
1974 2,740.6 n.a n.a n.a 79.2
1975 5,942.6 n.a n.a n.a 116.8
1976 7,856.7 n.a n.a n.a 32.2
1977 8,823.8 15,328.9 -6,505.1 -42.4 12.3
1978 8,000.0 12,452.4 -4,452.4 -35.8 -9.3
1979 7,406.7 20,190.1 -12,783.4 -63.3 -7.4
1980 14,968.6 15,435.3 -466.7 -3.0 102.1
1981 11,413.7 11,410.9 2.8 0.0 -23.7
1982 11,302.9 12,857.5 -1,554.6 -12.1 -1.0
1983 10,164.5 12,086.0 -1,921.5 -15.9 -10.1
1984 9,927.6 10,707.1 -779.5 -7.3 -2.3
1985 13,040.9 11,989.5 1,051.4 8.8 31.4
1986 16,223.7 11,085.4 5,138.3 46.4 24.4
1987 22,018.7 15,508.4 6,510.3 42.0 35.7
1988 27,749.5 24,297.6 3,451.9 14.2 26.0
1989 41,028.3 30,107.1 10,921.2 36.3 47.9
1990 60,268.2 39,763.6 20,504.6 51.6 46.9
1991 66,584.4 38,666.4 27,918.0 72.2 10.5
1992 93,835.5 52,035.9 41,799.6 80.3 40.9
1993 136,645.4 112,101.0 24,544.4 21.9 45.6
1994 156,837.2 110,200.0 46,637.2 42.3 14.8
1995 254,038.0 153,496.0 100,542.0 65.5 62.0
1996 282,969.6 189,000.0 93,969.6 49.7 11.4
1997 428,215.2 276,723.0 151,492.2 54.7 51.3
1998 487,113.4 367,917.0 119,196.4 32.4 13.8
1999 947,690.0 358,103.3 589,586.7 164.6 94.6
2000 701,059.4 664,735.5 36,323.9 5.5 -26.0
2001 1,018,025.6 936,800.0 81,225.6 8.7 45.2
2002 1,018,155.2 1,092,800.0 -74,644.8 -6.8 0.0
2003 1,225,965.9 1,189,600.0 36,365.9 3.1 20.4
2004 1,377,300.0 1,302,300.0 75,000.0 5.8 12.3
2005 1,822,100.0 1,799,900.0 22,200.0 1.2 32.3
2006 1,938,000.0 1,900,000.0 38,000.0 2.0 6.4
2007 2,450,900.0 2,266,400.0 184,500.0 23.6 26.5
Source: CBN Statistical Bulletin, Vol. 12, 2002; CBN Annual Report and Statement of Accounts, 2002-2007 and
Appropriation Acts 2004 - 2007

9
In the Nigerian case, poor public expenditure management has led to unsustainable fiscal deficits
and huge debt burden with attendant negative consequences on the economy. An examination of
federal government fiscal balance between 1970 and 2003 (Table 2) shows that budget surpluses
were recorded only in nine years (1971, 1973, 1974, 1979, 1980, 1995, 1996, 2001 and 2002).

Table 2: Federal Government Fiscal Deficit (as % of GDP)

Year Deficit-GDP ratio (%)
1970 8.7
1971 -2.6
1972 0.8
1973 -1.5
1974 -9.8
1975 2
1976 4
1977 2.4
1978 7.8
1979 -3.4
1980 -3.9
1981 7.7
1982 11.8
1983 5.9
1984 4.2
1985 4.2
1986 11.3
1987 5.4
1988 8.4
1989 6.7
1990 8.5
1991 11
1992 7.2
1993 15.5
1994 7.7
1995 -0.1
1996 -1.6
1997 0.2
1998 4.7
1999 8.4
2000 2.9
2001 -3.2
2002 -3.9
2003 1.6
2004 1.5
2005 1.1
2006 0.5
2007 -0.5
Note: deficits are shown as a positive figure while surpluses are negative
Source: CBN Statistical Bulletin 2006; CBN Annual Report, 2007

10
The surpluses recorded in the 1970s can be attributed to sudden revenue windfalls arising from
oil price hike. Federal Government revenue also witnessed a huge increase arising from both oil
and non-oil sources in 1995. It is however instructive to note that in several instances, the
recorded surpluses have always been quickly wiped off by subsequent increases/jumps in total
expenditure in succeeding years. Growth in total expenditure in the year following a budget
surplus was 46.8, 79.2, 116.8, 102.1, 23.7, 24.4 and 51.3 percent in 1972, 1974, 1975, 1980,
1981,1 996 and 1997 respectively (Table 1). This suggests a lack of fiscal restraint whereby
temporary increases in government revenue result in expenditure increases.
In most instances, the deficit to GDP ratio has been higher than what may be considered
sustainable. Average deficit to GDP ratio increased from 0.85 in the 1970-79 periods to 5 percent
in the 1980 to 1985 period. This further increased during the SAP period (1986-1993) to 9.3
percent before falling in the post-SAP period (1994 2003) to 1.7 percent. Overall the entire
1970 to 2003 period, the ratio averaged 3.8 percent (Table 2).

4. Budget Reforms

4.1 Budget Programming and Preparation Process Reforms

Since 2005, the budget process, with respect to programming and preparation has witnessed
some changes. In particular, budgeting has been done within a medium term (3-year) planning
framework. The use of a Medium Term Expenditure Framework (MTEF) is aimed at improving
consistency in budgeting as well as enhancing 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 price 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 an explicit
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
4.1.1 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.

11
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 governments 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.

4.1.2 Policy and Other Aspects of Budget Reforms

Particularly since 2005, the national budget 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).
NEEDS has four main goals, which are: wealth creation, employment generation, poverty
reduction and value reorientation while the MDGs provide a set of eight goals which seek to
address various dimensions of poverty and underdevelopment including hunger, education,
health and the environment. 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.
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, totalling about N100 billion per annum, was
earmarked, through the creation of a Virtual Poverty Fund (VPF) in 2006 for social spending
aimed at achieving the MDG targets. In 2006, the Federal Government allocated N100 billion

12
from debt relief funds for spending on the achievement of the MDGs while for 2007, the amount
was N110 billion. The resources go to 10 key ministries: Agriculture, Health, Education, Water
Resources, Power and Steel, Works, Womens Affairs, Intergovernmental Affairs (for spending
on youth projects), Housing and Urban Development and the Environment.
Institutional aspects of the wider reforms measures undertaken with implications for budgetary
control and monitoring included the introduction of public procurement reforms as well as a
Fiscal Responsibility Bill (passed into law in 2007). The public procurement reforms, among
others, included a certification process to ensure that projects undertaken by government
ministries, departments and agencies (MDAs) were those included in the budget, followed due
process and were in lie with policy objectives. Government also introduced the publishing of
budget information to make the budget and its implementation more readily accessible to the
wider public (see the Annex for a list of public expenditure reform measures). .The fiscal
responsibility law generally seeks to encourage fiscal prudence and sound financial management.
It seeks to institutionalize the use of a benchmark commodity price to determine government
budget revenue estimates and encourage savings of excess revenue whenever the price of the
commodity rises above the benchmark price, thereby de-linking expenditure from revenue
fluctuations .The law also seeks to encourage greater transparency and accountability in public
finance and improve inter-governmental fiscal coordination to secure greater macroeconomic
stability.

5. Budget Performance under Reforms

The divergence between actual and budgeted expenditure was substantially reduced in the reform
period (Table 1 above). Between 2004 and 2007, actual expenditures exceeded budgeted
expenditure by an average of only 8.1 percent. The highest discrepancy (equalling 23.6 percent
of budgeted expenditure) occurring in 2007, an election year, while the gap was substantially
lower (less than 6 percent) in the three preceding years. These figures are much lower than the
1986-1993 average of 55.3 percent and the 28.7 percent average in the 1971 to 2003 period.
Substantial success also seems to have been recorded in the area of reducing the fiscal deficit
(Table 2 above) with the deficit being contained at less than 3 percent of GDP during the period
in line with the fiscal rule introduced as part of the reforms. It should however be noted that this
performance was aided by the very high levels of oil revenue during this period, which allowed
the nation to accumulate large external reserves and build a savings fund (The Excess Crude
Account).
Other aspects of budget performance at this period included the policy-plan linkage evidenced in
the sectoral allocation of expenditures. Given the policy thrusts provided by NEEDS and the
MDGs as well as the budget themes, it should be expected that government spending would
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. 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 focuses on improving the quality of education,
healthcare and social services (Okonjo-Iweala, 2004; Usman, 2007). Based on the various policy
thrusts and priority areas articulated since 2004, the bulk of budget expenditure has been
channeled into the areas of works, education, health, water resources, power and security. The

13
table below shows the ministries, departments and agencies (MDAs) with allocations of above 5
percent of total budgeted MDA expenditure in the 2005 to 2007 budgets.

Table 3: MDAs with Highest Budgetary Allocations, 2005 2007

MDA AMOUNT (N) % OF TOTAL % OF TOTAL
MDA EXPENDITURE EXPENDITURE

2005 BUDGET
Education 120,035,527,799 8.86% 6.67%
Defence/MOD/Army/Airforce/Navy 111,868,968,876 8.26% 6.22%
Works 109,563,456,029 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%

2006 BUDGET
Education 166,621,653,758 10.97% 8.77%
Health 106,940,000,000 7.04% 5.63%
Defence/MOD/Army/Air Force/Navy 101,451,944,763 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%

2007 BUDGET
Works 191,435,617,222 10.41% 8.45%
Education 185,771,774,929 10.11% 8.20%
Health 122,399,999,999 6.66% 5.40%
Defence/MOD/Army/Airforce/Navy 117,314,507,407 6.38% 5.18%
Power and Steel 104,651,569,540 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

While the priority areas in the budget allocations are generally laudable, two crucial things may
be noted about the allocations. First, the proportions for health and education fall below
internationally recommended targets and commitments for developing countries (ActionAid
International, Nigeria / PACT Nigeria, 2006). The UNESCO recommendation for education
expenditure is 26 percent of the budget, while the Abuja Declaration, adopted at the Organization
of African Unitys (OAUs) special summit on AIDS in 2001, pledged that 15 percent of national
budgets would be allocated to health spending. Second, relatively low allocations have been
made to some other expected priority areas like agriculture, transport and gender issues (women
affairs), which are believed to be important for attaining the MDGs. The allocation to

14
agriculture, which is important for attaining the MDG goal of eradicating poverty and hunger,
was less than 2 percent of total expenditure in all the budgets over the 2005 to 2007 period.
Allocation to transport was also less than 1 percent of total expenditure in all the years. Low
levels of funding for women affairs has also informed opinion in some quarters that the budget
does not give priority to women development (Nigerian Labour Congress, not dated). The
proportion of total expenditure allocated to the Women Affairs Ministry was a meager 0.1
percent in 2005, 0.13 percent in 2006 and 0.11 percent in 2007.

5.1. Outstanding Issues and Challenges for Budget Reforms

While the evidence above generally suggests improved budget performance under the reforms
carried out between 2004 and 2007, and particularly reflects greater budget discipline and
improved plan policy linkage over the period, a number of institutional and governance issues
with implications for budget performance still need to be addressed. First, there have been
continued marked delays in budget passage often arising from disagreements between the
executive and legislative arms of government since the return to democratic governance in 1999.
In 2008 and 2009 for example, the national budget was not passed earlier than the end of the first
quarter of the year while similar incidents occurred even during the 2004 to 2007 period.
Second, the ability to maintain and sustain the fiscal discipline that characterised the 2004 2007
periods has been called into question since 2008 as oil prices and government revenue have
declined. A large fiscal deficit is currently projected for the 2009 budget and this raises the
question of whether the budgetary reforms can be sustained in an environment of highly volatile
revenue arising from the non-diversification of the nations revenue sources. Revenue volatility
remains a major constraint to effective budgeting in Nigeria and this underscores the importance
of diversifying the nations revenue sources to achieve greater stability and predictability. An
alternative arrangement that has been suggested for dealing with this problem is to base budgets
in a given year on revenues derived in the previous year.
Thirdly, it is still generally believed that budget performance; in terms of development impact
has been very poor. Indices of human development in Nigeria remain low and issues of
corruption, inadequate monitoring and evaluation as well as low executive capacity to implement
projects included in the budget continue to serve as constraints to better budget performance in
Nigeria. The nations performance indices in infrastructure provision, health and education
remain low when compared to some other nations of the world. This reflects the hugeness of the
development challenges facing Nigeria and may indicate the fact that the resources made
available so far still pale into insignificance when compared to what may be required to make an
appreciable and widespread positive impact in socio-economic infrastructure provision in a
country as populous as Nigeria. This suggests that government must not only increase spending
in these key areas but also seek ways of increasing efficiency of expenditure while minimizing
waste and corruption.

15
6 Conclusion

Budgeting in Nigeria has witnessed some considerable changes in recent years in terms of
process, policy and programming. These reforms have been undertaken in order to address
various lapses associated with past budgeting experience by strengthening the link between plan
and budget, entrenching fiscal discipline and generally providing better budgetary outcomes both
at the level of macroeconomic performance and socio-economic development in general. Policy
focus has shifted towards issues of poverty reduction, employment generation and improved
wealth creation and budget priority areas have moved in line with the nations development
strategy and the desire to attain the Millennium Development Goals.
While the reforms succeeded in creating better links between plan and budget and improved
fiscal discipline between 2004 and 2007, there remains a need to improve budget performance by
not only sustaining the reforms but by looking beyond budget process issues to institute
complementary reforms in areas such as diversification of revenue sources, institutionalising the
reform measures to ensure sustainability, addressing delays in budget passage as well as other
issues of corruption, the political commitment to fiscal prudence and improving the efficiency of
public expenditure. Ultimately, the effectiveness of the national budget will have to be judged
not by the size or even the distribution of the figures, but by the outcomes that have been
achieved things like the level of poverty, the incidence of diseases, the literacy and mortality
rates, the quality of education and the growth of the nations economy.

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Communique of the 2-Day Civil Society Summit on the Draft 2007 Federal Budget organized By
Actionaid International Nigeria and PACT Nigeria with Support From USAID and The
European Union, Rockview Hotel, Abuja, 25 26 October 2006.
Adeboye, T.O and E.O. Efiong (1977), Historical Background in Adeboye, T.O and E.O.
Efiong (eds), The Making of the Federal Government Budget, Papers Presented at A Workshop
Organised for Budget Officers of the Federal Government, 24 27 August
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
Akpobasah, M.A.B (1990), Preparation, Organization and Coordination of Budgets in
Adeyemo, O.A and E.C. Ndekwu (eds.), Readings in Public Expenditure Programming in
Nigeria, (Ibadan: NCEMA) Chapter 15.
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.
Caiden, Naomi (1989), A New Perspective on Budgetary Reforms, Australian Journal of
Public Administration, 48(1), March: 53 60

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Ebong, Ekop I. (1977), Operationalizing Plans Through Annual Budgets in Adeboye, T.O and
E.O. Efiong (eds), The Making of the Federal Government Budget, Papers Presented at A
Workshop Organised for Budget Officers of the Federal Government, 24 27 August
Fozzard, Adrian (2001). The Basic Budgeting Problem: Approaches to Resource Allocation in
the Public Sector and their Implications for Pro-Poor Budgeting, Overseas Development
Institute Working Paper 147.
Ilugbuhi, T.O. (1977), The Planning Process in Nigeria in Adeboye, T.O and E.O. Efiong
(eds), The Making of the Federal Government Budget, Papers Presented at A Workshop
Organised for Budget Officers of the Federal Government, 24 27 August
Joyce, Philip G. (1993), The Reiterative Nature of Budget Reform: Is There Anything New in
Federal Budgeting?, Public Budgeting and Finance, 13(3), Fall, 36-48
Kuye, Omowale (1990), Organization and Coordination of the Budget and Planning Offices in
Adeyemo, O.A and E.C. Ndekwu (eds.), Readings in Public Expenditure Programming in
Nigeria, (Ibadan: NCEMA) Chapter 16
Mercer, John (2001). Performance Budgeting For Federal agencies: A Framework (AMS)
Nigerian Labour Congress (NLC) (not dated). National Budget Has Not Developed Nigerian
Women by Peace Obiajulu, TUC President, Report on NLC website,
http://www.nlcng.org/peaceobiajulu.htm
Obadan, Mike I. (2003), National Development Panning and Budgeting in Nigeria (Lagos:
Broadway Press Ltd).
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, N. and P. Osafo-Kwaafo (2007), Nigerias Economic Reforms: Progress and
Challenges, Brookings Global Economy and Development, Working Paper No. 6, (Washington,
DC: The Brookings Institution).
Okonjo-Iweala, Ngozi (2004). Ministerial Briefing on Budget 2004.
Olaloku, F.A. (1994). Fearures and Techniques of the Budgeting System in Nigeria, in
Obadan, M.I and G. Ogiogio (eds.), Planning and Budgeting in Nigeria (Ibadan: NCEMA),
Chapter 8.
Philips, A.O. (1997). Nigerias Fiscal Policy, 1998 2010. NISER Monograph Series No.17.
Ibadan: NISER
Pyhrr, Peter A. (1977), The Zero-Base Approach to Government Budgeting, Public
Administration Review, 37(1), Jan/Feb, 1-8.
Robinson, Marc (1992, Program Budgeting: Costs and Benefits, Australian Journal of Public
Administration, 51(1), March, 17-26.
Rubin, Irene S. (1990), Budget Theory and Budget Practice: How Good the Fit?, Public
Administration Review, 50(2), March/April, 179-89
Schaeffer, Michael (2000). Municipal Budgeting Toolkit, Presentation for the
Intergovernmental Fiscal Relations and Local Financial Management Program of the World

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Bank Institute. Accessed online from
http://www1.worldbank.org/wbiep/decentralization/Topic10_Intro.htm
Schiavo-Campo, Salvatore and Daniel Tommasi (1999), Managing Government Expenditure
(Asian Development Bank). Accessed online from
http://www.adb.org/Documents/Manuals/Govt_Expenditure/default.asp
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,
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18
ANNEX: BUDGET AND PUBLIC EXPENDITURE REFORM MEASURES
OBJECTIVE: Improve Fiscal Discipline at all tiers of Government, Reduce Federal Govt. budget deficit and curtail deficit spending. Introduce
order into budget formulation and implementation.
EXPECTED IMPACT: More orderly budget process, greater ownership of budget by Executive and Legislature, Greater Transparency and
increased fiscal discipline.

SPECIFIC MEASURES & TARGETS IMPLEMENTATION STATUS AS AT END

&TIMING SEPT. 2004

On budget formulation, introduce fiscal strategy October 31, Done

paper as tool for specifying priorities and facilitating 2003
tradeoffs engaging the Executive, Legislature.
Introduce notion Medium Term Expenditure
Framework (MTEF)
Introduce sectoral/ministerial expenditure ceilings November 15, Done
as a budget tool in 2004 budget call circular. 2003

Clean up Capital & Recurrent Budgets to introduce October 31, 2003 Budget classification exercise completed end June 2004. New
clarity in Budget classification. through October codes now in use for 2005 budget.
31, 2004

Stock taking census on contractor arrears in system End November Stock taking on contractor arrears now completed.
2003 Strategy being put in place to pay down and securitize arrears.
Total contractor arrears over N500 billion
Develop plan to eliminate all contractor arrears by November 30, 2003 In process. Some of the excess crude savings will be used to pay
2006 and 2007 down contractor arrears in 2005.
Arrears will be securitized and redeemed 2006, 2007 and outer
years.
Eliminate 20% by 2004 2005 and 2006 About 7% to be eliminated by end 2004.
Eliminate 25% by 2005 and 25% by 2005 and 25% The stock of arrears is much larger than expected. About 10% will
by 2006 be eliminated in 2005. A plan for securitization and phased
Eliminate balance by 2007 elimination over a longer time horizon is being prepared.
Review and list backlog of uncompleted projects. December 31, 2003 List of 500 viable uncompleted projects in Due Process database.
Identify viable projects for completion with Viable projects have been identified for completion in most priority
emphasis on priority sectors of agriculture, sectors, Health, Works, and Water. Others ongoing. Identification
education, health, roads, power, water supply and of unviable projects has begun and list should be ready end
phase. March 2005. Some unviable projects have already been dropped
End funding for those that are unviable or not in from financing by the budget or they have been taken over by the
conformity with government development objectives private sector e.g. Ajaokuta, Delta Steel.

19
Make budgets publicly available, publish on End January 2004 for Budget summary booklet circulated since end March.
Government website, sale in bookshops. Increase 2004 budget Completed Budget published on Ministry website
transparency of government use of Revenue . www.fmf.gov.ng. Monthly publication in Local Newspapers of
allocations. State, Federal and Local Govt. shares of the Federation account
is ongoing. This is having tremendous impact as citizens and
media are now focusing more on issue of use of government
resources at all tiers of government. Booklet showing allocations
to all tiers of Government since 1999 will be published end Sept.
2004 as part of Transparency in Action series of the Federal
Ministry of Finance.
Quarterly reports on budget implementation & Quarterly starting Due to late passage of Appropriations bill in March, a half yearly
outcomes March 31, 2004 monitoring report has been done and transmitted to the National
Assembly Sept. 21st.
Introduce special monitoring of 15 largest capital In process
projects. Develop templates for March 30, 2004 AGFs Office undergoing pilot computerization exercise. However,
Monitoring in conjunction with BMPIU plans are underway for a financial management system linking
AGF to Budget Office with implementation in 2005-2006. Efforts
Create computerized budget monitoring system are underway in 4 pilot Ministries to strengthen AGF functions
and Essentially better link and concurrently and shift budgeting functions from Admin to Finance & Accounts.
computerize Budget &AGF Office. Also strengthen
AGF functions in line Ministries as part of the
introduction of the Financial Management System
(FMS).
Shift budgeting functions from Admin to Finance &
Accounts.

Create monthly cash management committee give December 31, Done. Committee had first meeting Jan., 28th, 2004.
teeth to Budget Monitoring and reconciliation. 2004 Monthly meetings have continued thereafter.
MOF, CBN, AGF, NNPC, Budget Office as core
members.

Strictly no excess ways and means beyond Quarterly monitoring Tight cash management through the Cash Management
statutory Excess allowed Committee has limited recourse to ways & means and reduced
likely fiscal deficit which is now easily financeable; looted funds
Develop and implement rudimentary expenditure July 2005 and additional independent revenues raised by the Federal
tracking system for 3 sectors -Education, Health, Government.
Roads and Agriculture.

20
Substantially improve pace of Capital Budget 80% of Budget Capital Budget to be released in quarterly tranches starting with
implementation implemented by first tranche of N100 billion. Second and third quarter tranches
December 31,2004 have also been released. A total of about N284 billion has been
released for the three quarters out of a capital budget of N350
billion.

Capital accounts of Ministries to be organized as January 1, 2004 Done and next step is to move to a single Treasury account
sub accounts under a single Central Capital
Account with CBN

Revise and send Fiscal Responsibility Bill including December 31, 2003 Fiscal Responsibility bill has been revised but stakeholder
Oil or commodity price based fiscal rule to National consultations are on-going to facilitate public support for the bill
Assembly and easier passage. These consultations with Governors, State
Commissioners of Finance Civil Society, Legislature etc. will be
completed end Oct. Bill will be transmitted to National Assembly
end Nov. with passage expected end March 2005. Timetable has
slipped because revisions took longer than expected and greater
stakeholder consultations are needed in view of the bills
importance and significance to the reform programme.

Revise and send finance bill to National Assembly December 31, 2003 Now scheduled for Nov, 2004
Passage of fiscal Responsibility and Finance Bills.
Develop and get approved by FEC & NEC Expected Sept 30,
implementation plan for Fiscal Responsibility Bill 2004

Sept. 30, 2004

21