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Aham Ikwumezie Ph.D, is a Lecturer, Department of Economics, Imo State University, Owerri


Budget is a very important exercise in human life, be it private or public. According to Ikwumezie [2001], it is necessitated by the scarcity of resources which have alternative uses. Every entity has its objectives and goals.  In business organizations, the primary goals centre on profitability and contribution to economic and social improvement.   In the public sector, the objectives are also economic and non-economic. The achievement of these objectives is within specified cost constraints. Public budget in Nigeria today is one exercise that can affect so many things. Abdullahi [2011] noted that public budget has become the main instruments by which government attempts to manage economic growth and development. It has also become an accounting instrument by which officials are held accountable for what government does and what it does not manage to accomplish.

As a managerial document, the budget specifies the ways and means for providing government services and as a political document, it allocates scarce resources among competing social and economic needs. The basic requirements for the budgetary process in Nigerian public sector are provided for in the Constitution of the Federal Republic of Nigeria, Financial Regulations and Financial Memorandum (Abdullahi in Abdullahi 2011).

The budgeting exercise at the federal level is strongly governed by the provisions of the 1999 Constitution. This involves the required process through which the budget must undergo before becoming an appropriation act of parliament, which strictly speaking, is a form of law abiding on and guiding the Executive in terms of the implementation of the budget provisions and executing the intending project and programs.

At the state level, budgeting is also governed to some extent by the constitution as well as the financial regulations. However, it is a different procedure at the local government level. Presently, the local governments in Nigeria are strictly under the regulations of the state Houses of Assembly which regulate their administrative and financial operations, besides the financial memorandum. This shows that the budgeting process at the local government is largely regulated by the executive as well as the state Houses of Assembly.


A budget is a quantified plan expressed in monetary terms which is prepared and approved for a defined future period of time, showing how much income is expected for the period and how much expenditure to be incurred during the period as well as the capital to be employed to attain a given objective (CIMA). A budget is also a forecast of expenditures and revenue for a specific period of time, usually one year.

The most difficult budgetary process involves a government Budget which is a plan for the collection and expenditure of monies needed to carry out social, military and economic policies of an administration [Ndan 2009 in Abdullahi 2011]. A government budget in its entire ramifications is fragile with many definitions based on the views of scholars and administrators. Ujo et al in Abdullahi (2011) asserted that budget is a control device used by administrators to guide them in the allocation of resources. Abdullahi (2008) observes that the budget is a control device of specific expenditure for projects.

Budgets are control devices that are designed to guide the actions of a unit and to provide feedback if the budget is secured. They are the standards for comparing actual expenditure (Robins in Abdullahi 2011).

Simply put, government budget is an estimation of government expenditure and revenue for the oncoming financial year. It is a financial plan that serves as basis for expenditure decision-making and consequent control of expenditure. As a planning document, a budget enables business, government, private organizations and households to set their priority and monitor progress toward selected goals. The personal or family budget is a financial plan that helps individuals to balance income and expenditure. A business budget is generally used as a tool to formulate intelligent decisions on the management and growth of a business venture.

The procedure for preparing budget is called budgetary process while the monitoring mechanism is budgetary control.

Purpose of Budget

There are a good number of reasons for budgeting. They include:

*     Budget is an instrument of economic and monetary policy. The budget can be used to control the economy to a substantial level

*     Budget helps in the determination of governmental activities to satisfy preferences of people.

*     Budget helps the government to attain greater efficiency, in the uses of resources. With budget, what is done is clearly stated Deviation is only allowed when necessary.

*     Budget is used to reduce income inequality. This is done through progressive income tax.

*     Budget facilitates the making of political decisions

*     Budget authorizes action in government

*     Budget can be used to fight inflation, recession etc.

Budget Types

A budget can be deficit, surplus or balance.

Deficit budget

This is a budget in which the aggregate expenditure of government is greater or more than total revenue collected within the period. The effect of deficit budget is that there tends to be more money in circulation.

Surplus Budget

This is a situation where government expenditure is less than its revenue. Surplus budget attracts more taxes and levies on public and firms with less government expenditure in the economy.

Balanced Budget

A balanced budget is a budget in which the total revenues of government equal the total expenditure. This is an ideal situation. The type of budget being implemented by the government depends on the state of the economy and the goal being pursued.

Budgeting Techniques

There are various methods adopted in the preparation of budgets. These include:

*  Line – Item Budgeting

This system of budgeting is an expenditure-oriented approach to budgeting where allocations are made based on objectives of expenditure, line after line using the head and sub-heads of accounts in the normal government expenditure profile. It is clearly the traditional approach to budgeting. Expenditures are based entirely on personal emoluments, overhead cost etc. This method is popular in Nigeria. Its simplicity and ease of application still recommends its continued use.

An incremental approach is often employed in arriving at the current estimates being a certain percentage over the previous year’s budget.

* Programme Budget (PB) or Planning Programming Budgeting (PPBS)

This is against the traditional budgeting technique which attempts to provide solutions to the shortcomings in the traditional budgeting techniques by emphasizing output and not input. The techniques hinge on the system theory which recognizes that an economic system is made up of subsystems which perform inter-related roles. It makes for efficiency in resources use since it looks at cost and benefits of any particular budget choice.

PPBS starts by first identifying the goals to be realized, then looking at the resource available for the attainment of such goals; and spelling out the activities of the government towards achieving the goals. The activities seen as capable of achieving the set goals in the most cost-effective manner are then chosen.

*  Zero- based Budgeting (ZBB)

In ZBB, all the items to be included in the budget must be given appraisal irrespective of appearing in the previous budget. No reference is made to the previous budget quite unlike the traditional budgeting techniques. An item in the previous budget can be included if deemed necessary.

                                                                       To be continued

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