Types of Budget in Nigeria And Importance

This article is a look at the types of budgets that have been implemented or that possibly be implemented, constitutionally, in the Federal Republic of Nigeria. We will also highlight the factors that affect a budget, as well as the possible benefits of having a national budget. Before we go on, however, it is a good idea, for the purpose of clarity, to first look at the meaning of the term; Budget.

So what is a budget?

{{A government budget is a document prepared by the government (most often the office of the President) or other political entity presenting its expected estimated revenues}} and proposed way or formula for the spending of that money. In the Nigerian system, the President (or if he is unavailable that duty falls on his vice President ) presents the budget to a joint session of the National Assembly. He is also, as a matter of tradition, required to make a speech to the legislature, where he is to justify the budget presented, point out the key focus areas, and explain the reason why he has chosen his key focus areas. After that ceremony, the National Assembly will need some time to review the budget, and then approve it, or make recommendations for amendments. Often, when the president has made the appropriate changes and sends the document back to the National Assembly, it is then approved and so disbursement of funds to the various parastatals and agencies can commence.

Types of Budget in Nigeria

What Determines a Budget?

The two basic factors that determine the outlook of any budget are the revenues and expenses. In the case of the Nigerian government, revenues are derived primarily from oil, and so the price of oil or the projected price of oil is a key factor and is put into consideration. {{{Government expenses include spending on current goods, equipment, commodities, and services, which economists call government consumption; and also government investment expenditures such as infrastructure investment (roads, schools, hospitals, etc)}} or research expenditure; and transfer payments like unemployment or retirement benefits (pension schemes). There is another way to explain the elements of the budget. These are receipts and expenditures. Receipts are of two types, revenue receipt and capital receipt (money received from taxes and sales of goods). The same way expenditures are of two nature, revenue and capital expenditure which is money spent on people and on goods or services.

Types of Budget In Nigeria

Government budgets are of the following types: Please note that in a single financial year, more than one kind of budget can be implemented.

  • Union Budget: This should perhaps more aptly be called the National Budget. Anyway, the union budget is the budget prepared by the central government or federal government, for the country as a whole. This budget can have a different key focus every year, depending on the particular needs of the country at a given time.
  • State Budget: The state also has its own needs, which may be different from that of the federal government, and so the office of the governor may prepare a budget, outlining the state’s needs, revenue, and expenditure.
  • Plan Budget: It is a special document showing the budgetary provisions that the government has made for important projects, programs, and schemes which are urgent, and are included in the central plan of the country.
  • Performance Budget: The individual ministries, agencies and departments dealing with development activities must also prepare performance budgets, which are circulated to members of the National Assembly. These performance budgets present the main projects, programmes and activities of the ministry or parastatal, and are intended to justify the allocation given to them.
  • Supplementary Budget: This, made by the Federal Government is a budget that intends to make more money available for disbursement to the various ministries and agencies and parastatal, perhaps owing to the government has exceeded its revenue forecast or projection.
  • Zero-based Budget: This kind of system is defined as the budgetary process which requires each ministry/department to justify its entire budget in greater detail. It is a system of the budget in which all government expenditures for the previous year must be justified so as to allow for a similar amount for the new period.

Need And Importance Of A Government Budget

Government Budget is an  immensely  important activity for a variety of reasons, some of which are highlighted below:

  • A planned approach to government’s activities: Without a budget, it would seem as if the government was just spending blindly without any real plan for the future, or any direction for sustainable development. A budget connotes stability and a deliberate, intentional approach to governance.
  • An integrated approach to fiscal operations: Instead of each ministry spending anonymously, the budget brings them all together like a family, all working for a common interest, the development, and upliftment of the People of Nigeria.
  • Affecting economic activities: When the budget is passed and the money is disbursed, you will find that there is money flowing all over the economy. Parastatals will engage contractors and hire workers to carry out capital projects, and those workers too will contribute to the buying and selling of the country, thus boosting the economy.
  • The instrument of economics policy: The budget, especially the part that researches the expected revenues helps the government to fashion out policies that can help bring development and stability. For example, when the government sees that it is dependent on oil exports, it can make efforts to diversify the economy.
  • Index of government’s functioning: If anybody wanted to research in detail how the Nigerian government or any government for that matter is run, a good place to start would be the Budget.
  • Public accountability: A Budget is a good tool for ensuring accountability in government. This is because the government thus makes a paper trail that can help in investigating any alleged misappropriation of funds. If a president or member of the cabinet stands accused of corruption, he has only to make a reference to the budget in order to clear his name.
  • Allocation of resources: Resources are scares, and so it is certainly stupid to spend unwisely. A budget helps to encourage the government to make the wise and purposeful allocation of available resources.
  • Elimination of poverty: The ultimate goal of the budgetary and planning office should be to eliminate poverty in Nigeria. Money cannot be handed out to citizens, but capital projects and infrastructure can be put in place that can create an enabling environment for the citizens to prosper.
  • Reduce inequality in the distribution of income: The budget and planning office can see early signs that the resources available are inequitably distributed, and can make concerted efforts to correct this anomaly before it produces terrible consequences in the country. Some of the consequences that can be produced by an unequal distribution of resources throughout the country are that such a system can lead to protests and riots, as the youth in the affected areas can quickly become restless, and threaten not just the peace of the country but the national unity as well. Remember that Nigeria is made up of many different tribes, some of whom have a long history of disaffection with one another, and who suspect each other of conspiring to disenfranchise them perpetually. Some sections of the country have also been clamoring for separation or secession for a very long time. So equitable distribution of resources is important.


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