CHAPTER ONE

INTRODUCTION

1.1 Background Of The Study

Fundamentally, a budget plays a critical and strategic role in the overall administration and sustainability of a country's affairs. It is a financial policy document that comprises the government's estimates of income and expenditures for a set time, often one year (Malgwi and Unegbu, 2012; and Okpala, 2012). According to Olomola (2012), a budget is a critical economic tool that the government uses to assist and carry out its agenda within a fiscal year. It is an economic fiscal method for the effective mobilization, allocation, and management of resources in order to accomplish predetermined goals (Horngren et al., 2008).

By tradition, the government exists to serve the national and individual interests (Bello, 2001; Okpala, 2012). It manages the affairs and welfare of its populace using a variety of mechanisms, the most important of which is budgeting. The government uses its yearly budget to control the economy and appropriate the nation's riches (Okpala, 2012; Olurankinse, 2012). Thus, it is thought that a nation's budget should contribute to poverty reduction, infrastructure development, job creation, the development of critical sectors of the economy, and the improvement of the populace's standard of life (Olomola, 2012). According to Aminu Tambuwal, the former Speaker of the House of Representatives, the budget and its execution continue to be sore points of governance in the process of nation building (Nwogu, 2013). This is because a nation's development and economic growth are inextricably linked to its revenue collection and financial management funds.

Each fiscal year in Nigeria, funds are distributed to the different levels of government in accordance with the established official allocation formula, with disbursements made to the various ministries, departments, and agencies in accordance with the approved budget estimates (ICAN, 2009; Fiscal Responsibility Act, 2007; The Constitution of the Federal Republic of Nigeria, 1999; Public Procurement Act, 2007). When these funds intended to cover recurring expenditures, capital projects, and other developmental activities are allocated, they are often used for personal enrichment (Olurankinse, 2012; Peter, 1999), and the budget seldom achieves its goals. This has been the pattern throughout the years, with government expenditure having little or no effect on the electorate's standard of life (Abe, 2012; Agbonkhese and Asekome, 2014). According to the Central Intelligence Agency (CIA) (2016), economic diversification and rapid growth in Nigeria have not resulted in a meaningful drop in poverty levels.

According to Okwoli (2004) and Akpan (2013), Nigerian society is corrupt with practices of corruption, including fictitious persons (ghost-workers) on government payrolls, contract inflation, budget padding, and money laundering. In 2015, Transparency International rated Nigeria as the 32nd most corrupt country in the world out of 168 nations assessed (Transparency International, 2015). Similarly, KPMG stated that in 2012 alone, the government lost over 225 billion (US$1.5 billion) to fraudulent practices. Additionally, it was stated that Nigeria accounted for the biggest number of fraud cases on the continent, leading the list of the most fraudulent countries in Africa in 2012. (Randle, 2012). To account for the majority of fraud instances in the country, political elites and public officials have been identified as primary perpetrators (Bello, 2001; Onuorah and Appah, 2012; Otusanya and Lauwo, 2013; Transparency International, 2015; CIA, 2016).

With this inclination, along with the nation's and economy's issues, the dividend of democracy to electorates remains a mirage and a long way from reality. Doubts seem to have surpassed electorate expectations. Interest in the status of governance is increasing (Olomola, 2012; Iredia, 2012). Significant stakeholder interests are placed on the nation's yearly budgets' effectiveness in guaranteeing the efficient management and accountability of public funds (Okpala, 2012). Without a progressive and durable fiscal system that serves as the economic blueprint for national reforms and change, Nigeria's 2020 aim of becoming one of the world's first global economies would remain a fiction (Horngren et al., 2008; Olomola, 2012; Abogun and Fagbemi, 2012). It is consequently vital that the nation's fiscal system be severely scrutinized and stringent steps made to ensure fiscal transparency and effective management and accountability of public funds.

1.2 Statement Of The Problem

As Olajide (2011), Olurankinse (2012), Okpala (2012), Okolo (2012), and Agbonkhese and Asekome (2014) observed, Nigerians have persistently denounced the nation's yearly budget's dismal failure to meet fiscal targets and manage and account for public funds each year since independence. There are reservations and inquiries about the nation's budgetary procedure and execution techniques (Akpan, 2013; Olomola, 2012; Iredia, 2012). This has been attributed to governance problems, poor management of public funds, and a high degree of corruption among public officials (Peter, 1999; Olomola, 2012; Omah et al., 2013; Iredia, 2012; Ugwuanyi and Ewuim, 2012; Agbonkhese and Asekome, 2014; Transparency International, 2015; Central Intelligence Agency, 2016).

As a result, this research emphasizes the need of revamping the nation's budgetary structure and execution tactics. It examines the status of the nation's development, the prevalence of corruption and money laundering among public officials, and the ineffective execution of the nation's yearly budgets as proof of budgetary system malpractices. This is because, despite the government's constant increase in yearly spending, neither residents' living conditions nor infrastructural facilities have improved much (Okpala, 2012; Samuel and Kabir, 2011; CIA, 2016).

1.3 Objective Of The Study

The overall aim of this study is to critically examine public fund management and government budgeting in Nigeria. Hence, the study will be channeled to the following specific objectives;

1.        Ascertain whether there is true and effective accountability in the management of public funds in Nigeria.

2.        Determine the level of transparency in the management of public funds in Nigeria.

3.        Ascertain whether the Nigerian budgeting system is adequately effective.

4.        Determine the extent to which the Nigeria nation’s annual budget in fulfills its fiscal objectives.

5.        Ascertain whether the systems in place to control how pubic funds are accessed, expended and accounted for is adequately effective.

1.4 Research Question

The study will be guided by the following questions;

1)        Is there true and effective accountability in the management of public funds in Nigeria?

2)        What is the level of transparency in the management of public funds in Nigeria

3)        Is the Nigeria budgeting system adequately effective?

4)        What is the extent to which the Nigeria nation’s annual budget fulfills its fiscal objectives?

5)        Are the systems in place to control how pubic funds are accessed, expended and accounted for adequately effective?

1.5 Significance Of The Study

Significant contributions of this study include the following: first, to call the attention of the legislators and budget implementation and monitoring committees to the need to hedge identified loopholes in the nation’s budgetary system. Second, it provides empirical evidence on the current state of PFM and accountability in government expenditure. Finally, it extends the body of literature on government budgeting (GB)

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