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Steps in Presentation of National Budget


In the present Nigeria, the government budget involves the following steps:
  1.  An appraisal of the economy for the past budgeting period showing achievement, failures and things that posed as problems during the period. 
  2. The appraisal of the economy in the past budget period is followed by an analysis of the present day situation in economy, stating problem and prospects in the present budget periods. 
  3. The budget then specifies the national objectives in the budgeting period and the various policies aimed at achieving them. In some of the budgets, specific targets are set and efforts are directed toward achieving them.
  4. The budget then forecasts the future economic trend over the given period. 
  5. Finally, the budget gives an outlay of expected revenue and intended expenditure over the budget period. This involves an analysis of the expected government resources during the budget period and the way the resources will be utilised to ensure justice and equity. 

Note In most cases, the government bases the current year budget on the figures in the previous year budget and this system is normally referred to as incremental system of budgets.

 State and Local Government Budget


Like the Federal Government, the state and local governments prepare and present their own budgets almost in the same manner as the Federal government. The only difference is that each tier of the government prepares its own budget according to its own resources

As already mentioned the Federal government presents its budget on the last day of previous fiscal year. As the fiscal year in Nigeria runs from 1st of January to 31st of December, the Federal government budget is

usually presented on 31st day of December each year. This will be followed by presentation of budgets by different state Governors. The presentation of State budget has no specific date like that of Federal Govern- ment. In preparing the budget, each state takes into account its resources, peculiarities and priorities. The revenues generated from the state are meant to urgument the state’s share of the ‘Federation Account’. The presentation of the state budget is done by the state chief executives. This is followed by detailed analysis of the budget by the Commissioner of Finance during which he answers questions from the general public.

It has to be noted that the implementation of the approved budget is usually carried out by the executive arm of the government whether it is Federal or State. The budgeted revenue mapped out for expenditure in the process of the execution of the content of the budget is later audited. This is to ensure that the approved money is spent in the project for which it is meant or in other words to avoid the diversion of fund from the project it is meant for to another and less important project.

The local government as the third-tier of the government presents its budget last after the State. The order in the presentation is so because the local government that presents last expects some amount from both the Federal and State Governments to make up what it will generate by herself. The expenditure of the local government is mostly directed towards meeting the recurrent expenditure of the local government as well as developing the resources of the local government.

The Budget as an Instrument of Economic Policy


The budget can be used as an instrument of economic policy. This is why we have balanced budget, budget deficit or budget surplus. Each of these three type of budgets has its own advantages as well as disadvan- tages. Each one plays a good role in the economy.

The classical economists believed that the budget must be balanced and they saw an unbalanced budget as an unhealthy phenomenon. Much is sometimes made of the need for balanced budgets to ensure a healthy economy even in the recent past. But even if optimum amount of government transfers and purchases occur, balanced budgets do not necessarily prevent inflation or solve any other economic problem. Instead with a balanced budget, total customer spending may be so high that inflation or shortages occur, or so low that there is unemployment.

Budget deficits were no longer to be viewed as extraordinary and potentially dangerous acceptable only as temporary expedient during recessions. Instead they were to be viewed as just another tool of economic policy. Some economists at present argue that if budget deficit are needed to provide the additional spending required to ensure a full employment economy, then such deficit should be encouraged in expansionary period as well as in recessions. These economists suggest that annual deficits in most years might be required as the price of economic growth.

The following are some of the main ways in which the budget can be used as an instrument of economic policy.

 To Stimulate Recovery from a Recession

In the later years of the Great Depression, it was suggested that the budget should be deliberately
unbalanced, a policy known as deficit financing in order to promote recovery. This worked
successfully during the period and also during a period of serious slump, it is necessary, but in he case of recession, it may be sufficient simply to reduce taxation.

To Check Inflation

The aim of an anti-inflationary budget is to reduce the amount of purchasing power in the hands of the consumers, and this is done by increasing the rate of taxation so that a substantial surplus is achieved. So during the time of inflation, governments should increase tax rate so as to reduce the disposable income of the consumers which will help to reduce the inflation rate.

Budgeting in the Nigerian Public Sector – (Government Budgeting) 121

To Reduce Inequality of Incomes


In a country where great inequality of incomes exist, attempt should be made in the budget to introduce progressive tax system. This will make the high income group to pay more proportion of their income or wealth as tax than the low income group. Again inequality of incomes can still be reduced by the provision of some social services which, though available to everybody are generally of most benefit to people in the lower income group.

To improve the Balance of Payment Position

Duties on particular imports may be imposed or increased for the purpose of curtailing the demand for these goods, thereby reducing imports. Again duties on export goods can be reduced to encourage
export which will equally improve the balance of payment position.

It is Used as a Means of Raising Revenue

This was the original role of the budget. Through the budget, the government plans to raise enough
money to finance the cost of national emergency such as war or disaster. It is also used as a means of
raising revenue for the various development projects of the government. This is true because in the
budget, the government sets out how it plans to raise its revenue.

Budget is Used as a Tool of Economic Planning

Through the budget, the government assesses the economic performance of the various sectors of the
economy during the previous year. Sectors which require special attention i.e. priority areas are identi- fied and carefully enumerated.

Disposing of Surplus Revenue in the Budget

Whenever a budget is not a balanced one, it would either be budget surplus or a budget deficit. Care must, therefore, be taken in handling either of the two. When there is a surplus budget giving rise to surplus revenue due to increase in taxation or decrease in government expenditure, the government must be very careful to handle this surplus in a way that will not offset the intended deflationary effect. The government must withdraw the money form circular flow and not allow it to creep back into the circular flow.

One way by which to accomplish this goal is to actually destroy the money i.e. to burn the bills. An alternative to this is to hold the money in idle treasury deposits. The third option is to use the money to retire some portion of the public debt.

Ordinarily, when holders of government bonds cash in their holdings, the government simply issues new bonds, selling the same amount of bonds to some different bondholders so that the amount of national debt remains constant. But when the government has a surplus, it can elect to pay off the old bondholders without selling new bonds thus retiring the debt.

However, there is a risk that some of this money will find its way back into the circular flow. But for the most part, the money, that the households and business have invested in government bonds is intended to be saved. Receivers of the money are, therefore, most likely to reinvest it in other form of saving-stocks in private industry, savings account or other securities.

Financing a Deficit in the Budget


It has already been stated that whenever the government expenditure is greater then the revenue collected deficit will accrue. How can this deficit be financed? There are many ways through which such deficit can be financed.

In the first place, the government may choose to meet the deficit by increasing the supply of money; that is the government will simply print up new bills in the amount equal to the deficit. Under certain circum- stances, this is a satisfactory solution but in some cases it may be inflationary. The inflation which is the reduction in the purchasing power of the currency may be acceptable or even beneficial with certain limits. However it carries with it potential dangers for the economy.

Historically, many cases of hyperinflation were either started or fed by the printing of new money to meet budget deficit. So in some cases, the governments are somehow hesitant about making extensive use of this method of financing. But the introduction of certain amount of new money is often a sound economic policy. In fact the relationship between the supply and value of money and the stability of the economy is an important monetary policy, The other way that government can finance a budget deficit is by selling bonds i.e borrowing money from households and businesses. One possible drawback to this method of financing deficit is that it may take from households money that would otherwise be spent or from the business money that would otherwise be invested in capital goods. Any such decline in spending or investment would of course offset the basic goal of an expansionary fiscal policy.

Students Assessment Exercise
Q1 a. Explain what is meant by the term “Budget”.
b. Discuss how government budget can be used as an instrument of economic policy.
Q2 a. Distinguish between budget deficit and budget surplus.
b. Under what situations will each one be applied in the economy.
Q3. Write briefly on the following
a. Balanced budget
b. Budget deficit
c. Budget surplus
d. Budget presentation

Conclusion


A budget may be simply defined as a document indicating the total and composition of government expendi- tures and the sources from which such expenditure are expected to be financed in the course of the year. When a government plans its annual expenditure and revenue in such a way that both are equal, the budget is said to be balanced. Where annual expenditures and tax revenues are planned in such a way that the expected revenue exceed expenditure then the budget is referred to as a surplus budget, however, the total intended expenditures for the year exceed the anticipated revenues, then the budget is referred to as a deficit budget.

Essentially, the budget process in Nigeria involves the determination of the expenditure priorities of the government together with the methods of applying the revenues from which these expenditures are met.

Although they may be variations among countries, the objectives and functions of a typical budget in general include the following.
  • The allocation function 
  • The distribution function 
  • The stabilisation function 
  • The control and management function 
  • Protection for local industries.