Nigeria Budget & Its Components

A budget is an essential aspect of Individual, Organisation and Government financials. It is a plan stated in monetary terms. The purpose of Budget is to:  Provide a forecast of revenues and expenditures  Enable the actual financial operation of the business to be measured against the forecast.  Establish the cost constraint for a project, program, or operation Source: wikipedia Why do we produce budgets?  To control resources  To communicate plans to various Stakeholders  To motivate and strive to achieve budget goals  To evaluate the performance  To provide visibility into performance

The Nigeria budget is made up of four components:  Part A – Statutory Transfers  Part B – Debts Service  Part C – Recurrent Expenditure (non-debt)  Part D – Capital Expenditure Statutory Transfer Debt Service Recurrent Expenditure Capital Expenditure Consolidated Revenue Fund of the Federation MDA Expenditure

The Federal Government is required by law to make certain mandatory expenditures annually in respect of: Statutory Transfer Statutory Transfer: NJC NDDC UBEC INEC NASS NHRC The National Judicial Council The Niger Delta Development Commission The Universal Basic Education Commission The Independent National Electoral Commission The National Assembly The National Human Rights Commission

Whenever the Federal Government spends more money than the revenues it earns, it must find the financial resources to pay for this additional spending. Debt Service Debt Service: Domestic Debts Foreign Debts Moneys borrowed within Nigeria moneys borrowed from outside Nigeria When the government pays interest and principal on its debts, this is referred to as Debt Service.

Statutory Transfer & Debt Services Statutory Transfer Debts Services ≈ 18.73% Statutory Transfers and Debt Service currently make up on average about 18.73% of Federal spending

Spending by the Ministries, Departments and Agencies (MDA) of Government on Salaries, Pensions & Overheads Recurrent (non-debt) Recurrent Expenditure (non-debt): Salaries Overheads Pensions The Federal Government employs people to work in the various MDAs and pays them salaries in order to maintain the administration of government and continue to provide public goods and services. In addition to the pension contributions paid on behalf of workers under the Contributory Pension Scheme, the Federal Government continues to pay the pensions of existing pensioners under the old Pay-As-You-Go System. Payment for electricity, water, telecommunications, office rent, office equipment and consumables, staff training, transportation, etc.

Capital Expenditure is used to provide infrastructure such as roads, water and power; fund educational services such as schools, colleges and universities; and provide healthcare facilities and services among others. Capital Expenditure: Capital Expenditure Infrastructure Healthcare Educational Services

Recurrent & Capital Expenditure: Recurrent Expenditure Capital Expenditure ≈ 81.27% The balance of 81.27% is MDA Expenditure, that is, money spent by the MDAs of Government to provide public goods and services

Nigeria Budget in a nutshell: Statutory Transfer Debt Services Recurrent Expenditure Capital Expenditure MDA Expenditure NJC NDDC UBEC INEC NASS NHRC Domestic Debts Foreign Debts Salaries Pensions Overheads Infrastructure Educational Services Healthcare ≈ 81.27% ≈ 18.73%

Empirical Analysis of Budget Components YEARBUDGET COMPONENTSALLOCATION % 2007 TOTAL - STATUTORY TRANSFERS102,300,000, % TOTAL - DEBTS SERVICE326,000,000, % TOTAL - RECURRENT (NON-DEBT)1,056,563,540, % TOTAL - CAPITAL EXPENDITURE781,530,882, % AGGREGATE EXPENDITURE2,266,394,423, TOTAL - STATUTORY TRANSFERS86,460,000, % TOTAL - DEBTS SERVICE289,500,000, % TOTAL - RECURRENT (NON-DEBT)961,108,775, % TOTAL - CAPITAL EXPENDITURE539,233,587, % AGGREGATE EXPENDITURE1,876,302,363, TOTAL - STATUTORY TRANSFERS89,600,000, % TOTAL - DEBTS SERVICE355,723,000, % TOTAL - RECURRENT (NON-DEBT)737,330,997, % TOTAL - CAPITAL EXPENDITURE617,284,246, % AGGREGATE EXPENDITURE1,799,938,243, TOTAL - STATUTORY TRANSFERS532,324,500, % TOTAL - DEBTS SERVICE369,369,000, % TOTAL - RECURRENT (NON-DEBT)539,286,472, % TOTAL - CAPITAL EXPENDITURE349,868,371, % AGGREGATE EXPENDITURE1,790,848,344,588 ( 2004 – 2007 )

Empirical Analysis of Budget Components YEARBUDGET COMPONENTSALLOCATION % 2011 TOTAL - STATUTORY TRANSFERS196,115,163, % TOTAL - DEBTS SERVICE542,381,827, % TOTAL - RECURRENT (NON-DEBT)2,481,705,176, % TOTAL - CAPITAL EXPENDITURE1,005,989,391, % AGGREGATE EXPENDITURE4,226,191,559, TOTAL - STATUTORY TRANSFERS180,279,158, % TOTAL - DEBTS SERVICE497,071,797, % TOTAL - RECURRENT (NON-DEBT)2,077,358,560, % TOTAL - CAPITAL EXPENDITURE1,853,906,761, % AGGREGATE EXPENDITURE4,608,616,278, TOTAL - STATUTORY TRANSFERS140,693,160, % TOTAL - DEBTS SERVICE283,649,892, % TOTAL - RECURRENT (NON-DEBT)1,649,429,453, % TOTAL - CAPITAL EXPENDITURE796,737,536, % AGGREGATE EXPENDITURE2,870,510,042, TOTAL - STATUTORY TRANSFERS187,600,000, % TOTAL - DEBTS SERVICE372,200,000, % TOTAL - RECURRENT (NON-DEBT)1,259,121,253, % TOTAL - CAPITAL EXPENDITURE673,155,465, % AGGREGATE EXPENDITURE2,492,076,718,937 ( 2008 – 2011 )

Empirical Analysis of Budget Components YEARBUDGET COMPONENTSALLOCATION % 2013 TOTAL - STATUTORY TRANSFERS387,976,000, TOTAL - DEBTS SERVICE591,764,000, TOTAL - RECURRENT (NON-DEBT)2,386,024,770, TOTAL - CAPITAL EXPENDITURE1,621,455,655, AGGREGATE EXPENDITURE4,987,220,425, TOTAL - STATUTORY TRANSFERS397,929,101, TOTAL - DEBTS SERVICE559,580,000, TOTAL - RECURRENT (NON-DEBT)2,471,814,067, TOTAL - CAPITAL EXPENDITURE1,319,777,651, AGGREGATE EXPENDITURE4,749,100,821,170 ( 2012 – 2013 )

Graphical Representation of Statutory Transfer ( 2004 – 2013 ) AVG NJC 17.27%21.36%48.44%50.48%55.44%41.58%42.03%40.48%36.83%5.64%35.95% NDDC 15.81%13.74%23.86%24.93%19.28%37.26%23.46%24.27%32.14%2.63%21.74% UBEC 19.66%17.15%27.70%24.60%25.28%21.16%34.51%35.25%31.03%23.63% NASS 38.66%37.70%56.72%85.54%45.86%39.31%58.65%52.05%61.87%6.52%48.29% INEC 8.25%10.05%23.15%27.85%11.40%6.77%63.03%6.46%15.70% NHRC 0.35%0.03%0.04% Top Spenders: 1 st = NASS2 nd =NJC3 rd = UBEC

Graphical Representation of Debt Services ( 2004 – 2013 ) AVG DOMESTIC DEBTS 91.82%91.49%92.82%93.18%80.31%82.27%81.29%75.99%52.22%50.29%79.17% FOREIGN DEBTS 8.18%8.51%7.18%6.82%19.69%17.73%18.71%24.01%47.78%49.71%20.83%

Graphical Representation of Recurrent Expenditure ( 2004 – 2013 )MDAs Gross % EDUCATION12.66 POLICE FORMATION AND COMMANDS11.33 DEFENCE/MOD/ARMY/AIR FORCE/NAVY11.00 HEALTH7.38 INTERIOR6.73 Top Spenders of Recurrent Expenditure:

Graphical Representation of Capital Expenditure ( 2004 – 2013 ) Top Spenders of Recurrent Expenditure: MDAsGross % WORKS13.58 POWER10.64 FEDERAL CAPITAL TERRITORY ADMINISTRATION10.18 AGRICULTURE & RURAL DEVELOPMENT6.57 WATER RESOURCES5.40 EDUCATION5.21 TRANSPORT4.81 HEALTH4.73 DEFENCE/MOD/ARMY/AIR FORCE/NAVY3.34

Statutory Transfer Debt Services Recurrent Expenditure Capital Expenditure Graphical Representation of All Budget Components Evidently, Recurrent Expenditure (Salaries, Pensions and Overheads) enjoys a huge share of Nigeria’s yearly budget

Summary of the Budget Components Recurrent Expenditure 48.06% (Salaries, Pensions & Overhead costs) Capital Expenditure (Infrastructure, Educational Services & Health) Debt Services (Domestic & Foreign Debts) Statutory Transfer (NJC NDDC UBEC NASS INEC NHRC) 29.62% 14.23% 8.10% (2004 – 2013)

Freely share, freely use and freely acknowledge the source – © Wale Micaiah Data source: -Budgit ( -Nigeria Budget office ( Analysis by: Wale Micaiah (M.sc., CISM, CCNP-Sec, MCSA) e: m: b: walemicaiah.blog.com w.