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 Expendit

ure

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 ServicesStatuto

ry Transfe

r

Debts Service

s

≈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 Expenditur

e

Infrastructure

Healthcare

Educational Services

Recurrent & Capital Expenditure:

Recurrent

Expenditure

Capital Expendit

ure

≈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 Expendit

ure

MDA Expenditure

NJCNDDCUBECINECNASSNHRC

Domestic DebtsForeign Debts

Salaries

PensionsOverhea

ds

InfrastructureEducational

ServicesHealthcare

≈ 81.27%≈ 18.73%

Empirical Analysis of Budget Components

YEAR BUDGET COMPONENTS ALLOCATION % %

2007

TOTAL - STATUTORY TRANSFERS 102,300,000,000 4.51% 18.90TOTAL - DEBTS SERVICE 326,000,000,000 14.38%TOTAL - RECURRENT (NON-DEBT) 1,056,563,540,997 46.62% 81.10TOTAL - CAPITAL EXPENDITURE 781,530,882,480 34.48%AGGREGATE EXPENDITURE 2,266,394,423,477

2006

TOTAL - STATUTORY TRANSFERS 86,460,000,000 4.61% 20.04TOTAL - DEBTS SERVICE 289,500,000,000 15.43%TOTAL - RECURRENT (NON-DEBT) 961,108,775,596 51.22% 79.96TOTAL - CAPITAL EXPENDITURE 539,233,587,755 28.74%AGGREGATE EXPENDITURE 1,876,302,363,351

2005

TOTAL - STATUTORY TRANSFERS 89,600,000,000 4.98% 24.74TOTAL - DEBTS SERVICE 355,723,000,000 19.76%TOTAL - RECURRENT (NON-DEBT) 737,330,997,094 40.96% 75.26TOTAL - CAPITAL EXPENDITURE 617,284,246,044 34.29%AGGREGATE EXPENDITURE 1,799,938,243,138

2004

TOTAL - STATUTORY TRANSFERS 532,324,500,000 29.72% 50.35TOTAL - DEBTS SERVICE 369,369,000,000 20.63%TOTAL - RECURRENT (NON-DEBT) 539,286,472,751 30.11% 49.65TOTAL - CAPITAL EXPENDITURE 349,868,371,837 19.54%AGGREGATE EXPENDITURE 1,790,848,344,588

(2004 – 2007)

Empirical Analysis of Budget Components

YEAR BUDGET COMPONENTS ALLOCATION % %

2011

TOTAL - STATUTORY TRANSFERS 196,115,163,718 4.64% 17.47TOTAL - DEBTS SERVICE 542,381,827,452 12.83%TOTAL - RECURRENT (NON-DEBT) 2,481,705,176,915 58.72% 82.53TOTAL - CAPITAL EXPENDITURE 1,005,989,391,174 23.80%AGGREGATE EXPENDITURE 4,226,191,559,259

2010

TOTAL - STATUTORY TRANSFERS 180,279,158,994 3.91% 14.70TOTAL - DEBTS SERVICE 497,071,797,452 10.79%TOTAL - RECURRENT (NON-DEBT) 2,077,358,560,347 45.08% 85.30TOTAL - CAPITAL EXPENDITURE 1,853,906,761,420 40.23%AGGREGATE EXPENDITURE 4,608,616,278,213

2009

TOTAL - STATUTORY TRANSFERS 140,693,160,103 4.90% 14.78TOTAL - DEBTS SERVICE 283,649,892,795 9.88%TOTAL - RECURRENT (NON-DEBT) 1,649,429,453,681 57.46% 85.22TOTAL - CAPITAL EXPENDITURE 796,737,536,101 27.76%AGGREGATE EXPENDITURE 2,870,510,042,679

2008

TOTAL - STATUTORY TRANSFERS 187,600,000,000 7.53% 22.46TOTAL - DEBTS SERVICE 372,200,000,000 14.94%TOTAL - RECURRENT (NON-DEBT) 1,259,121,253,061 50.52% 77.54TOTAL - CAPITAL EXPENDITURE 673,155,465,876 27.01%AGGREGATE EXPENDITURE 2,492,076,718,937

(2008 – 2011)

Empirical Analysis of Budget Components

YEAR BUDGET COMPONENTS ALLOCATION % %

2013

TOTAL - STATUTORY TRANSFERS 387,976,000,000 7.7819.65

TOTAL - DEBTS SERVICE 591,764,000,000 11.87TOTAL - RECURRENT (NON-DEBT) 2,386,024,770,349 47.84

80.35TOTAL - CAPITAL EXPENDITURE 1,621,455,655,252 32.51

AGGREGATE EXPENDITURE 4,987,220,425,601

2012

TOTAL - STATUTORY TRANSFERS 397,929,101,917 8.3820.16

TOTAL - DEBTS SERVICE 559,580,000,000 11.78TOTAL - RECURRENT (NON-DEBT) 2,471,814,067,335 52.05

79.84TOTAL - CAPITAL EXPENDITURE 1,319,777,651,919 27.79

AGGREGATE EXPENDITURE 4,749,100,821,170

(2012 – 2013)

Graphical Representation of Statutory Transfer(2004 – 2013)

2013 2012 2011 2010 2009 2008 2007 2006 2005 2004

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

7.78%8.38%

4.64% 3.91%4.90%

7.53%

4.51% 4.61% 4.98%

29.72%

TOTAL - STATUTORY TRANSFERS

2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 AVGNJC 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: 1st = NASS 2nd =NJC 3rd = UBEC

Graphical Representation of Debt Services(2004 – 2013)

2013 2012 2011 2010 2009 2008 2007 2006 2005 20040.00%

5.00%

10.00%

15.00%

20.00%

25.00%

11.87%11.78% 12.83%

10.79%9.88%

14.94% 14.38%15.43%

19.76%20.63%

TOTAL - DEBTS SERVICE

2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 AVGDOMESTIC 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)

2013 2012 2011 2010 2009 2008 2007 2006 2005 20040.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

47.84%

52.05%

58.72%

45.08%

57.46%

50.52%46.62%

51.22%

40.96%

30.11%

TOTAL RECURRENT (NON-DEBT)

MDAs Gross %EDUCATION 12.66POLICE FORMATION AND COMMANDS 11.33DEFENCE/MOD/ARMY/AIR FORCE/NAVY 11.00HEALTH 7.38INTERIOR 6.73

Top Spenders of Recurrent Expenditure:

Graphical Representation of Capital Expenditure(2004 – 2013)

Top Spenders of Recurrent Expenditure:2013 2012 2011 2010 2009 2008 2007 2006 2005 2004

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

32.51%27.79%

23.80%

40.23%

27.76% 27.01%

34.48%

28.74%

34.29%

19.54%

TOTAL CAPITAL EXPENDITURE

MDAs Gross %WORKS 13.58POWER 10.64FEDERAL CAPITAL TERRITORY ADMINISTRATION 10.18AGRICULTURE & RURAL DEVELOPMENT 6.57WATER RESOURCES 5.40EDUCATION 5.21TRANSPORT 4.81HEALTH 4.73DEFENCE/MOD/ARMY/AIR FORCE/NAVY 3.34

2013 2012 2011 2010 2009 2008 2007 2006 2005 20040.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

47.84%

52.05%

58.72%

45.08%

57.46%

50.52%46.62%

51.22%

40.96%

30.11%

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(NJCNDDCUBECNASSINECNHRC)29.62%14.23%8.10%

(2004 – 2013)

Freely share, freely use and freely acknowledge the source – © Wale Micaiah

Data source:- Budgit (http://www.budgit.com/)- Nigeria Budget office

(www.budgetoffice.gov.ng)

Analysis by: Wale Micaiah (M.sc., CISM, CCNP-Sec, MCSA)

e: walegate@yahoo.comm: 08078001800

b: walemicaiah.blog.comw. www.statisense.com