Policy Briefs

Policy Brief 44/18: Impact of Nigerian Budgets on the Living Standards of Nigerians

By Izuchukwu J. Okoye

For three-years running, the passage of Nigeria’s budget has been mired in controversy. Yet Nigerians seem nonplussed about the arising delays and its implications for the national wellbeing. This disposition is hardly surprising. Nigerians generally pay scant attention to National or State budgets. The importance, validity and impact of budgets often seem not to have any correlation with their everyday lives. Such anomalous thinking, which reflects civic education, explains why elected officials and bureaucrats tend to ignore the views of the electorate when discussing budgetary matters. Ironically, it is the national population that stands to lose much when failure to pass budget in a timely manner begins to affect projects and programmes such as health and education that require budgetary funding.

Understanding the budgetary process its implications and impact on the national population naturally differs according to literacy level and social status of Nigerians. Lay persons and market women, as opposed to academia, bureaucrats, entrepreneurs and intelligentsia, all think of the budget in divergent contexts and along the lines of vested interest. Yet across board, Nigerians tend to lean towards alternative explanations and variables –such as price of commodities, scarcity of money in circulation, slow implementation of political promises, scarcity of foreign exchange – as determinant factors in rationalizing budgetary implications on their wellbeing and lifestyle. Hardly, do they think of budgetary processes in terms of medium and long-term strategies linked to national development. They overlook also that in governance long-term thinking is always critical to framing strategy.

Since the return to democracy, drafting and passing Nigerian budgets have been characterized by political squabble between the Legislative and the Executive arms of government, with little or no interference from the judiciary. Each phase, from formulation, passage, presidential assent and implementation tends to be fraught with problems. Hence, the national budget, which is supposed to be a serious and important instrument of governance, meant to aid national planning and economic development, have increasingly continued to perform below par in Nigeria. Besides the challenges posed by global crash in world oil prices, Nigeria’s budget in the present democratic dispensation has been shrouded by the myths and illusions, more so with the U.S. dollar being the benchmark currency for determining revenue. This makes it all the more difficult to assess any positive impact the budget has on economic growth, development and standard of living of the average citizen.

Fiscal Year 2015 budget inherited by the Buhari Administration best exemplified the trauma foisted by national budgets. Being essentially an orphaned budget with dubious ownership, it was neither faithfully implemented by hold-over bureaucrats and legislators who were the formulators, nor by the Executive branch, the inheritors. The follow-on-budget of 2106 was constricted by the budget padding controversy, even as every effort was made to use it to execute the “change” campaign promises fully. The non-performance of 2015 budget inherited from the Jonathan administration, while understandable, does not exonerate the Buhari administration that was not just sluggish in identifying the associated problems, but seemed incapable of deciphering how to adapt the budget to achieving some macro-economic goals.  

Consequently, the 2015 budget failed, and by failing impacted on the 2106 budget, which consequently trigged a national recession. The limits and deleterious impact of the FY 2015 and FY2016 budgets were possible because those in Nigeria’s officialdom rarely speak openly about the level of performance of annual budgets. The constitution stipulates presenting the draft budget before the close of the preceding year, which presupposes that the budget itself would passed early in the New Year. This rarely happens. More frequent than not, the budget is now generally passed around May or June – half way into its operational cycle year.

Whereas the FY 2016 budget, initiated by the Buhari administration and presented on the 12th May, 2016 by Sen. Udo Udoma, the Minister of Budget and Planning, it was ironically not the envisaged zero-based budget aimed at prudent management of limited resources in the public interest. Rather it was deficit-laden, with N2.3 trillion in deficits and consequently, performed dismally with the government blaming fluctuation of oil prices and Niger Delta militants as impacting factors. In 2017, the story did not change; as the budget was again signed into law close to midyear. Tagged the “Budget of Recovery and Growth,” the minister said, “The budget was designed to expand partnership between public and private sectors, including development capital to leverage and springboard resources for growth and reinstate the economy, all in line the with the ERGP”.

This early presentation of budget was considered an attempt to correct the error of 2016. Yet passage of the Appropriation of Bill was delayed by the budget padding controversy. This extended the signing of the appropriation bill by one month beyond the previous year; this took place on 12th June, 2017. Estimated at 7.44 trillion Naira, the 2017 budget with over N2 trillion in deficits was clearly on the high side compared to previous one. Considered pro-rata against the national population of 180 million, every Nigerian would be entitled to N41,000.00, the approximate equivalent of USD $110, per citizen. This was a clear indication that Nigeria was a poor country. This fact alone raises a germane question. If national budgets cannot be associated with national development and the promotion democracy, can it be correlated to promotion of interest of Nigerian citizens?

An Oxfam International analysis in May 2017 had concluded that Nigeria was a rich country where millions of her citizens lived in hunger. According to the report, five of Nigeria’s wealthiest people, including Africa’s richest man Aliko Dangote, have a combined wealth of $29.9 billion – which outstripped the country’s entire 2017 budget. The report surmised that such wealth could end extreme poverty, if the wealthy persons each spent $1 million a day for 42 years. The exercise would also lift over 2 million people out poverty for a year, thus aligning the budget to SDGs. Presently, about 60% of Nigerians live on less than $1.25 a day; the threshold of absolute poverty.

Despite their non-performance, Nigeria’s national budgets have increased in size over the years. Given the recurring budgetary deficit, it seems clear that the past practices will be repeated thus warranting a selective funding and execution of components of the budget. What determines the priority remains unclear; but one certainty is that such whimsical funding has never augured well for the welfare of the private citizen. For instance, funding education is still well below the UNESCO recommended 26% of the budget. Accountability and citizen’s involvement in the budgetary process are rarely considered. It can be deduced that national budgets as presently drafted and implemented, make very minimal impact of the living standards of Nigerians.

Accordingly, it can be expected that the prevailing low literacy level, low life expectancy, high level of infrastructural deficit in the country will not be altered radically. Also unlikely to change, is the poorly-oriented appropriation, implementation challenges and lack of transparency. Remediating the present situation requires the adoption of policy measures aimed at ensuring that projects and programmes budgeted for are monitored and evaluated stringently. In that vein every capital release, should be made available for public perusal. An effective and improved tax system will be salutary. Finally, a Nigeria needs a strict an well-organized budgetary cycle that will impose systematic order, discipline and adherence fiscal responsibilities and laid down plans.


Okoye is an Economic Policy Research Associate at Selonnes Consult Ltd. 

Oseloka Obaze, MD & CEO

Oseloka Obaze, MD & CEO

Mr. Obaze is the former Secretary to the State Government of Anambra State, Nigeria from 2012 to 2015 - MD & CEO, Oseloka H. Obaze. Mr. Obaze also served as a former United Nations official, from 1991-2012, and as a former member of the Nigerian Diplomatic Service, from 1982-1991.

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