BUDGET PADDING IN NIGERIA
INTRODUCTION
The
budgetary process in Nigeria since 1999, at all levels is based on the
so-called envelop system, has always been a work of ‘guessed estimation' and at
best based on pseudo-estimates. A sum of money is arbitrarily allocated to
various sectors and budget heads, and pseudo-planners then in turn arbitrarily
sub-allocates these to different line items and sub-heads. The only empirical
input into all of these is the estimation of revenue accruable to the
federation each year, and the share of it going to the Federal government in
accordance with the revenue allocation formula.
Budgeting
is the property of accounting, and political rhetoric or hocus-pocus cannot
separate them. In this context, budget padding is not only fraudulent, it is
also a destructive crime against the future of the people. In fairness to the
people, and in line with our orchestrated “change” and the “fight against
corruption” mantras, perpetrators of high-profile padding-being economic
saboteurs and betrayers of public trust – must not go unpunished.
It
is a process that allows for not only chaos, but also serial padding. It is why
anyone knowledgeable about the budget process in Nigeria, anyone who has ever
attempted to undertake the analysis, tracking and monitoring of the budget,
anyone who has engaged with the budget process will be quick to point out their
frustrations with the budget process.
Logically,
“padding” in whatever form, is one of the elements of corruption. Although like
so many other English words, “padding” has several meanings. Its literal
interpretation in accounting is “false entry”. Its applications by those who
have a penchant for corruption are opaque and varied in nature. It could be
used to manipulate census figures, contract values, workforce (“ghost” workers),
electoral figures, goods and services, etc
(Tunde
T. 2016).
Budget
Padding takes place when legislators resolve to rewrite the budget by
introducing new items outside the estimates prepared and presented to them by
the president. The controversy over the padding of the budget was laid to rest
with the enactment of the Fiscal Responsibility Act, 2007 which has imposed a
duty on the finance minister to source input from certain institutions,
including the National Assembly during the course of preparing the national
budget. That is when negotiations and horse trading with the Executive by the
legislators is allowed. But neither the Constitution nor the Fiscal
Responsibility Act has empowered the National Assembly members to rewrite the
national budget by including constituency projects whose costs are arbitrarily
fixed by the legislators (Femi F. (SAN), 2016).
Under
section 81 of the Constitution, the president is given the exclusive power to
cause the budget to be prepared. Upon the preparation of the budget by the
Executive, it shall be laid before or presented to the National Assembly by the
president. In debating the Appropriation Bill, the legislators may reduce the
estimates if there are errors or inflation of the cost of items or if certain
items provided for have been purchased before or for any other genuine reason.
But the National Assembly cannot increase the budget in any manner whatsoever.
So the unilateral introduction of constituency projects is totally illegal and
unconstitutional (Femi F. (SAN), 2016).
By
introducing new items, the National Assembly has usurped the powers of the
president to prepare the budget. In other words, the legislators would have
prepared the budget and laid it before themselves and then passed it. That is a
negation of the doctrine of separation of powers. The Appropriation bill or
amended Appropriation bill is not like other bills. Whereas other bills shall
emanate from either of the two houses, money bills shall emanate from the
president. So a money bill is a special bill which cannot be subjected to
additions by the National Assembly because it has no power to prepare it (Femi F. (SAN), 2016).
Padding
is an unconstitutional infraction when the estimates are increased on the floor
of the House. The infraction becomes criminal when the Appropriation Bill is
altered by a few legislators after it had been passed by both houses of the
National Assembly. In the instant case, Honourable Jibrin is alleged to have
altered the budget by inserting projects worth N4 billion, while a handful of
other legislators led by the Speaker are alleged to have included 2,000 items
in the budget. Since the president was then misled to sign it as the
Appropriation Bill properly passed by both houses, the principal officers of
the National Assembly cannot turn round to seek protection under the Legislative
Houses Powers and Privileges Act. (Femi F. (SAN), 2016)
OBJECTIVES
The
aim of this seminary is to review budget padding Nigeria. effort will be made
to examine the impact of budget padding on Nigeria budgeting systems and its
over all effect of national development
SCOPE
The
scope this budget shall be limited to the incidence of budget padding in
Nigeria since 2016 till date. Emphases on 2016 budget shall be made with
respect to existing pool of literature, this study intends to contribute to the
body of knowledge in two ways, first, to examine the budget padding, the
ethical and moral implications, and lastly the probable consequences of the act
to Nigerian development.
LITERATURE REVIEW
Concept of Budget and Budget Padding
Perrin (1958) opined that the word budget originated
from the French word “bougette” (little bag). In Britain, it was used to
describe the leather bag in which the chancellor of the exchange carried to
parliament the statement of government needs and sources (Burkhead, 1956).
According to CIMA (Chartered Institute of Management Accountants) a budget
could be defined as a plan stated in quantitative monetary terms which is
prepared and approved prior to a defined period of time usually showing planned
income to be generated and, or expenditure to be incurred during that period
and capital to be employed to attain a given objective.
Budget
shows a quantitative expression of a proposed plan of action by management for
a specified period and an aid to coordinating what needs to be done to
implement the plan (Horngren, Stratton, Sutton, and Teall, 2004). Budgets are
central to the process of planning and control which are major activities of
management in all organizations (Okpanachi & Muhammed, 2013). According to
Kpedor (2012) budget as a profit planning device sets standard of performance
for managers. It is seen as a document which predicts revenues and expenditures
of a particular economic entity, for a specified period (Ahmed, Suleiman &
Alwi, 2003). The major objective of budgeting is to keep control of the
activities done in an organization by providing a roadmap for future activities
and setting a series of goals to be achieved and the means to achieve those
(Abdel-Kader & Luther, 2006).
Falana
(2016), Padding takes place when legislators resolve to rewrite the budget by
introducing new items outside the estimates prepared and presented to them by
the president. Neither the Constitution nor the Fiscal Responsibility Act has
empowered the National Assembly members to rewrite the national budget by
including constituency projects whose costs are arbitrarily fixed by the
legislators. According to Falana (2016), about 20 legislators in both chambers
of the National Assembly altered the budget by inserting constituency projects
worth N100 billion in the Appropriation Bill. Both the Senate and the House
allocated to themselves N60 billion and N40 billion respectively. If it is
established that the alterations were effected after the passing of the budget
by both chambers, the issue at hand goes beyond padding and become a clear case
of conspiracy, fraud, forgery and corruption. Padding is an unconstitutional
infraction when the estimates are increased
on the floor of the House. The infraction becomes criminal when the
Appropriation Bill is altered by a few legislators
after it had been passed by both houses of the National Assembly.
According
to www.premiumtimesng.com, Honourable Jibrin admitted to some criminal
conspiracies jointly perpetrated against the Nigerian people by both chambers
of the National Assembly, under his supervision as the Chairman of House
Committee on Appropriation. For the fact that budget frequently form an
important part of performance evaluation, human behavior suggest that
participants in the budget process are going to try to create breathing room
for themselves by overestimating expenses and underestimate sales. This
deliberate effort to effect the budget is known as creating budget slack or
padding the budget. This is done in an attempt to create an environment where
budget goals are met or exceeded. However, this does little to advance the goal
of the organization.
Recent literature has reviewed the motivations of
budget slack practices, but very scanty literature is available in budget
padding. Budget padding has been very rare occurrence in the developed
economies and also in developing economies like Nigeria. Researchers see budget
padding as the result of information asymmetry due to conflict of interest between
the subordinate and the superior, between the principal and the agent and like
in the Nigerian perspective, between the legislative who has the privileged and
insider information taking advantage against the Nigerian masses. Young (1985),
opined that budgetary slack or budget padding take place when a some staff
underestimate their level of productive capabilities in order to make certain
that they achieve the standards set in the budget by the top management.
Meanwhile, Kren & Liao (1988); Douglas & Wier (2000) postulate that
when supervisors use budgets to appraise performance, there are chances that
subordinates might try to falsify information in their budgets to increase the
possibility of achieving that target to their unacceptable and unfair advantage.
On their part, Luft & Shields (2003) said that budget slack is synonym with
budget padding as the one of the controversial work widely researched in
management accounting; yet no generally accepted sources of this slack and the
better means to reduce or avoid it. In the study of Ozer & Yilmaz (2011),
the found out that, trust in supervisors and target commitment influence the
correlation between justice perception and propensity to create budgetary padding.
In the same manner Staley & Magner (2007) stated that trust in supervisor
is a key variable that affects superiors‟ opinions of budgetary procedures
fairness, but it needs a deeper knowledge about it regarding the specific
mental processes by which budgetary padding or slack is bred. Our study tries
to align some non-economic variables like trust, confidence and misuse of them
as catalyst of budget padding.
Ita
(2016) opined that special attention being accorded to sectoral allocation in
the country’s annual budget, leaving other details in the hands of
appropriation committees of the legislature to handle and approve for
government agencies and parastatals, was responsible for padding. He said:
“There is also the common practice that after bills may have been passed by the
Senate and the House of Representatives; the legal department now re-drafts the
bills, perhaps, changing certain words to give them a presentation in a legal draftsman’s
perfect legislative draft. This, in my view, is inconsistent with the
provisions of the law.” According to him, the practice must stop, if padding of
the budget must be brought to an end.
From
the theoretical perspective, budget padding can result due to information
asymmetry existing between the Nigerian executive, the legislature arm and the
masses; the economic conflicting interest between the government and the
masses; the government’s opportunism or the economic self-interest. This is in
line
DISCUSSION OF
FINDINGS
The research (seminar) has
shown that the reasons for budget padding are as follows:
i.
It creates
illegal funds for Preparers and Beneficiaries: Apart from their allowances and salaries it helps
them with extra funds to continue to keep their political structures and remain
‟powerful”.
ii.
Padded
funds can also be laundered: Since budget padding involves secret insertion of line
items so it creates an avenue for such funds to be diverted without anyone
noticing.
iii.
Excess
funds are shared at the end of the year: The budget padding is done by group of lawmakers secretly without the
knowledge of their colleagues. So this caucus now shares the infused funds
among themselves and they tend to repeat this year after year.
iv.
Padded
funds are not returned to the treasury: Since these funds are used for phony projects which do not exist, it
provides an avenue for lawmakers to divert the funds for private use.
v.
Extra money
is used for patronages: Excess
funds from budget padding are now dispensed as political patronages. So when
you hear different organizations pay courtesy visits to politicians they don’t
go empty handed.
vi.
It is a
source of easy money for civil servants: Civil servants see the budget as an avenue to enrich them by
inflating the budget for their ministries. Some of them do this in connivance
with the lawmakers.
vii.
Budgets are
padded to anticipate a downward review by the appropriation committee: Budget
is sometimes padded by ministries to enable them to have access to funds after
it is been slashed.
viii.
It has been
institutionalized: It has become a norm among lawmakers who now see this
inappropriate way of laundering money as the in-house legislative culture.
ix.
It is typical of
Nigerians to generally pad their expenditures: It has become a culture for
Nigerian ministries and parastatals. Finally, insatiable greed of Nigerian
politicians: The average lawmaker earns well. They also have the privileged of
attracting projects to their
The
research also shows the effect of budget
padding on economic growth and national development:
i.
Budget padding
can impede and retard Nigerian economic growth and development.
ii.
Budget padding
may be likened to corrupt practices.
iii.
Deprived
government funds, thereby reducing public spending on socio-economic
infrastructures, social services, poverty oriented programs.
iv.
It has appearance
of criminality and financial embezzlement
v.
It tends to
diversion and misappropriation of public funds.
vi.
Antidevelopment
to the extent that it reduces the amount of funds available to be used for
developmental purposes. Funds that should have been used to better education,
health, infrastructure and other items needed to encourage a good life of
Nigerians are stolen by a microscopic few.
SUMMARY
Budget padding is done with intent to cheat, defraud
the country and enrich some few elected principal officers through manipulation
of budget numbers and yet try to legalize the act. By introducing new items,
the National Assembly has usurped the powers of the president to prepare the
budget. In other words, the legislators would have prepared the budget and laid
it before themselves and then passed it. That is a negation of the doctrine of
separation of powers. The Appropriation bill or amended Appropriation bill is
not like other bills.
CONCLUSION
This seminar paper to a large extent has review budgetary
padding with specific consideration of 2016 Nigerian budget in perspective. Budget
padding can result from two sources: forecast inaccuracy, which occurs as a
result of unintentional estimation errors and changes in efficiency; and
intentional manipulation which occurs when the efficient accomplishment of a
budgeting process depends on obtaining information from subordinates who are in
close proximity to resource usage.
The
Nigerian experience in 2016 budget padding saga is quite unfortunate incident
and the most disheartening, as the value of development assistance that flowed
into the country for socio-economic development was squandered by our political
leaders/elites. No doubt budget padding is nothing but corruption and corrupt
practices in Nigeria which had resulted in undermining the growth and stability
of Foreign Direct Investment (FDI) impede Nigeria’s ability to attract oversea
capital and investors. Undoubtedly, Nigeria is one of the world and largest
producer and exporter of crude oil, a country endowed with abundant natural and
human resources unfortunately still has more than 60 percent of its population
living below the poverty line. Conclusively budget padding could affect
productivity, output, exports, and balance of payment, foreign exchange, Gross
Domestic Product (GDP) and foreign reserve negatively.
RECOMMENDATION
Based
on the findings of this seminar, the researcher put forward the following
recommendations:
1.
In line with the
anti-corruption stand of the Nigerian current administration, all abuse of
powers and privileges by public and elected officials should be made to face
the law irrespective of status or position.
2.
The executive
should adopt a yearly publication of the appropriation bills before sending to
the legislative arms.
3.
The Presidency
should engage a reputable consulting firm to guide and audit the Appropriation
bill process, to ensure credibility of the budget.
4.
Lastly, this
paper recommends that it is high time the citizens, speak out and collectively
hold their elected representatives accountable, since we are all stakeholders
in Nigerian project and as a nation.
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