Nigerians are usually regaled with drama over the signing of the annual budget. This pattern is repeated on a yearly basis, such that most persons must be wondering what all the fuss is about.
In simple terms, a budget is financial plan which gives estimates of revenue and proposed expenditure for a period of time, usually a year. The budget thus shows how much money government is expecting and how much it plans to spend. The period (year) within which a budget runs is called a fiscal year.It must however be noted that the budget goes beyond just giving accounting details. It contains conscious government policy efforts to keep the economy on the right course.
The budget is usually categorized into recurrent and capital expenditures.The recurrent budget contains those items that occur regularly over the course of the year. Such items include salaries, pensions, rents,office stationery, electricity and water rates. The capital budget shows those items that are of fairly long duration and whose lifespan exceed a year, such as roads, bridges, rail lines, hospitals, schools, factories and airports. From the foregoing, it can be seen that the recurrent expenditure takes care of administrative costs while the capital expenditure provides projects that directly impacts on society.
For society therefor to get maximum benefits from the budget, spending must be skewed towards capital projects. This will enable infrastructure and social services to be put in place, increase investment, generate employment and promote welfare.
Since budgets relate revenues and expenditures, it gives rise to the concepts of balanced, surplus and deficit budgets. A balanced budget is one in which revenue is equal to expenditure, that is government is going to spend the exact amount it raised. When revenue exceeds expenditure, there is a surplus and when expenditure exceeds revenue, there is a deficit.
Whenever deficits arise, government has to raise additional revenue. The means by which government makes up for the shortfall in revenue is called deficit financing. Usually deficits are financed through borrowing and such borrowings can actually lead to public debt accumulation. Other means of financing deficits include drawing down on foreign reserves, sales of government assets, use of excess crude savings and printing of currency.
The budget is an integral part of the fiscal policy of a nation. Fiscal policy involves the use of government expenditure and taxes to influence economic activities or to achieve certain economic goals. Some of the goals of fiscal policy include reducing unemployment, achieving low rate of inflation, reduction in income inequality and promoting growth.
The budget is thus an important instrument as it can be used to affect the live of every citizen. And since government is spending public money (money belonging to every citizen in the nation), we must be concerned how the money is spent. It is therefore necessary for us to monitor spending through the quality of projects in our society. A look at the national budget document which can be obtained from the website of the budget office of the federation (www.budgetoffice.gov.ng) will tell us how much government is going to spend and what it is actually spending the money on. We can thus monitor those projects in our communities and engage with government to ensure we get value for money.
It must be remembered that public resources belongs to every Nigerian and it is our right to get maximum benefits from their use.
Piece written by Oke Okpomo
Okpomoy2k@yahoo.com Follow him on twitter@kpomskerio