CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
A budget is a quantitative expression of a plan for a defined period of time. It may include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows. It expresses strategic plans of business units, organizations, activities or events in measurable terms. Government budget is a government document presenting the government’s proposed revenues and spending for a financial year that is often passed by the legislature, approved by the chief executive or president and presented by the Finance Minister to the nation. The budget is also known as the Annual Financial Statement of the country. This document estimates the anticipated government revenues and government expenditures for the ensuing (current) financial year. For example, only certain types of revenue may be imposed and collected. Property tax is frequently the basis for municipal and county revenues, while sales tax and/or income tax are the basis for state revenues, and income tax and corporate tax are the basis for national revenues. The practice of presenting budgets and fiscal policy to parliament was initiated by Sir Robert Walpole in his position as Chancellor of the Exchequer, in an attempt to restore the confidence of the public after the chaos unleashed by the collapse of the South Sea Bubble in 1720. Thirteen years later, Walpole announced his fiscal plans to bring in an excise tax on the consumption of a variety of goods, such as wine and tobacco, and to lessen the taxation burden on the landed gentry. This provoked a wave of public outrage, including fierce denunciations from the Whig peer William Pulteney, who wrote a pamphlet entitled The budget opened, Or an answer to a pamphlet. Concerning the duties on wine and tobacco – the first time the word ‘budget’ was used in connection with the government’s fiscal policies. The scheme was eventually rescinded. Budgeting process is the continuum of budget preparation, approval, execution, reporting, Audit and review (Jouhson, 1979). This process revolves round the executive and legislative structures in a democratic system. In a capitalist economy like Nigeria, government plays an essential compensatory function; that is, it performs those functions that the market economy does not do efficiently or lacks the incentive to do at all. These functions have been classified as allocation, distribution and stability (Musgrave and Musgrave, 1979). In a federal system, federal, state, and locallevels of government perform these functions in varying degrees. TheFederal government is more heavily engaged in economic stabilization and redistribution functions than are state and local governments, and controls larger budgetary allocations. One of the main functions of government is to collect various forms of revenue and to utilize these revenues to provide social services to thepeople in an efficient manner as possible. In order to achieve this, then government annual budget, which has become one single most important and pervasive instrument for resource allocation, management and control comes in. Governmental budgets provide the legal authority for taxing citizensand spending public monies (Brooks, 1992:40). Federal budgets, from ageneral point of view are a tool of economic planning, making reasonableestimates and projections based on prevailing socio-economic indicators (Johnson, 1996:37). Broadly, the purposes and associated features of the public sector budget may be considered in terms of three aspects: As a tool of accountability, as a tool of management, and as a tool of economic policy.
