Nigeria’s opaque budgeting system

The federal government’s opaque budgeting cycle in recent years has been a major concern to both private sector operators in the country and global financial experts. Last week, the International Monetary Fund (IMF) stepped up the criticism of the multiple budget system run by the current administration. In its new report titled “Budget Credibility in Sub-Saharan Africa,” Nigeria featured prominently for routinely departing from approved fiscal plans, with deficits exceeding projections, and current expenditures overshooting limits, as well as capital projects repeatedly abandoned or implementation delayed midway.   

The consequences are dire, the report says, with the economy and the citizens often at the receiving end of such multiple budget add-ons that stifle infrastructure development across the country. The IMF’s damning report warned that such multiple budget systems, spurious benchmarks, overlapping execution, revenue shortfalls and other challenges ultimately lead to outcomes that seek to undermine budgeting as a fiscal control tool. Such credibility gaps, the global financial powerhouse cautioned, if not stopped, may derail macroeconomic stability and weakens long-term development results.

The IMF’s concern is genuine, and its advice to the federal government deserves urgent attention. Its worry is supported by verifiable data. At the federal level, for instance, the culture of budgeting is no longer the way it used to be. This has eroded public trust. It has also led to overspending, undefined budgeting cycle and financial indiscipline, among other unpleasant consequences for the economy.  The N68.32 trillion budget for 2026 was only signed into law by President Tinubu on April 17. This was more than three months into the new fiscal year, and over two months into its supposed implementation.

With this opaque budgeting execution, it can hardly bring about macroeconomic stability that will steer the economy in the right direction. At the signing of the Appropriation bill, the National Assembly extended the implementation of the capital component of the 2025 Appropriation Act to June 30, 2026. By all standards, this is a strange fiscal practice by the government in response to managing public displeasure over weak capital budget performance. Sadly, this practice is gradually becoming a budget governance culture that makes seamless budget implementation objectives hard to achieve. This cannot end overlapping budget implementation that the President assured Nigerians last year when he requested from the National Assembly for a re-enactment of a harmonised 2024/2025 budget. He said it was part of the groundwork to end the history of overlapping budget implementation which started in 2022 under ex-President Muhamnadu Buhari. Tinubu did not keep to his promise. Since then, budget rollover has become the norm. This is even when capital expenditure performances have been exacerbated by poor revenue generation to less than 70 per cent, according to data from the Ministry of Finance and the Budget Office.

This is central to the latest IMF report that has raised concerns from financial and private sector operators that the government does not care about fiscal transparency tests. The assertion is supported by ongoing borrowing spree by the government without justification, while budget implementation reports are often delayed as much as one year. Recently, some Nigerians flooded the World Bank website, urging it to decline the latest loan request by the federal government, accusing government of lacking financial discipline. Having multiple budgets within a year has grave implications for the economy. Such frequent budget revisions very often reflect weak planning assumptions, particularly around oil prices, exchange rates, and revenue projections. Moreover, it erodes investor confidence, and creates uncertainty for businesses. Besides, it worsens implementation challenges.   

A government that could not implement even a single budget would not effectively implement multiple budget systems. Opaque budgeting cycle will also lead to budget padding that has become a feature of our budgeting system. Beyond that, budget padding slows down project delivery and increases the risk of duplicated and abandoned projects and widens fiscal deficits, higher borrowing and debt servicing costs that are crowding out private sector credit. This underscores the significance of the fresh warning from the IMF. Let the government heed the IMF advice because a stitch in time saves nine. If not heeded, it is likely to create a chaotic economic environment for the private sector in particular. It will also make long-term planning and investment decisions very challenging. In addition, it will conflict with the need to manage scarce resources prudently, especially during economic disruptions as being faced by Nigeria and other countries as a result of the Middle East conflict that has upended many countries’ fiscal projections. The federal government should return to a transparent and credible budgeting cycle.