Abstract
The Medium Term Expenditure Framework (MTEF) provides the link between policy priorities and the budget. Given that in developing countries in general, and in Nigeria in particular, there is a disconnection between planning, policy and the budget, the MTEF has increasingly been regarded as central to public expenditure reforms. The objectives of this paper are to review the MTEF and budget performance in Nigeria for the period 2005-2008, and identify the challenges undermining the effective operation of the budgetary processes. The paper gathered that the MTEF is the bridge between the national development plan, its underlying policies and the annual budget. Analysis of available data on budget performance during the review period shows that public finance in Nigeria have not been operated within the specifications of the MTEF and the budget, and the priorities expressed in the budget are not always in sync with national objective plans. Some of the identified challenges to effective public expenditure management in Nigeria include lack of citizen’s participation in the process, the bureaucratic and inefficient nature of the civil service, large scale corruption, lack of proper coordination between the national development plan and budget, lack of adequate reforms in other key budget areas, such as execution, monitoring and reporting, lack of political commitment, and lack of adequate coordination between the national and sub-national governments.
Highlights
The Medium Term Expenditure Framework (MTEF) provides the “linking framework” that allows expenditures to be “driven by policy priorities and disciplined by budget realities” (World Bank, 1998)
Given the disconnection between national development objectives and budget priorities, which is common with developing country, the MTEF has become an integral component of public expenditure management (PEM) reform programs
This paper examines the Medium Term Expenditure and Fiscal Management in Nigeria for the period 2005-2008
Summary
The MTEF provides the “linking framework” that allows expenditures to be “driven by policy priorities and disciplined by budget realities” (World Bank, 1998). Fiscal policies and performance have a significant effect on macroeconomic conditions Fiscal phenomenon such as budget surpluses or deficits, level of public debt, sectoral allocation of government spending, tax rates, level and scope of subsidies and transfers have direct and indirect impacts on macroeconomic performance through their influence on the decisions of various economic actors (i.e. firms, households, etc.). Recent literature on public expenditure management offers an analytical framework for assessing the level of budget management, premised on MTEF and based on these three characteristics, which are captured using the following terminology: Aggregate Fiscal Discipline – keeping spending within a realistic budget constraint such that over time the government is not accumulating substantial debt Sectoral Prioritization – allocating resources across sectors in accordance with well-defined and appropriate policy priorities and sectoral strategies Technical (or Operational) Efficiency – utilizing resources in a manner that minimizes costs for providing a given set of outputs and outcomes
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