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Over the years the traditional budgeting system (incremental budgeting) has attracted criticisms and there are growing dissatisfactions because of its limitations. The paper examines beyond budgeting practice in Nigerian public sector and the possibility of its introduction. The survey was used to collect data from 10 public sector organization in Edo State while the one-way analysis was used to test the hypotheses The results reveal that though the budget was considered useful for resources allocation, planning and control, there were some level of limitations and dissatisfactions with the current budget process because it is time consuming, out of touch with reality and largely incremental, encourages a ‘spend or lose it’ mentality which leads to wastage of resources, conflicts and dysfunctional behavior within the organization, decrease the level of creativity and organization’s innovation. Again there is disagreement that the current budget has led to economic development of Nigeria, flexible and responsive to changing circumstances and distributes resources efficiently. There is no evidence of the existence of beyond budgeting principles in the Nigerian public sector which indicate that the structures and systems currently in place are not yet conducive to the introduction of beyond budgeting model. Moreover, public sector managers and executives are unwillingness to do away with the present budgeting structure despite its limitations The paper proffers recommendations on how the current budgeting system can be improved in Nigeria.


In the public sector, the budget is a vital tool for planning, control and evaluation of the activities of government. It is a guideline by which the goals of an organization are achieved. It is a compelling instrument of state engagement with the national economy. The national budget is more directly related to development as it contributes directly to the stock of national capital formation necessary to drive the growth process (Kwanashie,2013).Budgeting is government talking to itself, with outside interests eavesdropping and occasionally joining in. It is determined and at times differentiated due to a country’s legal framework, organizational structure of government, language, peculiarity and terminology (Schick,2004; Guess & Leloup,2010).According to Olomola (2009 & 2012), the budget is an important economic instrument of national resource mobilization, allocation and economic management. It helps to facilitate and realize the vision of government in a given fiscal year. Therefore, the type of budgeting practice influences the outcome or performance of such goals and objectives that a government sets out to achieve. The approach to budgeting in the Nigerian public sector has been incremental budgeting system where the previous years’ budget figures are reviewed upwards or marginally; and it has been criticized for re-enforcing the status quo without adapting to the complex, ever changing needs and problems of public sector organizations (Coombs & Jenkins, 2002; Omolehinwa & Naiyeju,2015)..Budgets perform three broad functions in the public sector-(economic, political, and legal functions): Economic, because they are an exercise of planning, controlling, and administering activities, intended to balance revenues and expenditures, and to allocate available resources efficiently in order to maximize social welfare; Political , because budget proposals offered by the executive body have to be approved by elected members of the legislative houses; Legal, because the budgets are regulated by laws, rules and regulations. In some cases, they have a legal status, they carry out a legal function. They establish limits to managerial decisions and actions of various governments, and officials violating them may be subject to penalties and sanctions. Basically, the logical operations in the process of presenting, preparing and implementing the traditional budgeting system, its acceptability and its performance are unsatisfactory and weak (Pharr,1990; Langfield, Thorne & Hilton,2006; Abdullahi,2007).The reservation is that sufficient attention is not given to the budgeting system in terms of performance. Besides, the same drab process is adopted every year without considerations of other decisive factors like the previous years’ (financial) achievements and performances. The needs for improved performance and service delivery drove the Obasanjo’s government budgetary reforms in the early 2000s. Nevertheless because budget reform must manoeuvre within boundaries that are largely fixed-the most limiting boundaries being political, temporal and informational, the success was short-lived, interrupted and abruptly terminated by subsequent administrations. Recent trends in budgeting include: performance budget, adoption of medium-term expenditure frameworks, creation of independent fiscal institutions, better budgeting , financial performance management and beyond budgeting (Veiga,et al, 2015; Deloitte, 2015).Zero-based and participatory budgeting have been implemented by many countries with advantages and disadvantages (Omolehinwa &Naiyeju,2015). Unlike the traditional budgeting which emphasizes expenditure rather than performance, and inputs rather than outputs (Abdullahi,2011), the beyond budgeting (BB) model is performance-based and emphasizes results or outputs achieved rather than how much have been expended. Again, the annual budgets provide little encouragement for organizational units to improve or ‘stretch’ their performance. In fact, success is defined as ‘meeting the budget’ rather than maximizing potential. Schick (2004) argues that interest in the BB concept has been sparked off that although the budget process has undergone numerous reforms, fundamental limitations still persist. Despite repeated efforts to uproot incrementalist tendencies, budgeting serves better as a means of continuing the past into the future than as a means of shaping the future directions of government or society. Although political leaders want a quick fix to their country’s plights and predicaments he doubts whether their governments will support the idea of BB. In response to the growing discontentment against the traditional budgeting system, a new management philosophy called beyond budgeting 1990s has been advocated for public sector organizations (Hope & Fraser, 2003; Hope & Bunce, 2004). Hope and Fraser (2003) believe that application of BB principles by the public sector will improve responsibility among teams in organizations and bring about a better prioritization and utilization of resources. BB entails a shift from a performance emphasis on numbers to one based on people and institutional arrangements. According to Shah (2007), BB allows institutions to build a base of political support, achieve a more equitable distribution of scarce resources, foster public learning, and promote transparency. In the case of Nigeria, the budgeting system is plagued with a lot of inconsistencies and challenges. For several years, there have been reported cases of budget disparity, budget non-accomplishment, budget indiscipline, poor or non-performance and poor budgetary implementation, fiscal rascality of certain federal institutions due to failure of the Finance Ministry to enforce the fiscal responsibility act (Olurakinse,2012).The budget process has also a lot of abuses such as: (i) inability of existing medium- long term plans to provide useful guide to the budgetary process, (ii) lack of political will and commitment to abide by stipulated rules and budget guidelines, (iii) high incidence of extra budgetary expenditure, (iv) persistently chronic budget deficit, (v) off-budget resource allocation and (vi) overlapping institutional arrangements in the budget process resulting in lopsided allocation of resources and delays in arriving at a consensus on critical decisions (Olomola,2009).These have resulted in the lingering poverty, unemployment and under-development (Ojo,2012).The non-release, partial release or delay in the release of approved funds for budgeted expenditure or funds made available only at the end of that quarter have had negative implications for institutional planning and management as well as the overall impact of the budget on the development and welfare of the people (Faleti & Myrick,2012). The issue of poor budget performance is evident in the infrastructural decay and slow pace of development especially in terms of capital projects, physical infrastructure, projects abandonment, political instability, deployable roads, high rate of unemployment and insecurity.The budget implementation has hardly commenced officially in January of each fiscal year. Ekeocha (2012) posits that the late submission of budget to the national assembly over the years has led to late commencement and poor budget implementation with its accompanying effects. Olomola (2012) also reports a major problem with timeliness of budgetary activities and compatibility with development priorities in majority of the states over a period of four years (2007 to 2010).Other pitfalls in the budget process include: inadequate monitoring of programmes and projects, unrealistic budgeting, non-compliance with established priorities, non-participatory budgetary process and slippages from targets (Olomola,2012). Olurankinse (2012) argues that “budget in the public sector of Nigeria has almost become a ritual or a yearly affairs which though good in content but without appreciable results. The issue of budget implementation has long been a source of concern to the public. As good as our budget is mostly in terms of preparation and contents; it is kept in shelves after approval as a historical book and never consulted. There are wide range of disparity between budget and accomplishments”. The traditional/incremental budgeting system is dominant in public institutions and organizations. Despite the extensive use of budget as a means of planning and control, motivation and co-ordination, responsibility distribution and performance evaluation, it has been argued that the budgeting practice is not perfect (Otley,1978; Comshare,2000). Abdullahi (2007) confirms its broad use in government parastatals and agencies due to its simplicity but criticizes the system as having lack of efficiency and transferring the problem of the previous financial year into the next due to the use of the same parameters. Hope and Bunce (2004) and Abdullahi (2011) posit that the approach encourages a ‘spend it or lose it’ mentality, and it is an obstacle to progress by managers (Daum,2002). According to Hanson, Otley and van de Stede (2003), practitioners express concerns that despite the integrative and performance evaluation functions of budget, it impedes resources allocation, encourages myopic decision making, promotes lying by managers, and leads to dysfunctional behavior and budget games (Argyris,1952; Hofstede,1967; Onsi 1973; Merchant,1985; Lukka,1988; Bart,1988; Jensen,2003;Odia & Okoye,2012). It is time consuming, based on unsupported assumptions and out of reality when used (Libby & Lindsay,2007). The traditional budgeting process is “costly to prepare, “too complex”, “takes too long”, “too inflexible, we cannot adapt quickly enough to the market”, “does not motivate you to set yourself ambitious targets”, a tool of repression” (Daum,2002). Given the limitations of traditional budgeting and the suggestion that beyond budgeting application in the public sector Hope and Fraser (2003) believe that applying beyond budgeting principles to the public sector would improve responsibility among teams in organizations and bring about a better prioritization and utilization of resources (McCarthy & Lane, nd; Hope & Fraser,2003; Hope Bunce,2004). The global trend in budgeting is to supplement traditional budgets with performance budgets. There is move away from control of expenses and revenues towards responsibility for service outcomes or results. In performance budgets, expenditures are associated with outputs or outcomes.While BB has been embraced by companies such as Svenska Handelsbanken, Statoil,, Toyota, ALDI, Southwest Airlines, Whole Foods, Guardian Industries and many other, there is limited evidence of BB in the public sector organizations in Sweden, Ireland, Netherland. Therefore, this paper intends to evaluate the budget practices in Nigerian public institutions and the prospects and effectiveness of the beyond budgeting model. The objectives of the paper include to : (1) determine the usefulness of the budget as a means of planning and control in the management of public sector organizations in Nigeria.(2) ascertain the limitations of the traditional budgeting system in the Nigerian public sector.(3) determine the existence of the beyond budgeting principles in the public sector and (4) determine the practicability and willingness to change to the beyond budgeting model by public sector organizations in Nigeria. The rest of the paper is structured into four sections as follows: The immediate section is the review of the literature on budgeting in Nigeria and beyond budgeting. Section three dwells on the methodology of the study. Section four is the data analysis and test of hypotheses.The last section is the conclusion and recommendations.




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