Arabian Journal of Business and Management Review (OMAN Chapter) Vol. 1, No.

6; January 2012

ACCOUNTABILITY AND PUBLIC SECTOR FINANCIAL MANAGEMENT IN NIGERIA

BY

ONUORAH, ANASTASIA CHI-CHI

DEPARTMENT OF ACCOUNTING, BANKING & FINANCE

FACULTY OF MANAGEMENT SCIENCES,

DELTA STATE UNIVERSITY, ASABA CAMPUS, NIGERIA

&

APPAH, EBIMOBOWEI (corresponding author)

DEPARTMENT OF ACCOUNTING, FACULTY OF BUSINESS EDUCATION

BAYELSA STATE COLLEGE OF EDUCATION, OKPOAMA BRASS-ISLAND, YENGOA, NIGERIA

ABSTRACT

Nigeria is the sixth largest producer of oil and gas in the world, but the average Nigerian on the
street is poor and there is poor infrastructure like power supply, roads, hospitals etc. This study
examines the management of public funds in terms of how public office holders give
accountability report of their stewardship. Data on total federal government revenue and
expenditure, state governments’ revenue and expenditure were collected from Statistical
bulletin from the Central Bank of Nigeria from 1961-2008. The results were analysed using
relevant statistical tools. The findings reveals that the level of accountability is very poor in
Nigeria because the attributes of accessibility, comprehensiveness, relevance, quality, reliability
and timely disclosure of economic, social and political information about government activities
are completely non available or partially available for the citizens to assess the performance of
public officers mostly the political office holders. On the basis of these, the paper recommends
among others that for accountability to be successful in the management of public funds in
Nigeria there must be a reduction in the level of corruption, improving public sector accounting
and auditing standards, legislators as champions of accountability and restructure the public
accounts committees and the value of money must be applied in the conduct of government
business.

Keywords: Accountability, Public finance, Public sector Accounting, Management, Nigeria.

INTRODUCTION

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Arabian Journal of Business and Management Review (OMAN Chapter) Vol. 1, No.6; January 2012

The Nigerian society is filled with stories of wrong practices such as stories of ghost workers on
the pay roll of Ministries, Extra-ministerial Departments and Parastatals, frauds,
embezzlements and setting ablaze of offices housing sensitive documents and corruption are
found everywhere in the country (Okwoli, 2004). According to Bello (2001), huge amount of
Naira is lost through one financial malpractice or the other in Nigeria, which to say the least,
drains the nation’s meager resources through fraudulent means with far-reaching and
attendant consequences on the development or even socio-economic or political programmes
of the nation. Billions of Naira is lost in the public sector every year through fraudulent means.
This represents only the amount that is ferreted out and made public. Indeed much more
substantial or huge sums are lost in undetected frauds or those that are for one reason or the
hushed up. Appah and Appiah (2010) argues that cases of fraud is prevalent in the Nigerian
public sector that every segment of the public service, could seem to be involved in one way or
the other in some of these nasty acts.

The bane of public sector financial mismanagement in Nigeria since the oil boom years a period
under which there existed structurally weak control mechanism, which create a variety of
loopholes that have tended to facilitate and sustain, corrupt practices. This is coupled with the
fact that there is a near total absence of the notion and ethics of accountability in the conduct
of public affairs in the country (Bello, 2001). Tanzi (1999) noted that

good governance is essential part of a framework for economic and financial management
which includes: macroeconomic stability; commitment to social and economic equity; and the
promotion of efficient institutions through structural reforms such as trade liberalization and
domestic deregulation. Poor governance may result from factors such as incompetence,
ignorance, lack of institutions, the pursuit of economically inefficient ideologies, or misguided
economic models. It is often linked to corruption and rent seeking.

Okoh and Ohwoyibo (2009) opine that accountability reflects the need for government and its
agencies to serve the public effectively in accordance with the laws of the land. Appah (2010)
point out that with the number and monetary value of public sector activities has increased
substantially. This increase in activities has brought with it an increased demand for
accountability of public officers who manage these activities of the public. Achua (2009) says
“serious consideration is being given to the need to be more accountable for the often vast
amounts of investment in resources at the command of governments, which exercise
administrative and political authority over the actions and affairs of political units of people.
Government spending is a very big business and the public demands to know whether the huge
outlays of money are being spent wisely for public interests”. Accountability is a fundamental
value for any political system. Citizens should have the right to know what actions have been
taken in their name, and they should have the means to force corrective actions when

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Arabian Journal of Business and Management Review (OMAN Chapter) Vol. 1, No.6; January 2012

government acts in an illegal, immoral, or unjust manner (Peters, 1999). Accountability is also
important for government. It provides government with the means of understanding how
programs may fail and finding ways that can make programmes perform better. Kaufman
(2005) argues that an emphasis on accountability by citizens is one aspect of the growing
emphasis on eliminating corruption and promoting transparency in government. However, the
issue of accountability in Nigeria is a fundamental problem because of the high level corruption
in all levels of government in the country. The Transparency International global Corruption
Perception Index in October 2010 ranked Nigeria 134 from its 130 position in 2009 and 121 in
2008. The 2010 CPI, drawn on a scale from 10 (highly clean) to 0 (highly corrupt), showed that
Nigeria scored 2.4, and is ranked 134 amongst the 178 countries surveyed. This fearful situation
of Nigeria’s lack of financial accountability in the public sector provided the need for this paper.
Therefore, the objective of this paper is to examine the accountability of public officers in the
management of the financial resources of the country and means of achieving an accountable
and transparent society like that of Denmark, New Zealand and Singapore that ranked first in
the 2010 CPI with scores of 9.3.

CONCEPTUAL AND THEORETICAL FRAMEWORK

2.1 The Concept of Accountability

Accountability is all about being answerable to those who have invested their trust, faith, and
resources to you. Adegite (2010) defined accountability as the obligation to demonstrate that
work has been conducted in accordance with agreed rules and standards and the officer
reports fairly and accurately on performance results vis-à-vis mandated roles and or/plans. It
means doing things transparently in line with due process and the provision of feedback.
Johnson (2004) says that public accountability is an essential component for the functioning of
our political system, as accountability means that those who are charged with drafting and/or
carrying out policy should be obliged to give an explanation of their actions to their electorate.
Premchand (1999) observed that

the capacity to achieve full accountability has been and continues to be inadequate, partly
because of the design of accountability itself and partly because of the widening range of
objectives and associated expectations attached to accountability. He further argues that if
accountability is to be achieved in full, including its constructive aspects, then it must be
designed with care. The objective of accountability should go beyond the naming and shaming
of officials, or the pursuit of sleaze, to a search for durable improvements in economics
management to reduce the incidence of institutional recidicism. The future of accountability
consists in covering the macro aspects of economic and financial sustainability, as well as the
micro aspects of service delivery. It should envisage a three-tier structure of accountability: that

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of official (both political and regular civil employees), that of intragovernmental relationships
and that between government and their respective legislatures.

According to Coker (2010), the various approaches to accountability based on the language of
account can be grouped into: (1) Process Based Accountability: This approach measures
compliance with pre set standard and formally defined outcomes. This includes fiscal and
managerial accountability with reliance on the use of accounting methodologies. (2)
Performance Based Accountability: This approach measures performance against broad
objectives. This measure may be qualitative and the criteria against which performance is
measured less precisely defined. Adegite (2010) also noted that there are three pillars of
accountability, which the UNDP tagged ATI (Accountability, Transparency and Integrity).
Accountability which is segmented into: (1) Financial Accountability: The obligation of any one
handling resources, public office or any other positions of trust, to report on the intended and
actual use of the resources or of the designated office. (2) Administrative Accountability: This
type of accountability involves a sound system of internal control, which complements and
ensures proper checks and balances supplied by constitutional government and an engaged
citizenry. These include ethical codes, criminal penalties and administrative reviews. (3)
Political Accountability: This type of accountability fundamentally begins with free, fair and
transparent elections. Through periodic elections and control structure, elected and appointed
officials are held accountable for their actions while holding public office. (4) Social
Accountability: This is a demand driven approach that relies on civic engagement and involves
ordinary citizens and groups exacting greater accountability for public actions and outcomes.
Table 1 below shows the content of accountability:

General Accountability Fiscal Accountability Managerial Accountability

 Answerability for  Approval of policies  Appropriate rules are
action. and actions having observed and that the
 Sanctions where financial implications authority is not
justification is not by a representative abused.
adequate. body.  Risks are taken within
 Ability to revoke a  Approval of an annual delegated powers to
mandate. or a medium term achieve objectives.
 Public scrutiny of budget.  Responsibility to
governmental actions.  Framework to ensure service delivery within
 Citizens participation that in the process of specified costs, quality
in the design of economic and time schedule.
programmes. management no  Observance of
actions are taken to economy and
impair the fiscal efficiency.
capacity of the
community.

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Source: Premchand (1999)

Ojoakor (2009) argues that the factors and forces which militate against accountability in
Nigeria include ethnicity and tribalism, corruption, religious dichotomy and military culture.

PUBLIC FINANCIAL MANAGEMENT IN NIGERIA

Public financial management is concerned with the planning, organizing, procurement and
utilization of government financial resources as well as the formulation of appropriate policies
in order to achieve the aspirations of members of that society. Premchand (1999) sees public
financial management as the link between the community’s aspirations with resources, and the
present with future. It lies at the very heart of the operations and fiscal policy of government.
The stages of public financial management include:

1. Policy formulation: Policy formulation is one of the most important stages in public
financial management structure. According to Premchand (1999), “the transformation
of the society’s aspirations into feasible policies with well-recognized financial
implications is at the heart of financial management. Issues not addressed during policy
formulation tend to grow in magnitude during implementation and may frequently
contribute to major reversals in the pursuit of policies or major slippages that may lead
to contrary results”. Public financial management should be designed to achieve certain
micro and macro economic policies. It entails a clearly defined structured and
articulated system that moves to promote cost-consciousness in the use of resources.
The government needs to have an estimate of revenue and expenditure to achieve the
policy objective of government.
2. Budget formulation: The budget formulation is the step that involves the allocation of
resources before the submission to the legislature for review and final approval.
According to Appah (2009), in Nigeria the budget formulation involves the articulation
of the fiscal, monetary, political, economic, social and welfare objectives of the
government by the President; based on these, (i) the department issues policies and
guidelines which form the basis of circulars to Ministries/Departments requesting for
inputs and their needs for the ensuring fiscal periods; (ii) accounting officers of
responsibility units are required to obtain and collate the needs of their units; and (iii)
accounting officers of ministries, in this case the Permanent Secretaries, are required to
collate these proposals which would be defended by unit heads before the supervising
minister.
3. Budget structures: According to Anyanwu (1997), budget structure addresses the
question of how the budget is or should be composed. In Nigeria, budgets have
revenues and expenditure sides. According to Prenchard (1999), many governments
have yet to put in place cash management systems, which would pave way for
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coordinated domestic management. The practice of limiting outlays to collected

revenues has exacerbated this problem. He, further argued that there is a massive
underfunding of programs and projects provided for in the budget.
4. Payments system: This involves the operational procedures for receiving monies for the
public and for making payments to them. In Nigeria, governments make payments using
a variety of procedures. These include book adjustments, issue of cheques, and
payment authorities and electronic payment systems.
5. Government accounting and financial reporting: Government accounting and financial
reporting is a very important component of the public sector financial management
process in Nigeria. As Adams (2001) noted that government accounting entails the
recording, communicating, summarizing, analyzing and interpreting financial statement
in aggregate and in details. In the same vein, Prenchard (1999) argues that government
accounts have the dual purpose of meeting internal management requirements while
providing the public with a window on government operations. Government financial
reports should be prepared with the objective in mind of providing full disclosure on a
timely basis of all material facts relating to government financial position and operations
(Achua, 2009). Financial reports on their own do not mean accountability but they are
an indispensible part of accountability.
6. Audit: One of the fundamental aspects of public sector financial management in Nigeria
is the issue of audit of government financial reports. Audit is the process carried out by
suitably qualified Auditors during the accounting records and the financial statements of
enterprises are subjected to examination by the independent Auditors with the main
purpose of expressing an opinion in accordance with the terms of appointment. The
high level of corruption in the public sector of Nigeria is basically as a result of the
failure of auditing. As Prenchard (1999) puts it “many audit agencies are legally
prevented from reviewing policies. Most of them cannot follow the trail of money, as
they do not have the right to look into books of contractors, and autonomous agencies”.
One fundamental failure of audit is the absence of value for money in the Nigerian
public sector.
7. Legislative control: The legislature (House of Representative and Senate) in Nigeria is
expected to perform this very important task of controlling and regulating the revenue
and expenditure estimates in any fiscal year. It is the responsibility of the members of
the National Assembly to ensure that the budget estimates are properly scrutinized to
ensure accuracy, effectiveness and efficiency of government revenue and expenditure.

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ACHIEVING ACCOUNTABILITY IN PUBLIC FINANCIAL MANAGEMENT IN NIGERIA

1. Legislatures to champion the cause of accountability.

The legislators in Nigeria and other developing countries have the constitutional responsibility
to ensure that the executive are accountable to the people for the management of public
funds. But the revise is the case in Nigeria, where the legislators are part and parcel of the
collapse of the system. However, for accountability to be achieved in Nigeria, legislators at all
level of government must ensure that appropriate laws and over-sight functions are properly
performed by them.

2. Re-orientation of Value System

One fundamental problem in Nigeria is the failure of the value system. This failure has resulted
to the high level of corruption and lack of accountability by public officers. According to
Adegite (2010), that corrupt tendencies pervade the strata of the Nigerian society so much so
that the youths, who are supposed to be the leaders of tomorrow, are neck deep in
examination malpractice, 419 and internet fraud. She recommends that for Nigeria to be
among the most developed economies in 2020, and then the nation’s value system should be
strengthened through the reintroduction of civics and ethics into the curricula of our
educational system while a national orientation for the rebirth of our value system should be
urgently initiated.

3. Management accountability framework.

Accountability law is only a part of the accountability process. A proper accountability

framework would require that the government should put in place guidelines for preparing and
approving work plan, method of monitoring plans, reporting performance, accumulation of
portfolio of evidence on performance reporting, system of validation and oversight of
performance reports, establishing and resourcing public accountability institutions, training
pubic managers and guidelines for dealing with political institutions by public managers.

4. Protection of Whistleblowers

One fundamental means of achieving optimum accountability in Nigeria is the protection of the
whistle blowers. An effective framework of accountability requires that those who blow the
whistle should be protected against any reprisal. The government in Nigeria should establish
appropriate laws to protect the whistleblowers.

5. Creating an environment of accountability

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An effective framework of accountability rests, besides, formal structures, on a proper

environment. It requires such things as existence of a proper code of conduct, training in ethics,
appearance of equal treatment by senior managers toward all employees, and unforgiving
accountability of senior officers. It also means that the oversight bodies should adopt a
reasonable attitude toward public managers.

6. Adoption of International Public Sector Accounting Standards

The success of accountability in the public sector in Nigeria lies on the proper implementation
of the International Public Sector Accounting Standards. Public sector organizations in Nigeria
use the cash basis of accounting. It is very necessary that Ministries, Departments and Agencies
should begin to use the accrual basis of accounting. A complete accrual basis of accounting
would make public managers accountable for recording and safeguarding of public assets,
managing public cash flows, and disclosing and discharging public liabilities. Adegite (2010) says
that to attract foreign direct investments to Nigeria, the financial reporting processes must be
aligned with international standards.

7. Public performance reporting

Public managers are in a business that affects virtually every aspect of a person’s life. People,
therefore, have a right to know, how the public managers are doing their business. The
legislators need to take a lead in this regard and enact necessary laws making it obligatory for
all public entities to report on their performance. Public reporting on performance of
departments or programs should be made mandatory.

8. Determination of the cost of doing government business

One major problem affecting the growth of public expenditure and corruption in Nigeria is the
high cost of doing government business. A large number of costs in the form of use of existing
assets and facilities are not recorded in the year the assets are used. The government following
cash-based accounting does not have a system of charging depreciation to the government
assets and allocating them to various programs and projects. Thus the true cost of doing
government business remains hidden. A proper accountability framework would require that a
detailed cost accounting system be introduced in government.

9. The establishment of the benchmark of efficiency

A very important problem facing public sector managers in Nigeria is the clear absence of
performance benchmark. Public performance reporting requires that benchmarks of efficiency
be devised for all ministries, departments and agencies. This should be done in consultation
with the MDA’s themselves and should remain open for periodic review and revisions.

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10. Strengthening the Public Accounts Committee

Public accounts committees play a very significant role in accountability of public officers in
Nigeria. Public accounts committees should be strengthened with a system of familiarizing the
members with the audit scope, approach and methods through workshops and powers to take
action if their recommendations are not implemented.

11. Change in the structure of Government Accounting and Auditing

Governmental accounting system in Nigeria is grossly deficient. Financial reports are outdated
and unreliable at all levels of government. Little attention is paid to financial accountability I the
public service. Achua (2009) posit that there is an urgent need to protect the commonwealth
from poor performance and fraud, and to protect individuals from lawless, arbitrary and
capricious actions by the state’s surrogate administrators. Therefore, the is an urgent need to
restructure the public sector accounting system taking into consideration the frailties and flaws
of governmental accounting in Nigeria. Adegite (2010) also says the rapid development and
changes that have taken place in the nation’s public sector since 1958. It is urgently necessary a
comprehensive revision of the entire audit laws of the country with a view to aligning them
with current realities and demands of globalization.

REVENUE AND EXPENDITURE IN NIGERIA

The government of Nigeria has different sources of raising revenue for carrying out the various
state functions. The sources of revenue can be classified into twelve (12) namely: customs and
exercise, licenses and internal revenue, direct taxes, fees, mining royalties, earnings and sales,
armed forces revenue, interest and repayment (general), interest and repayment (state),
reimbursements; rent on government property; statutory and non-statutory financial transfers
and miscellaneous revenue (Anyanfo, 1996; Anyanwu, 1997; Adams, 2001). However, Section
149 of the 1999 Constitution as amended provides that all revenues collected by the
Government of the Federation shall be paid into the Federation Account except for the
proceeds of personal income taxes of the Armed forces of the federation, the Nigerian Police
Force, External Affairs personnel and residents of the Federal Capital Territory.

Expenditure in Nigeria involves the all the expenses which the public sector incurs for its
maintenance, for the benefit of the economy, external bodies and for the country. Public
expenditure in Nigeria is usually categorized into recurrent and capital expenditure. According
to Anyanfo (1996), a recurrent expenditure is made frequently or regularly. In the context of
government financial management, recurrent expenditure has an economic life span of less
than one year. A capital expenditure has a life span of more than one year for the purpose of
acquiring or improving on a fixed asset.

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The table 1: Revenue collected by the federal government, recurrent and capital expenditure
for the period 1961 – 2008.

Year Revenue Recurrent Capital Total

expenditure expenditure expenditure
#million # million #million #million
1961 223.65 96.86 67.04 163.80
1962 477.70 103.61 63.87 167.48
1963 498.19 119.64 63.87 183.51
1964 554.41 143.87 76.47 220.34
1965 654.34 156.84 79.58 236.42
1966 812.88 177.27 77.87 255.14
1967 654.34 186.73 91.29 258.02
1968 569.53 218.75 131.14 349.89
1969 755.96 433.42 122.78 556.10
1970 634.00 716.10 187.80 903.90
1971 1168.80 823.60 173.60 997.20
1972 1405.10 1012.30 451.30 1463.60
1973 1695.30 963.50 565.70 1529.20
1974 4537.40 1517.10 1223.50 2740.50
1975 5514.70 2734.90 3207.70 5942.60
1976 6765.90 3815.40 4014.30 7856.70
1977 8042.40 3819.20 5004.60 8823.80
1978 7371.00 2800.00 5200.00 8000.00
1979 10,912.40 3187.20 4219.50 7406.70
1980 15,233.50 4806.20 10,163.30 14,968.50
1981 13,290.50 4,846.70 8,567.00 11,923.20
1982 11,433.70 5506.00 8,417.20 11,923.20
1983 10,608.30 4750.80 4,885.70 9,636.50
1984 11,253.30 5,827.50 4,100.10 9,927.60
1985 15,050.80 7,576.40 5,464.70 13,041.10
1986 12,595.80 7,696.90 8,526.80 15,223.70
1987 25,380.80 15,646.20 6,372.50 22,018.70
1988 27, 596.70 19,409.40 8,340.10 27,749.50
1989 53,870.40 25,994.20 15,034.10 41,028.30
1990 98,102.40 38,219.60 24,048.60 60,268.20
1991 100,453.80 38,243.50 28,349.90 66,584.40
1992 190,453.20 53,034.10 39,763.30 92,797.40
1993 192,769.40 136,727.10 54,501.80 191,228.90
1994 201,910.80 89,974.90 70,918.30 160,893.20
1995 459,987.30 127,629.80 121,138.30 248,768.10
1996 523,597.00 124,491.30 212,926.30 337.217.60

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1997 528,811.10 158,563.50 269,651.70 428,216.20

1998 463,608.80 178,097.80 309,018.60 487,113.40
1999 949,187.70 449,662.40 498,027.60 947,690.00
2000 1,906,159.70 461,600 239,450.90 701,059.40
2001 2,231,600.00 579,300.00 438,696.50 1,018, 025.50
2002 1,731,837.50 696,800.00 321,378.10 1,018,158.10
2003 2,575,095.90 984,300.00 241,688.00 1,225,965.90
2004 3,920,095.00 1,032,700.00 351,300.00 1,426,200.00
2005 5,547,500.00 1,223,700.00 519,500.00 1,822,100.00
2006 5,965,101.90 1,290,210.90 552,385.60 1,938,002.50
2007 5,715,600.00 1,589,270.00 759,323.00 2,450,896.70
2008 7,866,590.10 2,117,362.00 1,123,458.00 3,240,820.00
Source: Central Bank of Nigeria (2009)

The table above shows the federal government revenue, recurrent and capital expenditure for
the period 1961-2008.

MATERIAL AND METHODS

The study used ex-post factor research design. Documentary data is utilized from the Central
Bank of Nigeria Statistical Bulletin for the period 1961-2008 for government revenue, recurrent
expenditure and capital expenditure. The data generated for the study from the Bulletin were
analysed using ordinary least square (multiple regression). Excel software helped us to
transform the variables into a format suitable for analysis, after which the Econometric View
(Eview) 3.1 was utilized for data analysis. The analysis was guided by the following linear model:

= + + … … … … … . . (1)

= + + … … … … … … . . (2)

Where, REV is revenue, REEt is the recurrent expenditure and CAEt is the capital expenditure. α
is the intercept of the regression and βt is the coefficients of the regression, while ε is the error
term capturing other explanatory variables not explicitly included in the model.

RESULTS AND DISCUSSION

Table 2: Descriptive statistics

REVENUE RECURRENT CAPITAL

EXPENDITURE EXPENDITURE
Mean 8628485.5 239478.6 176117.6
Median 14170.65 6701.700 8378.650
Maximum 7866590 2117362 2416888

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Minimum 2236500 96.86000 63.8700

Std. deviation 1849693 479644.7 40566.8
Skewness 2.416858 2.309748 3.9629.34
Kurtosis 7.867136 7.706933 21.057119

Jarques bera 94.10766 86.98993 777.3296

Probability 0.000000 0.000000 0.000000
Observation 48 48 48
The table below shows the descriptive statistics for revenue, recurrent expenditure and capital
expenditure for the period 1961-2008. The revenue, recurrent and capital expenditure showed
a mean of (8628485.5, 2339478.6 and 176117.6), standard deviation of 1849693, 479644.7 and
40566.8 for revenue, recurrent expenditure and capital expenditure, the skewness and kurtosis
of (2.416858, 2.309748 and 3.9629.34) and (7.867136, 7.706933 and 21.057119). The
descriptive statistics shows that the minimum revenue made by the federal government
amounted too #2236500 million, but this amount does not reflect on the life of the average
man on the street. The faces of an average Nigerian on the streets of Lagos, Port Harcourt,
Kano, Sokoto, Kaduna, and other major cities in the country is that of abject poverty,
unemployment, lack of basic infrastructures etc. This is because of the complete absence of
accountability and transparency in the effective and efficient management of public funds by
public office holders all over the country.

Table 2: Regression result

Dependent Variable: REE

Method: Least Squares
Date: 07/02/11 Time: 19:47
Sample: 1961 2008
Included observations: 48
Variable Coefficient Std. Error t-Statistic Prob.
C -46338.33 53049.51 -0.873492 0.3869
REV 3.796526 0.099789 38.04551 0.0000
R-squared 0.969199 Mean dependent var 862848.5
Adjusted R-squared 0.968529 S.D. dependent var 1849693.
S.E. of regression 328134.2 Akaike info criterion 28.28101
Sum squared resid 4.95E+12 Schwarz criterion 28.35897
Log likelihood -676.7442 F-statistic 1447.461
Durbin-Watson stat 1.295971 Prob(F-statistic) 0.000000
Source: eview program

The table above show that there is a significant relationship between recurrent expenditure
and government revenue because the p-value of 0.0000 is less than the critical value of 0.05
and the R2 shows that about 96% variations in revenue is explained by recurrent expenditure.
This result has shown that most of revenue derived by government is spent on the payment of

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salaries and emoluments of officers in general administration, defense and internal securities
and national assembly. This is why most of the budget in Nigeria is purely on recurrent
expenditure.

Table 3: Regression result

Dependent Variable: CAE

Method: Least Squares
Date: 07/02/11 Time: 19:42
Sample: 1961 2008
Included observations: 48
Variable Coefficient Std. Error t-Statistic Prob.
C 347561.7 226073.7 1.537382 0.1311
REV 2.925812 0.515839 5.671942 0.0000
R-squared 0.411546 Mean dependent var 862848.5
Adjusted R-squared 0.398753 S.D. dependent var 1849693.
S.E. of regression 1434253. Akaike info criterion 31.23096
Sum squared resid 9.46E+13 Schwarz criterion 31.30893
Log likelihood -747.5431 F-statistic 32.17093
Durbin-Watson stat 0.940597 Prob(F-statistic) 0.000001
Source: eview program

The table above shows that there is a significant relationship between capital expenditure and
revenue of the government in Nigeria because the p-value of 0.0000 is less than the critical
value of 0.05 and the R2 of about 41% variation in revenue is explained by capital expenditure.
This also shows that the budget is Nigeria is less concerned with the provision of basic
infrastructures for the long run growth of Nigeria. This is why there is complete absence of
good roads, hospitals, water supply, electricity etc in the country because the Nigerian budget
and expenditure framework is recurrent expenditure driven.

Table 4: ADF result

ADF Test Statistic -3.159737 1% -3.5814

Critical
Value*
5% -2.9271
Critical
Value
10% -2.6013
Critical
Value
*MacKinnon critical values for rejection of hypothesis of a
unit root.
Source: eview program

The Augmented Dickey Fuller (ADF) test shows a value of -3.159737 is less than 5% critical
value of -2.9271 that is (-3.159737< -2.9271) gives stationarity at the first difference.

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Arabian Journal of Business and Management Review (OMAN Chapter) Vol. 1, No.6; January 2012

CONCLUDING REMARK

Accountability is a central concept for governance. Accountability requires that those who hold
positions of public trust should account for their performance to the public or their duly elected
representatives. Accountability, therefore, implies that decision makers are monitored by, and
are responsible to, others, each of whom is, in turn, responsible to the people of the country. In
respect of public financial management, there are several mechanisms through which
accountability is enforced such the auditor general, public account committee, and the
ombudsman. These accountability mechanisms must be strengthened to reduce the level of
corruption in the country. The nation’s annual budget must be an instrument of accountability,
a stewardship report of what was done in any given financial year and just a reflection of how
money was allocated, unspent and subsequently returned to the coffers of the government or
even wasted. Therefore, accountability is the hallmarks for good governance, if Nigeria is to a
member of the twenty most developed nations of the world by the year 2020, political office
holders, citizens and all stakeholders in the Nigerian project should embrace integrity,
transparency and accountability in the management of public funds.

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