The Effect of Public Sector Reforms on Public Sector Budgeting and Accounting Systems in Nigeria.


The study examined the compatibility of the public sector reforms and the accounting systems in the Nigerian public sector.

In particular, the Fiscal Responsibility Act 2007, being a major framework for carrying out the public sector reforms in Nigeria, is examined in order to determine in what ways, if any, the provisions therein would require a reform in public sector budgeting and accounting systems to enhance transparency, accountability and economic development in Nigeria.

The study employed the descriptive and ex-post facto research designs. The descriptive research design employed the cross-sectional method which consisted of surveys and field studies in the analyses of the primary data.

The primary data and secondary data were subjected to statistical analyses using the paired-wise t-test, correlation analyses, simple regression analyses, and sample t-test statistical models.

The findings revealed that the present cash-based accounting and budgeting systems have not supported the achievement of economic and development targets as major objectives of the Public Sector Reform and the Fiscal Responsibility Act (FRA).

Also, it discovered that the present cash accounting and budgeting systems do not ensure accountability and efficiency in the public sector and that the current cash accounting and budgeting systems are not congenial to GDP growth as one of the aims of the Public Sector Reforms.

This research also established that there is significant relationship between the attainability of fiscal policies and financial reporting systems and that there is need for a reform of the public sector accounting and budgeting systems to be able to achieve the objectives of the Nigeria Public Sector Reforms as provided for in the Fiscal Responsibility Act.

A model was developed by the researcher as a guide for economic and fiscal planning, and to reflect the relationship which has been established by the findings of this research.

The practical and theoretical implications of the model developed in this work is that a desired economic index can be used to derive and prepare budget estimates much the same way that economic variables can be used to predict economic indicators.

Based on the findings of this study, it is recommended that the Public Sector Reform in Nigeria should be backed up with a reform of the public sector accounting and budgeting systems to be able to achieve the reform objectives.

Having done this much, further work should be carried out to determine the best way to implement accrual accounting to achieve fiscal transparency, accountability, efficiency, and economic growth in Nigeria, given the level of development in general and IT in particular.


Title page i
Approval ii
Certification iii
Dedication iv
Acknowledgements v
Abstract vi
List of Tables xi
List of Figures xiv


1.1. Background of the Study 1
1.2. Statement of Problem 4
1.3. Objectives of the Study 6
1.4. Research Questions 6
1.5. Hypotheses 7
1.6. Scope of the Study 7
1.7. Significance of the Study 7
1.8. Limitations of the Study 9
1.9. Operational Definition of Terms 9
References 12


2.1. Introduction 13
2.2. The Economic and Public Sector Reforms In Nigeria 15
2.3. A Look At The Fiscal Responsibility Act (FRA 2007) 17
2.4. The Medium-Term Expenditure Framework (MTEF) 22
2.5. The Medium-Term Sector Strategy (MTSS) Policy Tool 23
2.6. Definition and Characteristics of Public Sector 24
2.7. What Is Public Sector Reform? 25
2.8. Components of Public Sector Reforms 26
2.9. Reasons for Reforms 26
2.10. What is An Accounting System? 32
2.11. Types of Accounting Systems 34
2.12. Characteristics of Accounting Systems 35
2.12.1. Cash Accounting System 35
2.12.2. Modified Cash Accounting System 38
2.12.3. Modified Accrual System 38
2.12.4. Accrual Accounting System 39
2.13. The Budget and its Functions in the Public Sector 41
2.14. Benefits of Budgeting 42
2.15. Purposes of Budgeting 42
2.16. Types and Characteristics of Budgets 43
2.16.1. The Line-Item / Incremental System 44
2.16.2. Zero-Based Budgeting System (ZBBS) 45 Planning, Programming and Budgeting System (PPBS) 47 Basic Elements of PPBS 47
2.16.4. Performance Budgeting 48
2.16.5. Rolling / Continuous Budgeting System 49
2.17. The Place of Accounting Systems In Public Sector Reforms 50
2.18. Challenges of Accounting Reform in the Public Sector 51
2.19 The Impact of Public Sector Reform on Accounting System 52
2.20. The Need for Accounting Reforms in the Public Sector 54
2.22. Advent of Accrual Accounting in the Public Sector 62
2.21. Reasons for Adopting Accrual Accounting in the Public Sector 65
2.23. Accounting Systems and Fiscal Regimes 64
References 68


3.1. Introduction 77
3.2. Research Design 77
3.3. Research Method 78
3.4. Methods and Sources of Data Collection 78
3.4.1. Primary Sources of Data 79
3.4.2. Secondary Sources of Data 79
3.5. Population for the Study 80
3.6. Sampling Technique 81
3.7. Sample Size for the Study 81
3.8. Validity and Reliability of Research Instruments 85
3.9. Method of Data Analyses and Model Specification 86
References 89


4.0. Introduction 90
4.1. Data Presentation and Analyses 90
4.1.1 Presentation and Analysis of Raw Data 90
4.1.2 Presentation and Analyses of Questionnaire Data 100
4.2. Hypotheses Testing 106
4.2.1. Hypothesis 1 106
4.2.2. Hypothesis 2 109
4.2.3. Hypothesis 3 116


5.1. Summary of Findings 119
5.2 Discussion of Findings 120
5.3. Contribution to Knowledge 150
5.4 Practical and Theoretical Implications of Study 154


6.1 Conclusion 163
6.2 Recommendations 166
6.3 Areas for Further Study 169


1.1 Background to the Study

Nigeria is a country endowed with abundant natural economic resources. But despite the abundance of national wealth, Nigeria has remained underdeveloped and is ranked among the poorest nations of the world (King, 2003; Soludo, 2007).

Since there is abundance of resources, Nigeria’s poverty level and underdevelopment can only be attributed to mismanagement and corruption, facilitated by weak, inappropriate and malfunctioning public sector.

In fact, Phillips (2006) has opined that the greatest hindrance to progress has been the boom and bust mode of economic management in Nigeria.

This has been encouraged by the dominance of oil in the economy. According to the European Commission (2002), “the quality of management of public finances in Nigeria represents the principal constraint on development”. The IMF has a similar view (King, 2003).

The federal government of Nigeria under Olusegun Obasanjo embarked on far-reaching economic reforms designed to deliver sustainable economic growth, wealth creation, and improve the quality of life of the Nigerian citizen.

The economic management reform, which is an integrated package of various economic reforms, was started in 2004.


Adamu, S. O. and Johnson, T. L. (1985); Statistics for Beginners. Ibadan, Nigeria: Evans Brothers (Publishers) Limited.

Ahsan, M. N., (1996); “Governance and the Legislative Audit Function”, Public Fund Digest, (VII) (1). Washington USA: International Consortium on Government Financial Management.

Alesina, A. and Silvia, A., (1998); “Tales of Fiscal Adjustment”, Economic Policy, 27 October: 487–546.

Alesina, A. and Roberto, P., (1995); “Fiscal Expansion and Fiscal Adjustments in OECD Countries”, Economic Policy, (21): 205–248.

Allen, R. and Tommasi, D., eds. (2001); Managing Public Expenditure: A Reference Book for Transition Countries. Paris: Organisation for Economic Co-operation and Development.

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