CHAPTER ONE

INTRODUCTION

1.1              Background of the Study

The central issue widely discussed in government accounting and finance, and by governments generally, is having access to the required resources needed to finance government programmes and service delivery. Most importantly, there are concerns on how to mobilize and manage financial resources, how to create systems for efficient, accountable and transparent financial transactions and the match between government revenues and expenditures (Aruwa, 2010). In order to achieve this, government annual budget, which has become one single most important and persuasive instrument for resource allocation, management and control comes in.

According to Mhome (2003), despite the fact that budgeting in African nations has witnessed lots of revolutions within the last few decades, no meaningful developments have been experienced. Accordingly, the Collaborative Africa Budget Reform Initiative – CABRI (2014) asssert that on the average, African countries have weak budget execution system, weak cash management, poor internal controls and irregular accounting practices. These problems have continued to generate serious concerns among scholars, thus raising questions on the strength of budgeting patterns and fiscal administration in the sub region. In line with the above, Ajakaiye & Akinbinu (2000) argue that the problem of budgets and budgeting in Africa could be traced to ineffective budgetary system and poor

regulatory framework which have compounded the budgeting process, thus giving rise to significant budget variances that has become a recurring decimal in Africa.

Given the above, this study is designed to examine the concept of fiscal administration as it affects budgeting in Sub-Saharan Africa.

1.2              Statement of the Problem:

Government budgets have remained crucial to the operation of various economies, and its relationship with economic growth has continued to generate series of debates among scholars. Taiwo & Abayomi (2011) opine that the size and structure of public expenditure for instance is a determinant of the pattern and form of growth in output of an economy; yet, the effect of such spending on economic growth remains an unresolved issue theoretically and empirically. In the view of Aigheyisi (2013), the effectiveness of government actual expenditure (which is presumed to be a function of budgeted expenditure) in expanding the economy and fostering rapid economic growth depends on whether such expenditure is productive or unproductive.

Notwitstanding however, Obinyeluaku (2013) reiterated that in all the regions of sub Saharan Africa (East Africa, Mid Africa, Southern Africa and West Africa), public expenditure consistently exceeded revenue almost throughout the period 1980-2012. Government revenue is also believed to have fallen from an average of 22 percent of GDP which was recorded during the 1980s while at the same time, public spending is believed to have grown at an unprecedented pace to reach over 28 percent of GDP on the

average (Nurudeen & Usman, 2010; Obinyeluaku, 2013; Aigheyisi, 2013; and Chude & Chude, 2013).

While there are notable studies on the relationship between government budget and economic growth, it is pertinent to note that only few studies have been conducted to analyse how governments at all levels and jurisdictions generate the needed resources to finance their budgets by seriously considering the match between budgeted and actual revenues and expenditures.

1.3              Objectives of the Study

The general objective of this study is to assess the relationship between budgeting and fiscal administration among selected Sub Saharan countries in Africa. The specific objectives of the study are:

1. To determine the relationship between tax revenue and government budgets of countries in Sub Saharan Africa.
2. To ascertain the extent to which non-tax revenue affects government budgets of countries in Sub Saharan Africa.
3. To assess the extent to which prior year capital expenditure affects the budgets of countries in Sub Saharan Africa.
4. To evaluate the relationship between recurrent expenditure and government budgets of countries in Sub Saharan Africa.

• To determine the extent to which budgeting of countries in Sub Saharan Africa is affected by fiscal deficit financing.
• To establish whether there is a significant relationship between budgeting/budgeting patterns and fiscal administration among countries in Sub Saharan Africa.

1.4              Research Questions

In view of the above research objectives, the following research questions are posed:

1. What is the relationship between tax revenue and government budgets of countries in Sub Saharan Africa?
2. To what extent does non-tax revenue affect government budgets of countries in Sub Saharan Africa?
3. How significant  is the effect of  prior year capital  expenditure on  budgets of countries in Sub Saharan Africa?
4. What is the relationship between recurrent expenditure and government budgets of countries in Sub Saharan Africa?
5. To what extent does fiscal deficit financing affect budgeting of countries in Sub Saharan Africa?
6. How significant is the relationship between budgeting/budgeting patterns and fiscal administration among countries in Sub Saharan Africa?

1.5              Statement of the Research Hypotheses

In order to achieve the objectives of this study and to find answers to the research questions stated above, research hypotheses were formulated and stated in their null forms as follows:

HO1:    Tax revenue does not have significant relationship with government budgets of countries in Sub Saharan Africa.

HO2:    Government budgets are not significantly affected by non-tax revenue of countries in Sub Saharan Africa.

HO3:    Prior year capital expenditure does not have significant effect on the budgets of countries in Sub Saharan Africa.

HO4:    There is no significant relationship between recurrent expenditure and government budgets of countries in Sub Saharan Africa.

HO5:    Fiscal deficit financing does not have any significant effect on budgeting in Sub Saharan Africa.

HO6:    There is no significant relationship between budgeting/budgeting patterns and fiscal administration among countries in Sub Saharan Africa.

1.6              Significance of the Study:

The outcome of the study will be useful to regional and national governments by providing informed basis for peer review and hence policy improvement. To development partners and donor agencies, it is the view of the researcher that they will be better informed of strengths and weaknesses in the financial operations of countries in

Sub Sahara Africa with a view to improving channels of aids and or attention. Individuals and businesses will be better equipped to take advantage of policy direction for their respective business plans. To the academia, it is expected that the study will provoke thought and interest, thus opening areas for future research. The citizenry are not left out as they will be in a better position to objectively assess the performance of their respective governments.

1.7              Scope of the Study:

The study was carried out on Sub Saharan African countries using a sample of twelve countries (Kenya, Ethiopia, Tanzania, Angola, D.R. Congo, Cameroon, South Africa, Botswana, Namibia, Nigeria, Ghana and Cote d’Ivoire). These countries were selected from each of the four regions of Sub-Sahara Africa using the amount/size of their GDP at US current price as specified by Worldbank (2014). On the basis of this parameter, the researcher therefore selected the three (3) largest economies in each of the four constituent regions of the fifty (50) countries in Sub-Saharan Africa (Library of Congress, 2010). These countries are believed to be typical developing and leading economies in the continent given their sizes by GDP classification (Worldbank, 2014). The study covers a fifteen year period, 2000 – 2014.

1.8              Limitations of the Study

Expectedly, a study of this nature contends with data limitation as empirical research requires accurate and comprehensive data. It has however been asserted that finding

complete data series for countries like South Africa is very difficult (Sunkide, 2012). This is the case with the entire continent of Africa (Oguyiaba, Steigler & Onoju, 2012). The researcher however states categorically that the above limitations did not significantly affect the research procedure adopted, nor the findings and conclusions of the study.

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