THE ROLE OF BUDGETING IN THE PRESENT NIGERIA ECONOMIC SITUATION
ABSTRACT
Budgeting have a role to play in this present economic development of Nigeria. Budgeting which is defined as “A financial statement prepared and approved prior to a defined period of true of the policy to be purpose of attaining that period for the purpose of attaining a given objectives is primarily a process of planning and control. A well prepared budget provides management with a planned programme based on research by the entire organization. In addition, a carefully planned budget, provides owing to co-ordination the various actions of the organization. Budgeting is the most comprehensive financial technology widely used within an organization. When it is properly applied as a management process and toll it unites all parts of the institution and all aspects of management task into one complete management approach to profitability. Budgeting positions one’s mind of the actual result or outcome with the predetermined plan. In other words, with good budgeting, the result of every effort can be forecasted. Through a good budgeting by exports there will be a standard economy, Budgeting reduces wastage of manpower, it also reduces wastage of finance. Therefore, in order to avoid problems in carrying or preparing budget, budgeting should be carried out exactly there way it is being laid down by the experts if there is any correction or variation to be made in future, the experts should be involved.
CHAPTER ONE
1.0 INTRODUCTION
The world generally had been in a state of permanent economic crisis for quite sometime, every government and organization (public and private) round the globe is faced with the issue of how to combat economic depression and stablize their economic affairs.
In Nigeria presently, there has been the problem of unexecuted plans and abandoned project by the federal and state governments and industries not because there was no completion fund to compound these project to completion, but because of lack of well certiculated plans and control measure coupled with scarcity of resources. Institute of Management and Technology for instance have such projects, which have been abandoned for years such as the uncompleted building in campus 11, the research institution (Bakassi) and many others. Because of the above mentioned the researcher has decided to vary out her project titled “The role of budgeting in the present Nigeria situation".” Budgeting evolved to and management optimize scarce resources which have alternative uses. Tertiary institution being a non – profit making organization requires stability and order units affairs in the face of inflationary economic situation facing Nigeria currently.
There has been to be a more certain long to improve the management function of planning and control so as to be able to find its activities and projects adequately, this is on explanation for the growing interest in the role of budgeting. Although, budgeting has been scourced by some as exercise in futility because of is depending upon the fore casting future events which cannot be fore told with precision is yet being found by most business executive to be the best to find a tranquil harbour in the storm battered world economy. Budgeting which is defined as a financial statement prepared and approved prior to a defined period of time of the polving to be pursued during that period for the purpose of attaining of given objective. (Moore, C. L. and Jaedike, R. K. Managerial Accounting 5th ed. (USA; S.W. Publishers (1980): is primarily a process of planning and control. A well-prepared budget provides management with a planned programmed based on research by the entire organization. in addition, a carefully planned budget provides away to co-ordinable and various actions of the organization. There are many write-ups in books, journal, magazines and newspaper on budgeting both this project will critically examine its examine its role in non-profit making organization, especially to institution of management and Technology (I.M.T) Enugu.
1.1 BACKGROUND TO THE STUDY
The Institute of Management and Technology came into life as a result of the merging of two schools – institute of Administration and college of Technology in April, 1972. In October of the same year a provisional council of the proposed new Institute was appointed by the cast controls state government. the council was commissioned to determine and recommend to the government the Institute that would produce high quality technologists as well as Professional Managerial Manpower in subject areas directed by the state and national needs. The council submitted its reports in early April, 1983.
1.2 STATEMENT OF PROBLEMS
Polytechnics and other Tertiary Institutions in Nigeria or edicts by the government as a non-profit making organization most of their capital and recurrent expenditures are being financed by the federal and state government. And they are regarded as government parastatals. Financing, Tertiary Institute in Nigeria requires a huge human and material resources especially with their ever increasing number disciplines students, and staff coupled with the recent economic situation the role of funding the tertiary institute has become too heavy for the government to carry, therefore the financial positions of our Tertiary Institution has become deplorable. With the above background in view, the researcher is being spurred to investigate without bias the various avenues through which the Institute of Management and Technology raises her income and how prudently she manages, control and accounts for it.
Budgeting is futuristic in nature and any attempt to quantitatively state the future is an estimate or at best a far approximation of the future best a far approximation of the future events, problem in budgeting is either over or under approximation. This in other words is variance, sometimes, the variance, may be totally out of the range, making its use for control purpose difficult.
(a) The rate of inflation is hard to predict so that budgeting for the price levels seems to be largely guesswork.
(b) The volume of activity cannot be foreseen limiting factors (mostly government policies) arise to restricts out put below budgeted levels.
Budgeting encompasses all aspects of organization’s activity such that any problem at one point of it generates multiple and effects. Because of this, it is feared that there will be problems of organization and attempts to into an optimal master budget may be unsuccessful. Also, the human element in budgeting increases its probabilistic nature and therefore, is likely to make its more probabilistic. There may be strike and inadequate motivation. The period of high inflation rate as it is now, often goes with frequent wage salary negotiations and strike in adequate motivation is said to have always been a problem of budgeting since different workers are motivated differently according to their different needs. The problem of motivation must have made worse by the excessive loss of purchasing power of the naira in the foreign exchange market. This is because of financial incentive believed to be main motivational method desired and practiced in Nigeria.
This is also because where the level of education is low and where skilled manpower is short in supply, the highest level of aspiration of many workers remains the in range of satisfying the lower level needs which more often that not tree of emotion, (emotional distress set in which management is not committed, educated persuasive or intelligent enough to convince its subordinate that budgeting is a positive device to help management choose and reach goals. When this happens, subordinate and executive manager may like budgeting to strike, lay off and pressure device as “cure-alls”. The control aspect of budgeting may have a number of budgeting may have a number of serious problems to over come in applying theory in practice. All the problems, aforementioned, where in existence jeopardize budgeting in the face of inflationary pressure in tertiary institutes. This research therefore, highlights budgeting in the face of Inflationary Pressure with due consideration to these and other problems, suggestions for their possible solution are made to enhance budgeting in the face of inflationary pressure, in tertiary institution.
1.3 OBJECTIVE OF THE STUDY
The objective of the study will be to appraise the role of budgeting to Nigerian tertiary institution in the face of inflation. Specially, the study will attempt:
(a) To find out the various sources of income to tertiary institutions (Institute of Management and Technology Enugu)
(b) To find out the extent to which the federal and state government funds the institution.
(c) To ascertain the impact of inflation and other unforeseen variables. On the usefulness of budgeting in tertiary institution management.
(d) To ascertain the role of budgeting in the face of inflationary pressure. To analyse impact of the role of budgeting in the face of inflationary pressure in tertiary institution management with particular attention to Institute of Management and Technology, Enugu.
1.4 HYPOTHESIS / RESEARCH QUESTION
In order to validate this research effort, the following research questions will be addressed.
(a) Do Tertiary Institutions engage in budgeting?
(b) Do Tertiary Institutions need budgeting during inflationary periods?
(c) Is budgeting cost effective during economic boom than necessary or inflationary period.
(d) How does the institution react to budgeting during economic depression budgeting fails to achieve its obligation?
(e) Is there a clear cut difference between the role of budgeting during economic boom and depressionary periods.?
1.5 SIGNIFICANCE OF THE STUDY
This project provides a beneficiary insight into the nature and rules of budgeting in the face of inflationary pressure to the Rector, Registrar, bursar and budgeting officers of Institute of Management and Technology Enugu.This study also will be of immense benefit to other organization (profit and non profit making) which insight in time past doubted the effectiveness of budgeting in inflationary period. The society at large will also benefit from this project, the federal, state and local government in particular who continually seek for ways to stabiles its undertaking a critical review of this study, this project provides material guide to such people. The will also serve as reference to students who are writing on the topic related to this in future, and lastly, to the researcher, understanding and appreciation of the subject matter.
1.6 SCOPE AND LIMITATION OF THE STUDY
For a more critical analysis of this subject. This study was limited to budgeting as obtainable in Institute of Management and Technology. The major work problems that militate against these works are as follows:
TIME: Apart from the normal academic work, theme were other related classroom work that engages the researcher in partial fulfillment of relevant courses, the time constraints is the principal budget fact or the limiting factor of this research. Inadequate time therefore had primary affect on this research and limited it accordingly.
FINANCE: To find a research work requires a huge sum of money. This research is single handedly funded by the researcher who also have other financial commitment in regards to their relevant course.
COLLECTION OF DATA: Data collection in Nigeria are always a difficult task due to the fact that officers are afraid of being exposed or afraid of exposing the institution.
1.7 DEFINITION OF TERMS
In order to validate this research effort, the following terms are being defined.
BUDGET: A budget as defined by the institute of Cost and Management Accountants is “A financial and quantitative statement, prepared and approved prior to a defined period for the purpose of attaining a given objective of the policy to be pursued during that period. It can also be defined as “A short-term financial plan, which guide mangers in achieving the objectives of a firm. A budget may be defined as a comprehensive and co-ordinate plan, expressed in financial terms, for the operations and resources of an enterprises for some specific period in future.
BUDGETING: This is one of the tools adopted by management for effective cost planning and control.
BUDGETARY CONTROL: This is the planning in advance of the various function of a business so that the business as a whole can be controlled.
PLANNING: This is defined a deciding in advance what to do how to do it, when to do it, and who is to do it. It bridges the gap between where one are and where one would like to be in future. Planning is also an inculpable part of all human activity and can be defined as the establishment of objectives, and the founulation, evaluation and selection of policies, strategies, tactics, and action required to achieve these objectives.
INFLATION: This is a continues rise in prices of goods and services. That is, a situation of persistent increase in prices of commodities.
