Assessment of budget compliance: Evidence from the Nigerian public sector

Purpose: Evidence suggests that the federal government annually budgets and appropriates amounts for both capital and recurrent expenditure to various ministries, departments, and agencies, yet there is no impact on the ordinary citizen on the street. The question is whether it is a result of non-compliance with budgets or other factors hindering budget compliance. In addition, the federal government introduced different policies to fast-track the process of budgeting and public expenditure; several factors have prolonged the period of the current economic recession. From the fiscal policy side, delays in budget approval and implementation are major challenges. Against this background, this study examines factors that influence budget compliance and in relationship with variance in Nigeria. Methodology: The data was gathered from secondary sources and analysed using the Engle-Granger co-integration test and the augmented Dickey-Fuller (ADF) test (Units root test). Findings: The findings revealed that corruption, political stability, and type of government have a significant negative relationship with variance. Additionally, corruption and crude oil prices show a negative effect on actual total expenditure. However, Gross Domestic Product (GDP) and revenue are positively significant with budget variance and actual total expenditure. Limitations/Implications: This study illustrates evidence relevance to the public and academic debates about how government should use all the institutions at their disposal to minimise corruption since corruption reduces the variance and actual total expenditure. In addition, since crude oil price hinder government expenditure, the federal government should focus more on other source of revenue for budget apart from crude oil. Originality: This study provides the effect of corruption, crude oil price, political stability and the type of government, as indicators for budget compliance on the variance and total actual expenditure. As a result, this study contributes to the literature in the area of budgeting system for the public sector in developing countries with specific focus on Nigeria.