Vice President Yemi Osinbajo said the present administration took the bold step to change the budgeting system in order to achieve the nation’s socio-economic goals amidst dwindling oil revenues.
This was disclosed while meeting with Permanent Secretaries and Directors-General during a one-day sensitization session on the 2016 budget and 2016-2020 Medium Term Plan of the Federal Government. According to a statement issued by his Special Assistant on Media and Publicity, Laolu Akande, the Vice President said the greatest challenge facing the country was controlling increasing recurrent expenditure and freeing up resources for growth-related capital expenditure.
He stressed that budget planning under the President Muhammadu Buhari-led administration would restore the long term policy-based approach to budgeting, alongside a zero-based budgeting, which questions all expenses and ensuring greater transparency.
Zero-based budgeting is an approach to planning and decision-making that reverses the working process of traditional budgeting. In traditional incremental budgeting departmental managers justify only variances versus past years based on the assumption that the “baseline” is automatically approved. By contrast, in zero-based budgeting, every line item of the budget must be approved, rather than only changes. Zero-based budgeting requires that the budget request be re-evaluated thoroughly, starting from the zero-base; this involves preparation of a fresh budget every year without reference to the past. This process is independent of whether the total budget or specific line items are increasing or decreasing. It also refers to the identification of a task or tasks and then funding resources to complete the task independent of current resourcing.
Its advantages are
Efficient allocation of resources, as it is based on needs and benefits rather than history.
Drives managers to find cost effective ways to improve operations.
Detects inflated budgets.
Increases staff motivation by providing greater initiative and responsibility in decision-making.
Increases communication and coordination within the organization.
Identifies and eliminates wasteful and obsolete operations.
Identifies opportunities for outsourcing.
Forces cost centers to identify their mission and their relationship to overall goals.
Facilitates more effective delegation of authority