Project Topics

THE IMPACT OF ZERO BASED BUDGETING IN NIGERIA ECONOMY. (A CASE STUDY OF CBN ENUGU)

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Zero-based budgeting (ZBB) is a method of budgeting in which all expenses must be justified and approved for each new period. Developed by  Peter Pyhrr  in the 1970s, zero-based budgeting starts from a “zero base” at the beginning of every budget period, analyzing needs and costs of every function within an organization and allocating funds accordingly, regardless of how much money has previously been budgeted to any given line item. Components of a public sector ZBB analysis consist of are a total of three elements that make up the concept: Decision Unit Determination which is the building process of the formulation of a budget structure. Decision Package Formulation which is a stage when compiling and packaging a budget request, this mechanism is utilized. Ranking, which is the process that requires the most attention as it requires a company’s manager(s) to prioritize out of a group of decision packages that are laid out to them. In general, there are three components that make up public sector ZBB: Identify three alternate funding levels for each decision unit (Traditionally, this has been a zero-base level, a current funding level and an enhanced service level.); The benefit of zero based budgeting include Accuracy: This type of budgeting helps companies to look over every department to make sure they are getting the correct amount of money. Efficiency: It helps judge actual need by focusing on current numbers instead of past budgets. Reduction in wasteful spending: It can remove redundant spending by re-examining potentially unnecessary expenditures. Coordination and Communication: It allows for better communication within departments by involving employees in decision-making and budget prioritization.

1.2    STATEMENT OF THE PROBLEM

Creating ZBB can take enormous amounts of time, effort, and analysis that would require extra staff. This could cause the process to be  counter productive in cutting costs leasing to Bureaucracy. There are also possibilities of Corruption: In using ZBB, managers could attempt to skew numbers to make expenditures into vital activities, thus creating a “need” for them thereby leading to loss of funds. This type of budgeting requires departments to justify their budget, which can be difficult on many levels. Departments such as advertising and marketing have to justify expenses they may or may not use in the next year due to the fluctuation of the market. This could cost them profits in the future due to not being able to justify a certain amount. Also, ZBB comes at the cost of time and extra training for managers. This means extra time every year to do the budget, make adjustments, and receive the proper training to understand how to do ZBB. The problem confronting the study is to appraise the impact of zero based budgeting in Nigeria economy. A case study of CBN, Enugu.

1.3     OBJECTIVES OF THE STUDY

The Main Objective of the study is to appraise the impact of zero based budgeting in Nigeria economy. A case study of CBN, Enugu. The specific objectives include:

    i.        To understand the prevalence of zero based budgeting in CBN Enugu.

   ii.        To examine the impacts of zero based budgeting on the Nigerian economy.

 iii.        To identify the reasons for the zero based budgeting in the Nigerian economy.

1.4 RESEARCH QUESTIONS

    i.        What is the prevalence of zero based budgeting in CBN Enugu?

   ii.        What are the impacts of zero based budgeting on the Nigerian economy?

 iii.        What are the reasons for the zero based budgeting in the Nigerian economy?

1.5 RESEARCH HYPOTHESIS      

Ho1: There is no significant impact of zero based budgeting on the Nigerian economy.

1.6     SIGNIFICANCE OF THE STUDY

The study appraises the impact of zero based budgeting in Nigeria economy. A case study of CBN, Enugu. It provides relevant data for the effective formulation and implementation of policies which will further stimulate the economy to economic growth and development.

 1.7 LIMITATION OF THE STUDY

The study was confronted with logistics and geographical factors.

1.8 DEFINITION OF TERMS

ZERO BASED BUDGETING DEFINED

Zero-based budgeting (ZBB) is a method of budgeting in which all expenses must be justified and approved for each new period. Developed by  Peter Pyhrr  in the 1970s, zero-based budgeting starts from a “zero base” at the beginning of every budget period, analyzing needs and costs of every function within an organization and allocating funds accordingly, regardless of how much money has previously been budgeted to any given line item.

ECONOMIC DEVELOPMENT

Economic development is the process by which a nation improves the economic, political, and social well-being of its people.

ECONOMIC GROWTH DEFINED

Economic growth is an increase in the production of economic goods and services, compared from one period of time to another. It can be measured in nominal or real terms. Traditionally, aggregate economic growth is measured in terms of gross national product (GNP) or gross domestic product (GDP), although alternative metrics are sometimes used.