Outcome-Based Budgeting and Infrastructure Delivery in Emerging Economies: Evidence from Subnational Fiscal Reform in Nigeria

Abstract

Outcome-based budgeting (OBB) has been a popular financial management reform that tries to enhance the relationship
between public spending and development performance and outcome, especially in infrastructure provision. In this paper,
the authors analyze the usefulness of using outcome-based budgeting as a means of enhancing infrastructure provision
at the subnational level in emerging economies based on the experiences of fiscal reform in Nigeria. The study is based
on the literature on the subject of financial management in the community, fiscal decentralization, and the governance of
infrastructure, which is why it develops an analytical model that is institutional and descriptive based on the secondary fiscal
and infrastructure performance information provided by the subnational governments. The analysis shows that outcomebased
budgeting can increase the efficiency of allocations, capital budget execution, and accountability in the delivery of
infrastructure with the help of plausible revenue models and performance monitoring solutions. Nonetheless, structural
challenges, such as the excessive reliance on intergovernmental transfers, cyclicality of the fiscal, and limited subnational
administrative capacity limits the performance of OBB. The results indicate that outcome-based budgeting may play a
significant role in the enhancement of better infrastructure results, but its effectiveness requires such complementary
reforms as revenue mobilization, institutional capacities development, and transparency systems. The paper presents the
policy implications to the emerging economies that are willing to use budgeting reforms to bridge the chronic infrastructure
deficits in the decentralized systems of governance.