THE ROLE OF ACCOUNTING IN THE CONTROL OF PUBLIC EXPENDITURES IN NIGERIA (A STUDY OF CENTRAL BANK OF NIGERIA)

CHAPTER ONE: INTRODUCTION

1.1 Background of the Study

Public expenditure refers to the spending undertaken by the government and its agencies to provide goods and services to citizens, fulfill statutory obligations, and promote economic development. In Nigeria, public expenditure occurs at federal, state, and local government levels, encompassing recurrent expenditures (salaries, overheads, debt servicing) and capital expenditures (infrastructure, education, health, defense). Given the enormous sums involved—running into trillions of Naira annually—the control of public expenditure is a matter of paramount importance. Without effective control mechanisms, public funds are vulnerable to waste, inefficiency, mismanagement, and outright corruption, all of which undermine economic development and erode public trust in government institutions (Premchand, 2019; Okonjo-Iweala, 2018).

Accounting plays a fundamental role in the control of public expenditures. At its core, accounting provides the systematic framework for recording, classifying, summarizing, and reporting financial transactions. In the public sector, accounting principles and practices are designed not only to track how money is spent but also to ensure that spending complies with authorized budgets, relevant laws, and regulations. Accounting systems generate the information needed for budget preparation, expenditure authorization, commitment control, payment verification, and post-expenditure audit. Without a robust accounting framework, public expenditure control would be impossible, as managers would have no reliable information on how much has been spent, against which budget lines, and for what purposes (Mellett, 2019; Chan, 2018).

The Central Bank of Nigeria (CBN) occupies a unique and pivotal position in Nigeria’s public financial management architecture. As the country’s apex bank, the CBN is responsible for formulating and implementing monetary policy, managing the nation’s foreign reserves, supervising banks and other financial institutions, and acting as banker to the federal government. In its role as banker to the government, the CBN maintains the Consolidated Revenue Fund (CRF) accounts, processes government payments, receives government revenues, and manages the treasury single account (TSA) system. The CBN also provides accounting and financial reporting services for many government transactions. Consequently, the effectiveness of accounting controls at the CBN directly affects the integrity of Nigeria’s public expenditure management system (CBN, 2019; Soludo, 2008).

The history of public expenditure control in Nigeria has been checkered with challenges, including persistent budget deficits, extra-budgetary spending, weak internal controls, audit queries, and high-profile corruption cases. The country has consistently ranked poorly on transparency and accountability indices. For example, Transparency International’s Corruption Perceptions Index has repeatedly placed Nigeria among the most corrupt countries in the world. Weak public expenditure controls have contributed to inadequate infrastructure, poor service delivery, and stunted economic development. In response, successive governments have introduced various reforms aimed at strengthening public financial management, including the Fiscal Responsibility Act (2007), the Treasury Single Account (TSA) policy (2012 onward), the Integrated Payroll and Personnel Information System (IPPIS), and the adoption of the International Public Sector Accounting Standards (IPSAS) (Ogbeifun, 2019; Adebayo and Oyedokun, 2020).

The Treasury Single Account (TSA) policy, implemented under the administration of President Goodluck Jonathan and consolidated under President Muhammadu Buhari, is a particularly significant reform for public expenditure control. Under the TSA, all government revenues are deposited into a single account maintained at the CBN, and all government payments are made from this account. This consolidation eliminates the proliferation of multiple bank accounts across government ministries, departments, and agencies (MDAs), which had previously made it difficult to track government cash flows and facilitated unauthorized spending. The CBN, as the operator of the TSA, plays a central role in ensuring that payments are authorized only against approved budgets and that no agency spends funds not credited to its sub-account. The TSA represents a major strengthening of accounting controls over public expenditure (Adegbite, 2020; Okafor and Udeh, 2021).

Beyond the TSA, the CBN performs several other accounting-related functions that support public expenditure control. The bank processes and validates payment instructions from MDAs against available budget balances, ensuring that spending does not exceed appropriations. It maintains detailed records of all government transactions, providing the audit trail necessary for internal and external audits. The CBN also produces financial reports on government operations, which are used by the Ministry of Finance, the Office of the Auditor-General, and international financial institutions to monitor fiscal performance. Additionally, the CBN provides training and guidance to MDAs on financial management and accounting procedures, helping to build capacity for expenditure control across the public sector (CBN, 2020; Nwankwo and Okeke, 2021).

However, despite the CBN’s critical role, significant challenges remain in the control of public expenditures in Nigeria. These include: the persistence of unauthorized or “off-budget” spending by some MDAs, delays in the release of budgeted funds leading to inefficient spending, weak commitment controls (recording of obligations before payments are made), inadequate integration of accounting systems across government, and political interference in the payment process. Moreover, the effectiveness of the CBN’s accounting controls depends on the quality of information provided by MDAs, many of which still struggle with poor record-keeping, unqualified accounting staff, and outdated systems. There have also been instances where the CBN itself has been criticized for inadequate transparency or for making payments without proper documentation (Etim and Bassey, 2020; Ogunleye and Adebayo, 2019).

The concept of expenditure control encompasses several distinct stages in the public financial management cycle. These include: budget formulation (planning how funds will be allocated), budget authorization (legislative approval of the budget), commitment control (recording obligations before payments are made), payment verification (ensuring goods or services have been received before payment), payment processing (actually disbursing funds), and post-expenditure audit (reviewing transactions after the fact). Accounting systems support each of these stages by providing the information infrastructure needed to track commitments, verify payment requests, record transactions, and produce audit trails. The CBN’s accounting systems are central to the payment processing and recording stages, as well as to the maintenance of government accounts (Premchand, 2019; Mellett, 2019).

The adoption of the International Public Sector Accounting Standards (IPSAS) by the Nigerian government represents another important development in public expenditure control. IPSAS are accrual-based accounting standards designed to improve the transparency, comparability, and reliability of public sector financial reporting. Unlike cash-based accounting, which records transactions only when cash changes hands, accrual accounting records economic events when they occur, providing a more complete picture of government assets, liabilities, revenues, and expenses. The transition to IPSAS requires significant changes in accounting systems and practices at the CBN and across MDAs. While IPSAS promises to improve expenditure control by providing better information on commitments, arrears, and contingent liabilities, the transition has been challenging and is still ongoing (Chan, 2018; Okafor and Udeh, 2020).

The role of internal audit within the CBN and other government agencies is also critical to public expenditure control. Internal auditors verify that expenditures comply with approved budgets, relevant laws, and internal policies. They test the effectiveness of accounting controls, identify weaknesses, and recommend improvements. The CBN, as a financial regulator, places strong emphasis on internal audit within the banks it supervises and, presumably, within its own operations. However, the independence and effectiveness of internal audit in the public sector have been questioned, with some internal audit units being underfunded, understaffed, or subject to management pressure to overlook irregularities. Strengthening internal audit is an ongoing priority for public financial management reformers (Eze and Nwafor, 2019; Adebayo and Oyedokun, 2020).

External audit, conducted by the Office of the Auditor-General of the Federation (OAuGF), provides an independent assessment of the CBN’s financial statements and the government’s overall financial operations. The Auditor-General’s annual reports have consistently highlighted weaknesses in public expenditure controls, including non-compliance with financial regulations, inadequate documentation, unauthorized spending, and weak internal controls. However, the effectiveness of external audit in Nigeria has been constrained by late submission of accounts by MDAs, inadequate funding for the Auditor-General’s office, and limited follow-up on audit recommendations by the legislative Public Accounts Committees. Strengthening the link between audit findings and corrective action is essential for improving expenditure control (Oyo-Ita, 2019; Ogbeifun, 2019).

The Central Bank of Nigeria itself is both a spender of public funds (through its operational budgets) and the custodian of government accounts (through its banker-to-government function). This dual role creates the potential for conflicts of interest or, at minimum, the need for careful segregation of duties. The CBN’s own expenditures are subject to the same control weaknesses as other government agencies, and there have been historical instances where the CBN was criticized for its spending on currency printing, security, and other activities. The bank’s accounting controls over its own expenditures are therefore as important as its controls over government-wide expenditures. This study will examine both dimensions of the CBN’s role (Nwankwo and Okeke, 2021).

The period of this study (contemporary, focusing on recent years) is particularly relevant given the ongoing fiscal challenges facing Nigeria. The country has experienced significant oil price volatility, economic recessions (most notably 2016-2017), and the economic disruptions caused by the COVID-19 pandemic. These shocks have increased pressure on public finances while simultaneously increasing the need for effective expenditure control. When revenues are tight, every Naira must be spent more carefully. The CBN’s role in ensuring that expenditures are controlled—that only authorized, necessary, and properly documented payments are made—becomes even more critical during periods of fiscal stress. Understanding how the CBN’s accounting functions support expenditure control is therefore timely and policy-relevant (Okonjo-Iweala, 2018; Soludo, 2008).

Finally, this study is motivated by the need to move beyond generic discussions of public expenditure control to a detailed, empirical examination of the specific accounting roles played by a key institution—the Central Bank of Nigeria. While much has been written about public financial management reforms in Nigeria, relatively few studies have focused on the CBN’s internal accounting processes and how they contribute to (or detract from) expenditure control. This case study approach will generate detailed, context-specific insights that can inform policy and practice. The findings will be valuable not only for the CBN but also for the Ministry of Finance, the Office of the Auditor-General, international development partners, and other stakeholders in Nigeria’s public financial management system (Adebayo and Oyedokun, 2020; Okafor and Udeh, 2021).

1.2 Statement of the Problem

Despite the implementation of numerous public financial management reforms in Nigeria—including the Treasury Single Account (TSA), the adoption of IPSAS, and the strengthening of the Office of the Auditor-General—significant problems persist in the control of public expenditures. These problems include unauthorized spending by government ministries, departments, and agencies (MDAs); persistent budget deficits; late or incomplete submission of financial accounts; weak commitment controls; inadequate documentation for payments; and audit queries that go unaddressed. The Central Bank of Nigeria (CBN), as banker to the federal government and operator of the TSA, plays a critical role in public expenditure control through its accounting functions. However, the specific contributions of the CBN’s accounting processes to expenditure control have not been systematically examined. Furthermore, it is unclear to what extent weaknesses in the CBN’s own accounting controls contribute to the broader problems of public expenditure management. There are also questions about the effectiveness of the CBN’s oversight of MDA spending, the adequacy of its payment verification processes, and the timeliness and accuracy of its government financial reporting. Therefore, this study is motivated to investigate the role of accounting in the control of public expenditures in Nigeria, with a specific focus on the Central Bank of Nigeria, and to identify areas for improvement in accounting controls and processes.

1.3 Aim of the Study

The aim of this study is to examine the role of accounting in the control of public expenditures in Nigeria, using the Central Bank of Nigeria (CBN) as a case study.

1.4 Objectives of the Study

The specific objectives of this study are to:

1. Examine the accounting functions of the Central Bank of Nigeria that support public expenditure control.
2. Assess the effectiveness of the CBN’s payment verification and processing controls in preventing unauthorized expenditures.
3. Evaluate the role of the Treasury Single Account (TSA) as an accounting tool for expenditure control at the CBN.
4. Identify the challenges facing the CBN in using accounting to control public expenditures.
5. Propose recommendations for strengthening accounting-based expenditure controls at the CBN and across government.

1.5 Research Questions

The following research questions guide this study:

1. What accounting functions does the Central Bank of Nigeria perform that support public expenditure control?
2. How effective are the CBN’s payment verification and processing controls in preventing unauthorized expenditures?
3. What role does the Treasury Single Account (TSA) play as an accounting tool for expenditure control at the CBN?
4. What are the major challenges facing the CBN in using accounting to control public expenditures?
5. What measures can be implemented to strengthen accounting-based expenditure controls at the CBN and across government?

1.6 Research Hypotheses

The following hypotheses are formulated in null (H₀) and alternative (H₁) forms:

Hypothesis One

• H₀: The accounting functions of the Central Bank of Nigeria have no significant effect on the control of public expenditures.
• H₁: The accounting functions of the Central Bank of Nigeria have a significant effect on the control of public expenditures.

Hypothesis Two

• H₀: The Treasury Single Account (TSA) has not significantly improved public expenditure control at the CBN.
• H₁: The Treasury Single Account (TSA) has significantly improved public expenditure control at the CBN.

Hypothesis Three

• H₀: There is no significant relationship between the effectiveness of the CBN’s payment verification controls and the reduction of unauthorized government expenditures.
• H₁: There is a significant relationship between the effectiveness of the CBN’s payment verification controls and the reduction of unauthorized government expenditures.

Hypothesis Four

• H₀: Challenges such as inadequate staff capacity and political interference do not significantly affect the CBN’s ability to control public expenditures.
• H₁: Challenges such as inadequate staff capacity and political interference significantly affect the CBN’s ability to control public expenditures.

1.7 Significance of the Study

This study is significant for several stakeholders. First, the management and staff of the Central Bank of Nigeria will benefit from a systematic assessment of the CBN’s accounting roles in expenditure control, enabling them to identify weaknesses and implement improvements. Second, the Federal Ministry of Finance, Budget and National Planning will gain insights into how the CBN’s accounting functions can be better integrated with budget planning and execution processes, enhancing overall fiscal discipline. Third, the Office of the Auditor-General of the Federation will find value in the study’s identification of control weaknesses, informing future audit plans and recommendations. Fourth, the National Assembly, particularly the Senate and House Committees on Finance and Public Accounts, will benefit from evidence on the effectiveness of existing expenditure controls, supporting legislative oversight functions. Fifth, international development partners such as the World Bank, the International Monetary Fund (IMF), and the Department for International Development (DFID/UKAID) will gain insights that can inform technical assistance programs for public financial management in Nigeria. Sixth, academics and researchers in public finance, accounting, and public administration will find value in the study’s contribution to the literature on public expenditure control in developing economies. Seventh, civil society organizations and anti-corruption agencies (such as the Economic and Financial Crimes Commission, EFCC) will benefit from a clearer understanding of accounting control mechanisms, supporting their advocacy and enforcement efforts. Finally, the Nigerian public will benefit indirectly as improved expenditure control leads to more efficient use of tax revenues, better public services, and reduced corruption.

1.8 Scope of the Study

This study focuses on the role of accounting in the control of public expenditures in Nigeria, using the Central Bank of Nigeria (CBN) as a case study. Geographically, the research is limited to the CBN’s headquarters in Abuja, where its government banking operations are primarily conducted, as well as relevant departments within the CBN. The study covers the CBN’s roles as banker to the federal government and operator of the Treasury Single Account (TSA). Content-wise, the study examines the following areas: the CBN’s accounting functions related to expenditure control (payment processing, commitment control, reconciliation, reporting); the effectiveness of the TSA as an expenditure control tool; payment verification and authorization procedures; challenges such as political interference, staff capacity, technology constraints, and legal framework issues; and internal and external audit interactions. The study targets managers and staff in the CBN’s Banking Services Department, Financial Services Department, Internal Audit Department, and other relevant units. The time frame for data collection is the cross-sectional period of 2023–2024, though historical and policy context back to the introduction of the TSA (c. 2012) will be considered. The study does not cover state-level public expenditure control, nor does it cover the expenditure control functions of the Ministry of Finance (other than as they relate to the CBN).

1.9 Definition of Terms

Public Expenditure: Spending undertaken by the government and its agencies to provide goods and services to citizens, fulfill statutory obligations, and promote economic development. It includes both recurrent (operational) and capital (developmental) expenditures.

Public Expenditure Control: The mechanisms, processes, and procedures used to ensure that public funds are spent only as authorized by law, within approved budget limits, for intended purposes, and with due regard for economy, efficiency, and effectiveness.

Accounting: The systematic process of recording, classifying, summarizing, and reporting financial transactions to provide information for decision-making, control, and accountability.

Central Bank of Nigeria (CBN): The apex monetary authority of Nigeria, responsible for formulating and implementing monetary policy, managing foreign reserves, supervising financial institutions, and acting as banker to the federal government.

Treasury Single Account (TSA): A unified structure of government bank accounts that consolidates all government revenues into a single account (or a set of linked accounts) maintained at the CBN, enabling centralized control over government cash balances and expenditures.

Banker to the Government: The role of the CBN as the principal banker for the federal government, including maintaining government accounts, processing government payments, receiving government revenues, and managing government debt.

Consolidated Revenue Fund (CRF): The government account (maintained at the CBN) into which all federally collected revenues are paid and from which all authorized expenditures are made, as required by the Nigerian Constitution.

Commitment Control: An accounting control mechanism that records and tracks obligations (contracts, purchase orders, etc.) before payments are made, ensuring that sufficient budget exists and that commitments do not exceed appropriations.

Payment Verification: The process of confirming that goods or services have been received as specified, that the payment request is authorized, and that supporting documentation is complete and accurate before a payment is approved and processed.

Internal Audit: An independent, objective assurance and consulting activity within the CBN designed to evaluate and improve the effectiveness of risk management, control, and governance processes, including expenditure controls.

External Audit: An independent examination of government financial statements and operations conducted by the Office of the Auditor-General of the Federation to provide assurance to the National Assembly and the public on the accuracy, completeness, and compliance of public expenditure.

Fiscal Responsibility Act (2007): Nigerian legislation that establishes principles of fiscal discipline, transparency, and accountability for federal and state governments, including requirements for budget preparation, expenditure control, and reporting.

International Public Sector Accounting Standards (IPSAS): Accrual-based accounting standards issued by the International Public Sector Accounting Standards Board (IPSASB) for use by governments and other public sector entities to improve financial reporting quality and comparability.

CHAPTER TWO: LITERATURE REVIEW

2.1 Conceptual Framework

A conceptual framework is a structural representation of the key concepts or variables in a study and the hypothesized relationships among them. It serves as the analytical lens through which the researcher organizes the study, selects appropriate methodology, and interprets findings. In this study, the conceptual framework is built around two primary constructs: Accounting (the independent variable) and Public Expenditure Control (the dependent variable). Additionally, the framework identifies the specific accounting functions relevant to expenditure control and the dimensions along which expenditure control effectiveness can be measured (Miles, Huberman, and Saldaña, 2020).

The independent variable, Accounting, refers to the systematic process of identifying, recording, classifying, summarizing, and reporting financial transactions to provide information for decision-making, control, and accountability. In the context of public expenditure control at the Central Bank of Nigeria, accounting is conceptualized along six specific functional dimensions: (a) budgeting and appropriation accounting (recording and tracking budget allocations and releases), (b) commitment accounting (recording obligations before payments are made), (c) payment processing and verification accounting (ensuring that payments are authorized, supported, and accurate), (d) ledger and fund accounting (maintaining the Consolidated Revenue Fund and other government accounts), (e) reconciliation accounting (matching CBN records with MDA records, commercial bank records, and cash balances), and (f) financial reporting (preparing periodic reports on government revenue, expenditure, and cash positions). Each of these accounting functions contributes differently to the overall control of public expenditures (Premchand, 2019; CBN, 2020).

The dependent variable, Public Expenditure Control, refers to the mechanisms, processes, and procedures used to ensure that public funds are spent only as authorized by law, within approved budget limits, for intended purposes, and with due regard for economy, efficiency, and effectiveness. For the purpose of this study, public expenditure control is conceptualized along four sequential stages of the expenditure cycle: (a) pre-audit control (controls applied before a payment is made, including budget availability checks, authorization verification, and documentation review), (b) payment control (controls applied during the payment process itself, including payment instruction validation, signature verification, and fund availability), (c) post-payment control (controls applied after payment, including recording, reconciliation, and internal verification), and (d) audit and accountability control (ex post reviews by internal and external audit to verify compliance and detect irregularities). Effective expenditure control requires all four stages to function properly (Mellett, 2019; Chan, 2018).

The conceptual framework posits a direct positive relationship between the quality and effectiveness of accounting functions and the degree of public expenditure control. Specifically, when the CBN performs its accounting functions accurately, completely, and in a timely manner, public expenditure control is enhanced. For example, accurate commitment accounting (recording obligations as soon as contracts are signed) prevents the government from making payments that would exceed budget limits. Rigorous payment verification (ensuring that goods or services have been received before payment) prevents fraudulent payments for undelivered items. Timely reconciliation (matching CBN records with MDA records) detects discrepancies that might indicate errors or irregularities. Conversely, when accounting functions are weak—due to system failures, staff incompetence, or deliberate manipulation—expenditure control is weakened, and the risk of unauthorized, wasteful, or corrupt spending increases (Premchand, 2019; Adebayo and Oyedokun, 2020).

The framework also recognizes the importance of the Treasury Single Account (TSA) as an accounting tool that transforms the structure of government accounting and, consequently, expenditure control. The TSA consolidates all government cash balances into a single account (or a set of linked accounts) at the CBN, replacing the previous system where MDAs maintained multiple accounts across various commercial banks. The TSA enhances expenditure control by: (a) providing the CBN with a complete, real-time view of government cash positions, (b) eliminating the ability of MDAs to spend from accounts without CBN oversight, (c) reducing the cost of banking services (through negotiated fees), and (d) improving the ability to reconcile transactions. The TSA is therefore conceptualized as a moderating or enabling variable that amplifies the effect of accounting on expenditure control (Adegbite, 2020; Okafor and Udeh, 2021).

An important feature of this conceptual framework is the recognition of institutional and environmental moderators that influence the accounting-expenditure control relationship. These include: (a) the legal and regulatory framework (the Constitution, Fiscal Responsibility Act, Financial Regulations, and CBN Act), (b) the quality of human resources (competence, integrity, and training of CBN accounting staff), (c) information technology infrastructure (the quality and reliability of the CBN’s accounting systems and platforms), (d) political environment (pressure from political actors to authorize or process questionable payments), (e) inter-institutional coordination (the relationship between the CBN, Ministry of Finance, MDAs, and the Office of the Auditor-General), and (f) external oversight (the effectiveness of the National Assembly’s Public Accounts Committees). For the CBN, even the most sophisticated accounting systems can be undermined by weak legal frameworks, political interference, or poor coordination with MDAs (Ogbeifun, 2019; Oyo-Ita, 2019).

The framework also distinguishes between the CBN’s dual roles in public expenditure control: (a) its role as banker to the government (controlling expenditures made by MDAs from government accounts) and (b) its role as a spender of public funds (controlling its own operational expenditures). These two roles involve different accounting processes and face different challenges. As banker to the government, the CBN’s primary responsibility is to ensure that payments requested by MDAs are authorized, within budget, and properly documented. As a spender, the CBN must ensure that its own expenditures comply with its internal budget, procurement rules, and public financial regulations. The conceptual framework acknowledges both roles, as weaknesses in either dimension can undermine overall public expenditure control (CBN, 2019; Nwankwo and Okeke, 2021).

Methodologically, the conceptual framework guides the development of research instruments and analytical procedures. Interview guides and survey questionnaires are structured to capture each of the six accounting functions (budgeting, commitment, payment processing, ledger/fund, reconciliation, reporting) and each of the four stages of expenditure control (pre-audit, payment, post-payment, audit). Questions probe specific examples from the CBN’s experience. The framework also guides the collection of documentary evidence, such as CBN payment processing manuals, internal audit reports, TSA operational guidelines, and financial statements (Creswell and Creswell, 2018; Saunders, Lewis, and Thornhill, 2019).

Empirical studies that have employed similar conceptual frameworks in other public sector contexts provide validation for this approach. For example, studies on public expenditure control in Ghana and Kenya have identified payment verification and reconciliation as the accounting functions with the greatest impact on reducing unauthorized spending. Studies on the TSA in Nigeria have found that the policy significantly improved cash management but that challenges remain in commitment control and the integration of MDA accounting systems with the CBN’s platform. In the CBN specifically, research has highlighted the importance of internal audit and the need for continuous staff training to keep pace with evolving accounting standards and technologies (Adegbite, 2020; Okafor and Udeh, 2021; Eze and Nwafor, 2019).

The conceptual framework also addresses the unique characteristics of the CBN as a central bank. Unlike other government agencies, the CBN has a high degree of operational autonomy (as provided by the CBN Act) and employs specialized accounting staff with expertise in both public sector accounting and central banking operations. These characteristics may enhance the CBN’s ability to perform expenditure control functions effectively compared to other MDAs. However, the CBN’s autonomy also means that its own expenditures are subject to less direct oversight by the Ministry of Finance, placing greater responsibility on internal accounting controls. The framework acknowledges these unique features (Soludo, 2008; CBN, 2020).

Visually, the conceptual framework for this study can be represented as a diagram with “Accounting Functions” (independent variable) at the left, with six boxes (budgeting, commitment, payment processing, ledger/fund, reconciliation, reporting). An arrow points to “Public Expenditure Control” (dependent variable) on the right, with four boxes (pre-audit, payment, post-payment, audit). Above the arrow are placed the moderating variables (legal framework, human resources, IT infrastructure, political environment, inter-institutional coordination). Below the arrow, the TSA is shown as a moderating/enabling factor. Two circles at the top represent the CBN’s dual roles (banker to government and spender of public funds). This visual representation aids readers in quickly grasping the hypothesized relationships (Miles et al., 2020).

In summary, the conceptual framework of this study provides a clear, logical, and empirically grounded structure for investigating the role of accounting in the control of public expenditures at the Central Bank of Nigeria. By disaggregating accounting into six functional dimensions and expenditure control into four sequential stages, and by acknowledging the role of moderating variables and the CBN’s dual roles, the framework enhances the validity and reliability of the research findings. It also serves as a bridge between the theoretical foundations (discussed in section 2.2) and the empirical investigation (chapters three and four) (Creswell and Creswell, 2018).

2.2 Theoretical Framework

A theoretical framework is a collection of interrelated concepts, definitions, and propositions that present a systematic view of phenomena by specifying relationships among variables, with the purpose of explaining and predicting those phenomena. In this study, four major theories are adopted to explain the role of accounting in the control of public expenditures: the Agency Theory, the Stewardship Theory, the Institutional Theory, and the Public Interest Theory. These theories collectively provide a robust lens for understanding how accounting serves as a control mechanism in public financial management, why it sometimes fails, and how it can be strengthened (Jensen and Meckling, 1976; Davis, Schoorman, and Donaldson, 1997; DiMaggio and Powell, 1983; Posner and Sunstein, 2018).

2.2.1 Agency Theory

Agency Theory, developed by Jensen and Meckling (1976), is one of the most influential theories in corporate governance, public financial management, and accounting research. The theory describes the relationship between principals (those who delegate authority) and agents (those who act on behalf of principals). In the context of public expenditure control, the principals are the Nigerian citizens (and their elected representatives in the National Assembly) who provide public funds through taxes and other revenues. The agents are government officials, including those at the CBN, MDAs, and other public bodies, who are entrusted with spending those funds on behalf of citizens. Agency Theory posits that agents may not always act in the best interests of principals due to information asymmetry (agents have more information about their actions and spending decisions than principals do) and divergent interests (agents may pursue personal goals such as wealth, power, or career advancement rather than citizen welfare) (Jensen and Meckling, 1976; Premchand, 2019).

In the context of this study, Agency Theory explains the fundamental need for accounting controls over public expenditure. Because citizens (principals) cannot directly observe every spending decision made by government officials (agents), they rely on accounting systems to provide information on how funds were spent, whether spending complied with budgets and regulations, and whether value was obtained. Accounting serves as a monitoring mechanism that reduces information asymmetry and allows principals to detect and deter agent opportunism (such as unauthorized spending, wasteful procurement, or outright embezzlement). The CBN’s accounting functions—particularly payment verification, reconciliation, and reporting—are examples of monitoring mechanisms that reduce agency costs (the costs of ensuring that agents act in principals’ interests) (Mellett, 2019; Chan, 2018).

Agency Theory also explains why expenditure control sometimes fails. If the accounting system is weak (e.g., if it does not capture commitments, if reconciliations are delayed, if reports are inaccurate), information asymmetry increases, and agents have more opportunity to act opportunistically without detection. Similarly, if the penalties for detected irregularities are weak (e.g., no prosecution, no recovery of funds, no career consequences), the deterrent effect of monitoring is reduced. Agency Theory therefore predicts that effective expenditure control requires not only accounting systems but also strong enforcement mechanisms and independent oversight (such as the Office of the Auditor-General and the Public Accounts Committees). For the CBN, Agency Theory suggests that the bank’s accounting controls should be complemented by robust internal audit and clear consequences for violations (Okafor and Udeh, 2021).

Empirical applications of Agency Theory to public expenditure management in Nigeria have found that weak accounting controls are associated with higher levels of unauthorized spending, audit queries, and corruption perception. Strengthening accounting controls (e.g., through the TSA, IPPIS, and GIFMIS) has been associated with reduced agency costs and improved fiscal outcomes. However, the theory also highlights that no accounting system can perfectly eliminate agency problems; there will always be residual agency costs. The goal is to design accounting controls that reduce agency costs to an acceptable level, given the costs of implementing the controls themselves (Adebayo and Oyedokun, 2020; Ogbeifun, 2019).

2.2.2 Stewardship Theory

Stewardship Theory, developed by Davis, Schoorman, and Donaldson (1997), offers a contrasting perspective to Agency Theory. While Agency Theory assumes that agents are self-interested and opportunistic, Stewardship Theory posits that managers and public officials are inherently trustworthy, responsible, and motivated to act in the best interests of the organization and its stakeholders. Stewards derive satisfaction from organizational achievement, collective success, and the responsible management of resources placed in their care. In the public sector context, stewardship theory suggests that most government officials are public servants who genuinely want to use public funds efficiently and effectively. They do not require constant monitoring and punitive controls; rather, they need the tools, training, and support to fulfill their stewardship responsibilities (Davis et al., 1997; Mellett, 2019).

In the context of this study, Stewardship Theory explains the role of accounting in supporting, rather than merely controlling, public expenditure management. From a stewardship perspective, accounting provides the information that stewards (CBN officials and other government staff) need to make good decisions. Budget reports help stewards plan expenditures. Commitment tracking helps stewards avoid overspending. Reconciliation helps stewards verify that transactions are accurate. Financial reporting helps stewards demonstrate to citizens that they have been good stewards of public funds. Accounting, in this view, is not primarily a tool of coercion or surveillance but a tool of enablement and accountability. This perspective is consistent with the CBN’s own emphasis on transparency, professionalism, and public service (CBN, 2019; Nwankwo and Okeke, 2021).

Stewardship Theory also explains why excessive or overly rigid accounting controls can be counterproductive. If accounting systems are so burdensome that they slow down legitimate spending (e.g., delays in paying contractors for completed work), they may frustrate stewards and undermine their motivation. Similarly, if controls are designed on the assumption that every employee is a potential fraudster, they may create a culture of distrust and low morale. Stewardship Theory suggests that accounting controls should be designed to balance the need for assurance with the need for efficiency and should be implemented in a way that respects and supports the professionalism of public servants. For the CBN, this implies that expenditure controls should be rigorous but not paralyzing, and that staff should be trained and empowered to act as responsible stewards (Eze and Nwafor, 2019).

Empirical research in public sector organizations has found that a stewardship culture (characterized by transparency, accountability, and public service motivation) is associated with better financial management outcomes, even when formal controls are relatively light. Conversely, organizations with weak stewardship cultures (where staff feel no ownership or responsibility) tend to have poor outcomes even when formal controls are strong. For the CBN, which prides itself on professionalism, fostering a stewardship culture may be as important as implementing technical accounting controls (Oyo-Ita, 2019; Adebayo and Oyedokun, 2020).

2.2.3 Institutional Theory

Institutional Theory, developed by DiMaggio and Powell (1983) and Scott (2001), explains why organizations within a given field tend to adopt similar structures, practices, and processes over time. The theory identifies three mechanisms of institutional isomorphism: coercive isomorphism (pressure from regulators, laws, or powerful organizations), mimetic isomorphism (copying successful competitors in response to uncertainty), and normative isomorphism (pressure from professional bodies, training, and networks). According to Institutional Theory, organizations adopt practices such as accounting controls not only because they improve technical performance but also because they confer legitimacy, which enhances survival and access to resources (DiMaggio and Powell, 1983).

In the context of this study, Institutional Theory explains why the CBN and other Nigerian government agencies have adopted specific accounting controls and public financial management reforms. Coercive pressures include the Fiscal Responsibility Act (2007), which mandates certain budgeting, accounting, and reporting practices, and the adoption of IPSAS, which is required for continued credibility with international financial institutions. Mimetic pressures include observing the public financial management reforms adopted by other countries (e.g., Ghana’s TSA, South Africa’s treasury systems) and copying them to appear modern and effective. Normative pressures include the influence of professional bodies such as the Institute of Chartered Accountants of Nigeria (ICAN), the Association of National Accountants of Nigeria (ANAN), and the Chartered Institute of Public Finance and Accountancy (CIPFA), which promote certain accounting standards and practices as professional norms (Chan, 2018; Ogbeifun, 2019).

Institutional Theory also explains why accounting controls may be adopted symbolically rather than substantively. Organizations may create the appearance of strong controls (e.g., producing policy manuals, creating internal audit units, issuing financial statements) without actually implementing effective controls in practice. This “decoupling” of formal structure from actual practice allows organizations to maintain legitimacy while avoiding the costs or disruptions of genuine reform. In the Nigerian context, there are concerns that some public financial management reforms have been more symbolic than substantive, with the TSA and IPSAS adopted on paper but not fully implemented in practice. For the CBN, Institutional Theory suggests that researchers should look beyond formal policies to examine actual practices—whether the accounting controls that exist on paper are actually operating effectively (Okafor and Udeh, 2021; Adegbite, 2020).

Empirical studies in Nigeria have found evidence of both substantive and symbolic adoption of public financial management reforms. Some MDAs have fully embraced the TSA, IPPIS, and other reforms, while others have complied minimally, maintaining parallel systems or finding workarounds. The effectiveness of accounting controls therefore depends not only on their formal design but on the extent of genuine implementation. For the CBN, as a lead agency in implementing many of these reforms, its own substantive compliance is critical to the credibility of the entire public financial management system (Nwankwo and Okeke, 2021).

2.2.4 Public Interest Theory

Public Interest Theory, rooted in welfare economics and regulatory theory, posits that government intervention (including the establishment of accounting controls) is justified when it serves the broader public interest. According to this theory, public sector organizations and their managers are expected to act in the best interest of the public (citizens, taxpayers, beneficiaries) rather than in their own private interest. The theory assumes that public sector entities exist to correct market failures, provide public goods, and promote social welfare. Consequently, decisions made by public sector managers must be transparent, accountable, and justifiable to the public. Accounting information serves as the primary mechanism for demonstrating that decisions and expenditures are indeed aligned with the public interest, as it provides objective, verifiable evidence of resource allocation, cost efficiency, and program effectiveness (Posner and Sunstein, 2018; Chan, 2018).

In the context of this study, Public Interest Theory explains why the control of public expenditures through accounting is not merely a technical or managerial issue but a matter of democratic accountability and social justice. The funds that flow through the CBN’s accounts ultimately come from Nigerian taxpayers—individuals and businesses who work hard to pay taxes. When those funds are wasted or stolen, it is not just a statistical inefficiency; it is a violation of the public trust. Accounting controls at the CBN serve the public interest by protecting taxpayer funds, ensuring that spending aligns with public priorities (as expressed in the budget), and providing the information citizens need to hold their government accountable. The TSA, for example, serves the public interest by reducing the opportunities for leakages and diversions of public funds (Ogbeifun, 2019; Oyo-Ita, 2019).

Public Interest Theory also implies a normative standard: that government officials, including those at the CBN, have a positive duty to implement and enforce accounting controls effectively. Ignoring accounting controls, or making exceptions for political convenience, constitutes a violation of the public trust. This theoretical lens is particularly powerful in the Nigerian context, where public sector corruption has been a persistent challenge. For the CBN, adopting a public interest orientation means that every expenditure control decision—whether to process a disputed payment, whether to report a suspected irregularity, whether to demand additional documentation—should be guided by the question: “What serves the best interest of the Nigerian people?” (Adebayo and Oyedokun, 2020).

Empirical applications of Public Interest Theory to public financial management have shown that organizations with strong public interest cultures (evidenced by proactive disclosure of financial information, responsiveness to audit queries, and use of citizen feedback) tend to have better financial performance, lower corruption perceptions, and higher stakeholder trust. In Nigeria, the CBN is often viewed as one of the more credible and professional public institutions, suggesting that a public interest orientation may be relatively strong. However, there have also been criticisms, particularly regarding the transparency of certain CBN expenditures (e.g., currency printing contracts, security spending), indicating that the public interest orientation can be improved (Soludo, 2008; Nwankwo and Okeke, 2021).

2.2.5 Synthesis of the Four Theories

Taken together, Agency Theory, Stewardship Theory, Institutional Theory, and Public Interest Theory provide a multi-layered theoretical foundation for this study. Agency Theory explains the need for accounting controls as a response to information asymmetry and potential agent opportunism. Stewardship Theory complements Agency Theory by recognizing that most public officials are trustworthy and that accounting controls should enable rather than merely constrain. Institutional Theory explains why the CBN and other government agencies adopt specific accounting controls (isomorphic pressures) and why there may be gaps between formal policies and actual practices (decoupling). Public Interest Theory provides the normative justification for expenditure control: it serves the broader public good, protecting taxpayer funds and democratic accountability (Jensen and Meckling, 1976; Davis et al., 1997; DiMaggio and Powell, 1983; Posner and Sunstein, 2018).

The synthesis of these theories also guides empirical testing and practical recommendations. Research questions and hypotheses derived from this theoretical framework can focus on: from Agency Theory, the effectiveness of CBN accounting controls in reducing unauthorized spending; from Stewardship Theory, the extent to which CBN staff perceive accounting controls as enabling rather than obstructing; from Institutional Theory, the degree to which TSA and other reforms have been implemented substantively versus symbolically; and from Public Interest Theory, whether CBN expenditure control practices align with the public interest. The framework suggests that strengthening expenditure control at the CBN requires attention to all four theoretical dimensions: better monitoring (Agency), better empowerment of responsible stewards (Stewardship), deeper substantive implementation of reforms (Institutional), and a stronger public interest culture (Public Interest) (Creswell and Creswell, 2018).

Critically, these theories also acknowledge limitations and tensions. Agency Theory and Stewardship Theory are sometimes seen as opposing perspectives, but in practice, a balance is needed: controls that are too weak invite opportunism, while controls that are too strong undermine stewardship. Institutional Theory warns that reforms can become symbolic, but it does not provide an easy way to distinguish symbolic from substantive adoption. Public Interest Theory provides a normative goal but does not specify how to resolve conflicts between competing public interests. Therefore, the theoretical framework does not offer simple solutions; rather, it provides a set of lenses for analyzing the complex reality of public expenditure control at the CBN (Saunders et al., 2019).

In conclusion, the theoretical framework of this study is firmly anchored in four well-established, complementary theories: Agency Theory (Jensen and Meckling, 1976), Stewardship Theory (Davis et al., 1997), Institutional Theory (DiMaggio and Powell, 1983), and Public Interest Theory (Posner and Sunstein, 2018). These theories collectively explain the role of accounting in controlling public expenditures, the motivations and behaviors of public officials, the pressures that shape accounting system design, and the ultimate purpose of expenditure control in a democratic society. The framework provides a solid foundation for the conceptual framework (section 2.1), the research methodology (chapter three), and the interpretation of findings (chapters four and five) (Miles et al., 2020).