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Resources are scare both locally and internationally but this is greatly in contrast with the tendency for them to be wasted and underutilized by the human factor involved in the production of goods and services. It is observed that with more and more firms springing up every day in almost all the industry only the fittest of their firms will survive the growing competition in the market. Every firm is therefore expected to produce at the minimum cost possible so as to remain in business and also to achieve the corporate objectives of profitability and survival. Under such condition supra, there is a great need to do a realistic planning of the activities of the firm putting into consideration the limiting factors and the objectives of the firm. By other to achieve this, budgets as tool of planning and control becomes indispensable.

A budget according to Horngren (1982) is a quantitative expression of a plan of action and an aid to coordination and implementation: a budget is a plan of what is to be done in the organization usually expressed in quantitative of financial terms.

The Oxford Advanced learner’s dictionary defined a budget as an estimate or plan of the money available to somebody and here it will be spent over a period of time. It can be gathered from this definition above that a budget will take cognizance of the available resources before marking the plan for their utilization It is interesting to know that budget is a mere plan it cannot implement itself. For actualizing budget, implementation is a must. There is a need for budget as enhance the actualization of the set plan through its ability to control and check any variance of actual results from those budgets.

Batty (1982) has defined budgetary control as a system which uses budgets as a means of planning and controlling all aspects of producing and / or selling commodities or services.

Pandey (1985) has observed that although many people will complain about budget and its process, budgets are indispensable in a large modern organization. The benefit that occurs from budgets and its control is much greater than cost involved. From the foregoing, considering the scarcity of resources and high competition that permeate most businesses, budgets when rightly applied, would be an effective tool for planning and control especially in banking industries. The choice of Guarantee Trust Bank Plc occupies a forefront in the services of a high range of banking industries in Nigeria. This is related to the fact that it is banking industries in a very competitive industry and lots of challenges faces Nigeria banking industries as they struggle with economic depression and high inflation resulting from IMF / World Bank led structural adjustment plan (SAP) implemented by the Nigeria government. There programme were initiated to promote the liberalization of the domestic economy, operating efficiency, productivity growth, privately owned enterprises development, economic growth , trade and investment. The economic liberalization policies have nurtured an open economy, and have minimized the hurdles that the banking industries need to class in order to obtain raw materials and inputs and other resources for productive activities. However, it has created unprecedented change in their business environment both in the domestic market and form imports into the country. Thus, banking industries need to develop and implement a well conceived strategic plan in order to be competitive in the business environment.


Budget has been a tool for measuring the effectiveness or performance of an organisation; its effective use will either make or mar the efficiency of the organisation. It is on this premise that this study seeks to assess its effectiveness in the area of planning and control with special reference to Guaranty Trust Bank Plc. 


The objectives of the study include:

i.        to determine whether budgets are set and pursued in banking industries;

ii.       to investigate the management control practice in terms of budgets being tool for management control;

iii.      to identify the reasons why budgets are not often realized;

iv.      to find the effectiveness of budgeted control in actualizing the budgeted results;

v.       to encourage banking industries to seek the realization of their budgets through the efficient application of planning and control.


Some of the questions that would be asked in the course of the study include.

i.        Why budgets are set in banking industries?

ii.       Why do budgets often different from the actual results?

iii.      Do banking industries often achieve their budgeted results?

iv.      In what ways would budgetary control useful in planning and control of the operation of banking industries?


          Hypothesis I

H0:     Budgets are not often pursued in banking industries.

H1:     Budgets are often pursued in banking industries.

Hypothesis II

H0:     Budgets are not often attainable in banking industries

H1:     Budgets are often attainable in banking industries.

Hypothesis III

H0:     Budgets is not an aid to the achievement of corporate objectives in banking industries

H1:     Budget is an aid to the achievement of corporate objectives in banking industries.


The findings from the study would also be found useful by banking industries in their achievement of their corporate objectives. Potential industrialists would also find the study useful in order to penetrate the market and remain therein.


Due to the constraint imposed by time, cost penalty of deals, the scope of the study would be limited to just one banking firm, used as the case study (Guarantee Trust Bank (GTB).


Guaranty Trust Bank Plc was incorporated in July 1990 as a private limited liability company, wholly owned by Nigerian individual and institution licensed to provide commercial in August and other banking services to the Nigerian public in 1990. The Bank commenced operations in February 1991, and has since then grown to become one of the most respected and service focused banks in Nigeria. In September 1996, Guaranty Trust Bank Plc became a publicly quoted company and won the Nigerian Stock Exchange President’s Merit award that same year and subsequently in the years 2000, 2003, 2005, 2006, 2007, 2008 and 2009.  In February 2002, the Bank was granted a universal banking license and later appointed a settlement bank by the Central Bank of Nigeria (CBN) in 2003.

Guaranty Trust Bank undertook its second share offering in 2004 and successfully raised over N11 billion from Nigerian Investors to expand its operations and favourably compete with other global financial institutions.

In 2007, the Bank entered the history books as the first Nigerian financial Institution to undertake a US$350 million regulation S Eurobond issue and a US$750 million Global Depositary Receipts (GDR) Offer.

Guaranty Trust Bank plc is a foremost Nigerian financial institution with vast business outlays spanning Anglophone West Africa and the United Kingdom. The Bank presently has an Asset Base of over #2 trillion Naira, shareholders funds of over #230 Billion Naira and employs over 5,000 people in Nigeria, Cote d’Ivoire, Gambia, Ghana, Liberia, Sierra Leone and the United Kingdom. The Bank’s culture is tied t eight guiding principle called the Orange Rules; Simplicity, Professionalism, Service, Friendliness, Trustworthiness, Social Responsibility and innovation. Over the years, the Bank has been a recipient of numerous accolades and commendations for exceptional service delivery, innovation, corporate governance, corporate social responsibility and management quality.

Guaranty Trust Bank plc provides a full range of commercial, investment and retail banking products/services to its discerning corporate, commercial and retail customers. Driven by the developmental challenges of its host communities, the Bank’s CSR philosophy compels it to pro-actively meet and often exceed the social, environmental and growth expectations in line with international best practices, of those with whom it proudly shares a common destiny. For Guaranty Trust Bank plc, every day presents the opportunity to make history. In achieving this, the bank is constantly evolving whilst consolidating its pride of place as a proudly African, truly international organization.

1.9     Definition of Terms and Abbreviation

The technical terms and abbreviations used in the study are explained as:

1.       Variance: This is the difference between budgeted or planned result and the actual result. i.e. the variation.

2.       Industry: A combination or aggregation of all the individual firms’ producing similar commodities for the same market.

3.       Firms: A firms is an independently administration business unit which organizes production of goods and services.

4.       AAT: Association of Accounting Technician.

5.       CEO: Chief Executive Officer

6.       CIMA: Chartered Institute of Management Accountants.

7.       Shareholders: Those who have bought shares in a particular company.

8.       Operating capital: This is the sum needed by a business for its dry-to-day operation.

9.       Capital Intensive: Involves using more machines than labour manual

10.     GDP: Gross Domestic Product

11.     PLC: Public Limited Company.

12.     Depreciation: This is the amount set apart for the wear and tear of asset e.g. equipment used up for operations.

13.     AMA: American Mangers Association

14.     Ceteris Paribus: All things being equal

15.     Infra: Stated below

16.     Supra: Stated above

17.     Relevant Cost: This is the cost that is relevant in determining cost price and selling prices of goods and services respectively.

18.     Marginal Costing Techniques: This is the techniques used in firing selling prices where only variable cost are considered; contribution is used in writing off the fixed cost.

19.     Contribution: This is the difference between selling price and variable cost.

          Contribution = Selling Price = Variable Cost

          C = S – V

20.     Limiting Factor: This is any factor that is capable of limiting the activities of an organization i.e. the major contained e.g. sales.

This material content is developed to serve as a GUIDE for students to conduct academic research

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