THE Fiscal Responsibility Act (2007) provides a framework for sound fiscal government practice in Nigeria. It was created with the intention of setting Nigeria on the path of good governance in a transparent and accountable manner. The objective of the Act is to ensure prudent management of the national economy, secure greater accountability and transparency in fiscal policy framework and the establishment of the Fiscal Responsibility Commission to ensure the promotion and enforcement of the nation’s Eeonomic objectives, and for related matters. So many developed nations of the world have their own fiscal governance laws. The laws serve as a guide for whatever financial decisions they take. The developmental outcome of these countries is also within the ambits of their fiscal laws. For example, a once heavily indebted country like Brazil set up its Fiscal Responsibility Law (FRL) in 2000. An article with the title “Brazil Fiscal Responsibility Law and the quality of Audit Institutions,” reveals that the positive effect of Brazils FRL with regard to the fiscal situations of Brazil state have improved considerably since the enactment of the Fiscal Responsibility Law.
According to the write up, the consolidated state accounts have systematically presented a surplus roughly equivalent to 4 percent of GDP after the law was enacted. The same can be said of Brazil’s public debt. A succession of primary surpluses enabled the government to effectively reduce the GDP/debt ratio peaked at 55 percent, there has been a reduction in net debt as measured by percent of GDP, which is estimated to be below 36 percent in 2008 Nigeria cannot be said to have gotten its fiscal governance right even after the enactment of the FRA (2007). Before the enactment of Nigeria’s FRA (2007) Nigeria’s external debt figures have been relatively progressive. From 2006-2021, the figures is as follows, 2006 $12.961bn, 2007 $15.488bn, 2008, $16.472bn, 2009 $19.285bbn, 2010 18,821bn, 2011 $21.003bn, 2012 $21.466bn, 2013 $24,482bn, 2014 28.628bn, 2015 $32,413bn, 2016 $34,396bn, 2017 $43,192bn, 2018 $50,451bn, 2019 $54.832bn. The figures in 2020 show a slight reduction to $33.348bn and $33,468bn as at June 2021.
There is no doubt that as long as borrowing is for infrastructure projects and within the borrowing limits, it is not a bad economic decision. However, in the case of Nigeria, it is difficult to link the effects of the sums borrowed to progress attained in social economic indicators. Borrowing for infrastructure is expected to create jobs and reduce the infrastructure deficit in Nigeria. It is also expected that infrastructure provided through debts provides the profits to repay the loans. On the contrary, despite the debts, the socio-economic indicators in Nigeria remain negative. Poor performance of loans has left the nation with high unemployment rate predicted to reach 40 per cent by the end of 2021. The SGF recently revealed that Nigeria requires $2.3trn in the next 22 years to bridge its infrastructure gaps. The Fiscal Responsibility Act is meant to address some of these challenges. It makes provision for the preparation of the Medium Term Expenditure Framework. The MTEF is a three-year rolling plan which contains macro-economic projections, plans and policies for the next three financial years. It also addressed the issue of debts and borrowings, with an aggregate limit of three percent of the GDP.
The major challenge of the FRA is with its implementation. The Commission which is saddled with the responsibility of enforcing provisions of the Act, does not have the power to prosecute offenders. As a matter of emphasis, the sensitive role of the Fiscal Responsibility Commission includes publishing the debt profile of the federal and state governments to aid legislative approvals or disapproval for loan requests. The FRC is as well mandated to oversee the remittances of operating surpluses of government owned enterprises into the Consolidated Revenue Fund. Unfortunately, Sec. 2. Of the FRA does not give the FRC power to prosecute offenders. The section provides as follows, for the purpose of performing its function under this Act, the Commission shall have power to (a) compel any person or government institution to disclose information relating to public revenues and expenditure and (b) cause an investigation into whether any person has violated any provisions of this Act S.2 (2) If the Commission is satisfied that such a person has committed any punishable offence under this Act violated any provisions of this Act, the Commission shall forward a report of the investigation to the Attorney-General of the Federation for possible prosecution.
Findings reveals that most Governments at sub-national levels flouts the rules of borrowings in excess from commercial banks even when such banks have been notified by the FRC to stop issuing loans to the affected states. Also, most government-owned enterprises which violate provisions of the Act disregard queries issued by the FRC presumably because the commission is not empowered to prosecute them. Without prejudice to the powers of the Attorney General, instead of subjecting the FRC to investigations without power to prosecute, the FRA (2007) should be amended to give the FRC the power to prosecute any offender who has committed any punishable offence under the provisions of the Act. This may be done however with consent from the Attorney General.
This will give the commission the necessary morale to enforce the provisions of the Act in line with the countries developmental targets.
- Emejuiwe is a public affairs analyst
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