A New Financial Year.

The budget in virtually all countries of the world is governed by laws and policies laid down to serve the best interest of the country. These laws and policies are subject to change when empirical evidence proves that they no longer serve the public good. In other words, change is not just done for the sake of change but for the sake of some higher and nobler national interests. There must be some mischief identified in an existing law; to cure the mischief and advance a remedy, a new law or amendments of existing law arise. This is the context of amendments, repeals and new laws.

Section 11 of the 2016 Appropriation Act reads that: “In line with the provisions of Section 318 of the Constitution of the Federal Republic of Nigeria 1999 as amended, this Act will run for a course of 12 months starting from the date it is assented into law”.

To properly contextualise this provision, the relevant part of Section 318 of the 1999 Constitution is reproduced here: “Financial year” means any period of 12 months beginning on the first day of January in any year or such other date as the National Assembly may prescribe”. However, there is a Financial Year Act which states that the period of the Nigerian financial year is the period starting from the first day of January and terminating on December 31 every year. Thus, what the 1999 Constitution reaffirms is the period already defined in the Financial Year Act but recognises the inherent power of the legislature to amend the law.

The implication of Section 11 of the 2016 Appropriation Act is that the legislature purports to have exercised the power to change the financial year. But, the National Assembly did not fix any new and definite time frame. It made it specific to the 2016 Appropriation Act which runs out in 12 months from the date of assent. As of the time the National Assembly passed the bill, it did not know the exact date of presidential assent, so it could not state a timeframe. It therefore left the timeframe open ended. The situation as it stands now is that the 2016 budget signed in May 2016 will be in operation until a date in April after the end of the first quarter of 2017. This is a new development that departs from the usual parliamentary practice of extending the capital budget at the end of the financial year to the end of the first quarter of the succeeding financial year. Further, the National Assembly did not specifically repeal the Financial Year Act and made no mention of it in the Appropriation Act. The poser is: Has the Financial Year Act been implicitly repealed or has the National Assembly fully exercised the power provided in Section 318 to change the financial year?

How do we situate the 2016 budget timeframe with other constitutional and statutory timeframes related to the budget? Under the Fiscal Responsibility Act, the medium term expenditure framework governing the budget is expected to be ready and endorsed by the Federal Executive Council by the end of June and thereafter send for approval to the National Assembly. This is to ensure that the budget process for the next financial year starts early. Section 81 of the constitution mandates the President to cause to be prepared and laid before each House of the National Assembly at any time in each financial year estimates of the revenues and expenditure of the Federation for the next following financial year. When the estimates are laid by the President, the National Assembly is expected to work on it and get it ready for the next financial year. However, it is acknowledged that meeting this deadline has not been the case in the last 10 years and the culture of late presentation and passage has become the norm. The question that arises is whether the National Assembly will defer the commencement of the 2017 federal budget until the end of April 2017 even if it was presented and passed on time. Or would two Appropriation Acts be operational at the same time? the National Assembly needs to make up its mind.

The other set of statutory provisions relate to the provisions of the Fiscal Responsibility Act for reporting on budget implementation which demands quarterly and yearly reports based on the January to December timeframe. The provisions and policies relating to audit of public accounts demand reporting based on the financial year model of January to December, not an indeterminate period which only crystallised after presidential assent to the 2016 Appropriation Bill. How do all these statutory demands fit into the new 2017 specific financial year? It will definitely upset a lot of other schedules.

Essentially, what is the mischief in the current financial year that starts in January and ends in December that informs this indeterminate change for the 2016 federal budget? What purpose will the change serve? The background to the enactment of budgets in the last couple of years speaks volumes of late presentation by the president and late passage by the legislature leading to budgets being implemented for not more than eight months every year in the last ten years. Yes, the mischief has been identified as late presentation and passage. So, what is the available cocktail of remedies? The most reasonable thing to do in the circumstances is for the preparation to be done early and presentation not later than the first Monday in September every year whilst the National Assembly will be under obligation to finish the passage not later than the time they proceed for Christmas and New Year break. What value will this change add to the budget process, especially budget implementation?

It is not good legislative practice to amend laws in the heat of passion, in a manner that looks ad-hominem or simply to respond to a particular event without having the big broad picture in mind. It would be a distortion of the law making process. Having made a mistake in the late presentation and passage of the Appropriation Act, all that reason demands is for the executive and legislature to say never again, learn lessons and begin the budgeting process on time. This financial year change is like a person in a deep hole who needs to get out but insists on continued digging. It would not work and it cannot work.

It is therefore suggested that if the National Assembly wants to change the financial year, it has to think through all accompanying budget laws and policies. It also has to take into consideration weather conditions that hamper of facilitate outdoor capital budget implementation. Of course, it needs the input of stakeholders before it arrives at such a huge decision as to the change of the financial year. It is not something to be done “Nichodemously”. It will also involve constitutional and statutory amendments.

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