By CHIJIOKE NELSON on May 27, 2015
Exchange Of Status… Five Days To GoThe word thrifty has to do with prudent management of resources, especially scarce ones that are considered economically important, hence they are dished out freely without assessed approximate returns or satisfactions derivable and the sermons on thrifty are usually given against profligacy.
Nigeria’s economic situation presently is no doubt due to follow the routine of strict compliance to this simple economic principle, especially as allegations, counter allegations and assessed frivolous behaviours with public funds are high.
Experts have long been reiterating the need for fiscal prudence over the acclaimed inadequate revenue streams, laying more credence to popular religious quote that “whoever is faithful in what is least, is also faithful in what is big.”
Recently, the gathering of exerts on fiscal governance prescribed the strengthening of Fiscal Responsibility Act, otherwise known as the “Sunshine Laws” and retaining of the institution charged with its enforcement as opposed to planned scrapping.
Besides, the experts reiterated that there is no auspicious time than now for a change in orientation and deliberate efforts to end financial recklessness, uncoordinated fiscal activities among three tiers of government, rising debt overhang, lack of transparency and corrupt practices bedeviling the country.
Specifically, the Senior Resident Representative, International Monetary Fund (IMF), Gene Leone, said that for development to take place, there must an integrated approach to policy direction, as “every medicine does not cure all sicknesses, fiscal policies should have specific targets aimed at overall benefits.”
“While the country is also predisposed to massive oil price shock, the country is consistently being exposed to low reserves for investment and foreign exchange buffer. Nigeria needs to generate investment demands through good reforms and close coordination of efforts across all tiers of government. This is the time for effective application fiscal prudence, though it is one aspect of the whole solution,” Leon said.
Acting Chairman of Fiscal Responsibility Commission (FRC), Victor Muruako, is not pleased with the nation’s three-tiered government for not obeying clear fiscal rules, which has hitherto, led to reckless borrowing, debt overhang as well as poor savings culture.
“For decades, Nigeria’s fiscal climate was marked by the absence of clear fiscal rules, uncoordinated fiscal relations between the arms and tiers of government, reckless borrowing and debt overhang all of which has evolved poor savings culture, disregard for transparency and accountability, corrupt practices resulting in chaotic and unhealthy economic outcomes,” the Acting Chairman of the FRC, Chief Victor Muruako, said.
He stated that the new fiscal regime had to be rules-based rather than discretionary as there is the need for transparency rather than opaque, accountability rather than recklessness.
“In the last six years, the commission has worked at putting these reforms on the right footing, this has by no means been an easy task. Our experience as a reform-implementing agency has demonstrated that much more than strong laws are needed if we must effectively break with the past,” he said.
He noted that the commission has continued to ensure that scheduled agencies and corporations of government pay their operating surpluses timely, assuring that it will continue to do that particularly now that government needs every resource it can access to ensure provision of infrastructure and for good governance.
‘’As at today, the commission has prompted the remittance of over N300 billion to the consolidated revenue fund of government. We are geared towards doing more. We are glad to report that there is growing commitment to transparency and accountability at all levels, though gradually, we have got a number of the states to embrace this culture,” he added.
A Professor of Political Economy, Pat Utomi, pointed out that there was need to hold people accountable for their application of national wealth and flayed the leadership of the country for coming out of crude oil boom very wobbly.
“Today, there is manifest shortfall, lack of employment and uncertain democratic dividend. There is no significant improvement in infrastructure and states are finding it difficult to pay salaries of the impoverished civil servants. It is a shame and a show of irresponsibility on the part of leadership.
“It is irresponsibility to see governors who cannot pay salaries go about with chartered aircraft, even in the midst of the acclaimed austerity measures. Worse still, the revenue allocations meant for the grassroots developments have been hijacked by state governments for frivolous expenditures. It is also disastrous to have 82 per cent of our budget mainly on recurrent expenditure. Fiscal responsibility is the only way out for the country now and the laws must be strengthened and enforced for us to survive these difficult times,” he added.
The Lead Director, Centre for Social Justice (CSJ), Eze Onyekpere, had recalled the high lobbying, debates and intrigues that played out before the commencement of the Fiscal Responsibility Act (FRA).
“It has been eight years since the FRA was enacted and a very convenient time to review the successes and challenges and to do the Strengths, Weaknesses, Opportunities and Threats analysis of fiscal responsibility practices across the nation with a view to improve performance, share experiences and learn from the best in class.
“Now that Nigeria is facing dwindling revenues from oil prices and challenges in meeting budgetary financial targets, the fiscal responsibility principles are needed to improve revenue and budgetary performance,” he said.
But as a way forward in countering the assessed lingering fiscal rascality, which has already switched the economy to “penny-pinching” mode, the National Forum of Fiscal Responsibility Commissions, convened by CSJ, in collaboration with FRC, in a communiqué made available to The Guardian, said they are now resolved to sharing good practices, foster resolution of knotty implementation challenges and encourage more states to domesticate the FRA.
The communiqué, signed jointly by Muruako; Chairmen of Taraba and Kebbi states FRCs, Benjamin Ibisu and Muhammed S. Fawa; and Onyekpere, the participants prayed that withdrawals from savings, Excess Crude Account (ECA) and reserves should only be spent through appropriation by the NASS and state legislatures.
“Considering the dwindling resources of the nation and the need for fiscal transparency, Federal and state governments should retain, strengthen their respective FRCs or similar agencies and fully establish the National Forum of Fiscal Responsibility Commissions as a permanent forum for knowledge exchange and information dissemination, as well as engage in sensitisation and advocacy to popularise the law.
“The consistent poor capital budget implementation over the years, demand the full enforcement of the Public Procurement Act 2007, with emphasis on renewed capacity building and sanctions for offenders.
“The idea of financial releases by the Ministry of Finance for projects without cash backing is unsupportable by the provisions of the FRA. Subject to the availability of funds, the Ministry of Finance should in future, release all sums due to MDAs.
“The National Assembly and state legislatures should demand for comprehensive reports on the implementation of capital budgets and also craft provisions in the Appropriation Act/Law which they will combine with the oversight mechanism to ensure the full implementation of capital budgets.
“We recommend the adoption of the Lagos State model for the improvement of the independent revenue and finances of the Federal Government and other states of the Federation. Automation of the revenue collection system and expansion of the nonoil revenue base is imperative.
“Estimated accruals to ECA and or the Sovereign Wealth Fund should be articulated in the MTEF and the budget. Withdrawals should be in accordance with Section 36 of the FRA- ‘that no Government in the Federation shall have access to the ECA unless the price of oil falls below the reference commodity price for a period of three consecutive months and the augmentation shall be limited to the sums that will bring the revenue of government to the level contained in the budgetary estimates or a proportion of the savings may be appropriated in the following year for capital expenditure,” the communiqué noted.
The participants also agreed the Medium Term Expenditure Framework should be prepared early for the endorsement of the Executive Council of the Federation; before the end of June and submitted to National Assembly (NASS) immediately after endorsement by the council and anchored on consultations with states, designated agencies of government, organised private sector, civil society and other stakeholders and for the consultations to be effective.
The Minister of Finance should gazette and publish the approved MTEF and make same available to the public, while the MTEF should document the projections for economic growth, inflation, interest rate, external reserves and access to credit and the underlying assumptions, facts and logic in support of these projections.
“Government should reorder its spending priorities and ensure a 60 per cent/40 per cent balance between recurrent and capital expenditure in the medium term. This can be achieved through the meticulous implementation of the Monetisation Programme, the recommendations of the Expenditure Review Committee and other reforms.
“Government should provide incentives for the private sector to invest in new refineries – the Public Private Partnership (PPP) model is recommended. FGN should privatise existing refineries to plug the leaking pipes of corruption and waste that have led to incredible sums being spent on perpetual turnaround maintenance operations. Individuals and companies found to have abused the oil subsidy regime should face diligent criminal prosecution.
“In the capital expenditure provisions, more emphasis should be placed on developmental capital as against administrative capital. For the private sector to play the role of providing funding to fill the financing gap for infrastructure and critical sectors, there is the need for government borrowing not to crowd out the private sector. Improved access to credit through coordinated policy implementation by the central bank, Debt Management Office and the Finance ministry is imperative,” it added.
There was also a recommendation for the President and NASS to set the limitations of debt for all the three tiers of government in accordance with Section 42 of the FRA, which shall not exceed the debt-GDP country specific threshold of 25 per cent as approved by the Federal Executive Council.
There will be need to pruning down recurrent expenditure and reduction of corruption may reduce the need for borrowing, hence MDAs’ budgets should be captured under the national budget, while all revenue should be captured and paid into the Treasury Single Account.