The Fiscal Responsibility Act is undoubtedly one of the most significant fiscal legislations that have the capacity to lead Nigeria on the path of economic growth and stability. If properly implemented, it can also be a legal instrument for the practice of good governance in Nigeria. Unfortunately, since the enactment of the FRA (2007), it has been flawed by the level of implementation. The ongoing repeal and amendment of the FRA (2007) provides an opportunity to close some of these gaps.
The Act provides for the Medium Term Expenditure Framework MTEF, the framework upon which the financial projection of the country for the next three years is predicated. It is on this basis that the annual budget is also prepared. In preparation of the MTEF, S.13 provides that the Minister of Finance may hold public consultation with input from select public and professional bodies. These include the National Palnning Commission, Joint Planning Board, National Commission on Development Planning, National Economic Commission and the Central Bank of Nigeria.
However, Subsection (c) says that the minister `may’ deem it appropriate to make the consultation which makes it discretionary. It also implies that their input may be either reflected in the MTEF or not. But knowing fully well that economic plans and decisions must be a reflection of the popular will of the citizens, these categories of persons should be mainstreamed in the MTEF preparation. The Act should be amended to make public consultation mandatory. It is also of note that no mention of input from Civil Society and Fiscal Responsibility Commission was contained in the list of those to be consulted. These categories of people should also be reflected in the amendment of the Act.
The Act also provides for an aggregate expenditure ceiling which must not be more than the estimated aggregate revenue plus a deficit not exceeding three per cent of the estimated gross domestic product or any sustainable percentage as may be determined by the National Assembly for each financial year. This provision has been grossly violated in the funding of the national budget. Nigeria has consistently funded its budget above the deficit threshold of three per cent GDP. The act should provide penalties for future violations.
On the remittance of operating surplus, the Act provides in S.22 for corporations to establish general reserve funds and allocate one fifth of its operating surplus at the end of each financial year, which shall be paid into the Consolidated Revenue Fund of the federal government not later than one month, following the statutory deadline for publishing each corporations account. The Act did not prescribe punishment for Government-Owned Entareprises that fail to remit their operating surplus. Suitable sanctions should be prescribed in the on-ongoing amendment
On debt sustainability, The Fiscal Responsibility Act set the framework for debt management with a debt limit for federal, state and local governments; it mandates the National and Subnational governments to present a debt analysis which must accompany their request for debt but this has also been grossly violated by the federal and the subnational governments. The Act must as well prescribe sanctions for defaulters.
On the fund of the Fiscal Responsibility Commission, the Act provides that the FRC would be funded through budgetary allocation from the federal government and grants from other sources. The budget of the FRC has been abysmally low and has made the commission less effective. Therefore, the act should be amended to consider setting aside five per cent of recovered operating surplus for the FRC.
The FRC lacks the powers to prosecute; the Act provides in S.2, that if the Commission is satisfied that a person has committed any punishable offence under the Act, or has violated any provision of the Act, the Commission shall forward a report to the Attorney General of the Federation for possible prosecution. The lack of direct prosecutory power to the FRC creates a window for the Act to be grossly violated by those the FRC is deemed to over-sight. This places the FRC as a toothless bulldog.To correct this anomaly, the ongoing amendment should grant the FRC the direct power to prosecute offenders of the Act.
Victor Emejuiwe is a Good Governance/Public Affairs analyst