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Nigeria heads for another debt trap, Fiscal Commission warns

The Chairman of the Fiscal Responsibility Commission, Alhaji Aliyu Jibril Yelwa has raised alarm at the spate of the foreign and local debts being incurred by the three tiers of government in Nigeria.

In a paper presented at a meeting for planning and advocacy on Fiscal Responsibility organizsd by the UNDP at the UN House in Abuja yesterday, Yelwa said such unwholesome debt profile posed a veritable management and institutional challenge to the implementation of the Fiscal Responsibility Act.

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Yelwa particularly singled out the states for flagrant violation of the law in the area of borrowing, especially through floating of bonds and sales of treasury bills. Said he: “Some state legislatures are being stampeded to approve borrowing by government that have less than two years to go…even when what they borrow may have to be repaid in the next ten years”.

On its part, Yelwa said the Commission had written to all financial institutions i.e banks, Security and Exchange Commission, Debt Management Office, etc drawing their attention to the provisions of the Fiscal Responsibility Act 2007 as it relates to government borrowing.

He called for concerted efforts by all stakeholders to determine our total debt profile before further borrowing can be encouraged.

Yelwa also appealed to donor support agencies to assist the Commission in fast tracking “inter-Agency collaboration” so as to determine the local debt profile of the three tiers of government before the end of the 2nd quarter of 2010, adding that this will control the spate of borrowing based on informed data.

In the same vein, Yelwa also frowned at the fact that state and local governments are yet to buy themselves into the Fiscal Responsibility Act.

He said that the notion that the Act is only applicable to the Federal government was wrong.

He also said the novelty of the Act makes the implementation of the Fiscal Responsibility legislation at the states and local government daunting, especially as the state and local governments lacked technical capacity and legal framework for fiscal discipline. In addition, he added, they do not have the existing models and templates, records, processes or examples on which to build.

The cheering news is that the Commission is more than willing to guide and assist operators of public financial management on their responsibility as provided for under Section 54 of the Act.

This mind-set, he added, may hinder the effectiveness of the Act when it is realized that state and local governments control over 48 percent of the nationally shared resources.

According to Yelwa, the state governments are all bound by the provisions for the preparation of the Medium Term Expenditure Framework, Savings and Assets Management and the excess Crude Account, Debt and indebtedness and borrowing.

Yelwa advised that when Fiscal Responsibility Law is enacted by the states, there should be a Debt Management Division within its framework. He called for an independent source of funding for proposed Fiscal Responsibility Commission at the state, adding that “ a specific percentage of the state budget i.e. 05% could be given as budgetary provision to the Agency”. This, he added, is the only means by which it could be independent of the Executive and execute its functions without fear or favour.

He added that most of the fiscal performance reports submitted by the agencies were riddled with material inconsistencies, over spending, under spending under utilization of funds, misapplication of funds, revenue sub-optimality, outright revenue leakages, etc. Some of the responses, he added, fell short of the standard and world best practices in financial and accounting reporting system.

Yelwa said the Commission, having observed some lapses in the 1st quarter Budget Implementation Report, 2009, has now designed a format which it has forwarded to the appropriate quarters, adding that the Commission will soon under take on-the-spot visits to physically verify and confirm actual existence of projects.

Alhaji Yelwa said despite the enormity of the task, the commission was undaunted, adding that it will soon convene a stakeholder’s forum to address issues of leakages in revenue collection, spending inefficiencies, management of public funds, borrowing and other abnormalities.

He stated that for the first time in history, we now have a concise and focused legal framework that regulates fiscal conducts, contains guidelines on the management of government finances, imposes limitations on government spending, and borrowing.

Any breach of the provisions of the Act is liable to prosecution. He said that the Act also criminalizes all acts of slothfulness in the course of budget preparation, implementation, monitoring, and reporting as well as immunity from operators that hitherto were covered under locus standi.

Section 51 of the Act states as follows: “A person shall have legal capacity to enforce the provision of this Act by obtaining prerogative orders or other remedies at the Federal High Court without having to show any special or particular interest”.


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