By Henry Boyo
THE discussion, in last week’s column, was about the intention of State Governors to, henceforth, demand payment of their monthly portion of fiscal allocations, in the currency in which the revenue was earned. It is not clear why both CBN and the Revenue Mobilisation and Fiscal Commission, RMFAC, have consistently audaciously breached, the subsisting Constitutional provisions for the disbursement of Government revenue, for so long, even when this breach is, largely, responsible for the present prostrate state of our economy.
It is, however, unlikely, that the silent beneficiaries of this clearly disruptive and oppressive, payment strategy, will simply give up the honey pot, and make revenue allocations constitutionally compliant, even if this will facilitate the realisation of a progressive economy with increasing job opportunities.
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However, if CBN’s resistance to Constitutional provisions continues, the Governors will probably be best served, to reinforce the legality of their demand, by resuscitating and actively, following through an earlier bill sponsored, in 2016, by Senator Francis Alimikhena (APC Edo North).
Senator Alimikhena’s bill is clearly in consonance with Section 162 of the Constitution and the State Governors’ intent to receive fiscal allocations in the original currency earned. Regrettably, the bill only scaled the 2nd Reading, before the dissolution of the National Assembly in 2018.
The object of the Senator’s bill, however, is to give Revenue Mobilisation, Allocation & Fiscal Commission (RMAFC) the power “to monitor the accruals to and disbursement of Revenue, from the Federation Account, in the currency in which the revenue was earned.” The bill suggests that this proposal is not only “in accord with section 162(3) of the 1999 Constitution, but will, also hopefully, reverse the continued depreciation of Naira against Dollar, as the three tiers of Government will have direct access to the dollar components of their respective share from the Federation Account, from which they may draw, from time to time and convert also to Naira to meet personnel and other running costs; furthermore, the beneficiaries can also make direct transfers to third parties to meet approved Dollar denominated financial obligations.”
The Bill recognizes, therefore, the negative impact of the continued allocation of only the Naira equivalent to the three tiers of Government, even though the Federation Account consists of both Naira and Dollar sourced currency components.”
According to the sponsor “the enactment of this Bill into law, will cause a fundamental paradigm shift in the nation’s fiscal and monetary modeling, as the Dollar will, for once, begin to chase the Naira when the three tiers of Government (the biggest spenders in the economy) bid for Naira from Banks with part of their dollar allocations, to cover their Naira expenditure – both capital and overhead.”
The bill may be cited as “the Revenue Mobilisation, Allocation and Fiscal Commission Act (Amendment) Bill, 2016”; however, a summary of the operational and Technical Details which support the enactment is as follows:
To begin with, the proposed bill notes that “Section 162(1) of the 1999 Constitution of the Federal Republic of Nigeria, states that the Federation shall maintain a special account to be called the “Federation Account”, into which shall be paid all revenues collected by the Government of the Federation…etc.” Furthermore, Section 162(3) also states that “any amount standing to the credit of the Federation Account shall be distributed among the Federal, State Governments and the Local Government Councils, on such terms and in such manner as may be prescribed by the National Assembly”. Therefore, the pertinent question according to the bill is “whether or not this constitutional provision has been complied with in its entire ramification. The answer is no, because, what has always been distributed, is what CBN determines to be the equivalent amount, when the Dollar component of the Federation Account is illegally converted by CBN before distribution.”
Again, “it is important, according to the Sponsor of the bill, “to remind ourselves that, if individuals and corporate entities are allowed to operate domiciliary accounts into which their foreign exchange earnings are deposited,” why is it then that “the Federal, States and Local Governments, cannot similarly maintain their own domiciliary accounts, with the CBN, into which their respective shares of dollar allocations are paid?” In response, the sponsor, argues that since there is no “provision in our laws that prohibits such forex allocations, why then should CBN arrogate, to itself, the power to take custody and ownership of the dollar revenue, which rightly belongs to the constituents of the Federation and issue Naira equivalents instead for sharing every month?”
Besides, the technical explanations attached to the bill, similarly observes that “this practice has greatly harmed the value of the Naira, over the years, as the same Naira, with lower exchange parity with dollar, is paid back to banks by the respective Federating units for exchange into dollars, whenever they have to meet their foreign currency obligations.”
This practice is condemned as “an economic paradigm that has suffered paralysis and therefore needs a paradigm shift. This process, furthermore, according to the bill, is injurious to the Naira rate and the economy, as the federating units are forced to buy back their own dollars (with a weaker Naira rate) to pay for their imports of vital equipment and supplies.”
In fact, the bill describes this practice as “the worst form of round-tripping, which is primarily responsible for weaker Naira rates, even when, ironically, crude price and output exceeded expectations.” Consequently, the bill’s sponsor, is concerned that this, clearly, inchoate and oppressive payments framework will, invariably, subsist unless the provision of Section 162, of the 1999 Constitution is complied with.
Furthermore, the bill warns that “it is spurious to deny payment of dollars allocations, to State and Local Governments, because of the fear that this will facilitate treasury looting, as the relevant question, is whether or not CBN officials, who have, illegally, usurped custody and control of our export dollar revenue are “angels from outer space, or whether CBN itself is corruption free?”
Senator Alimikhena, therefore, concludes that the economic damage caused by the present payment system is unquantifiable, but makes a patriotic call, however, to arrest further depreciation of the Naira rate, which has sunk, alarmingly, since the early eighties from less than 70 kobo to almost N400/$ presently.
Furthermore, the proposed bill suggests, that if this ‘strategic’ madness of an occluded payments system persists, our hopes for economic growth and diversification with increasing job opportunities, will remain a pipe dream, and we may, ultimately, need a wheelbarrow of useless Naira notes to buy a tuber of yam!
Finally, the senator’s bill recalls that “the CBN has experimented with various FOREX models since 1986, and is still experimenting till today, yet no conducive solution has been found. Madness, they say, is doing the same thing over and over again and expecting a different result.” Consequently, Alimikhena has recommended that “the common sense step to take is for the Federating Units to be empowered by legislation to open and maintain Domiciliary Accounts into which their share of dollar allocations are paid, as well as Naira Account into which Naira allocations can also be domiciled for the settlement of domestic expenditure.”