The Fiscal Responsibility Commission (FRC) says 13 states, including Akwa Ibom, Benue, Edo, Rivers, Imo, Kano, Katsina, Borno, Plateau, Ogun, Ondo, Oyo, and Zamfara have failed to comply with the Fiscal Responsibility Law.
It revealed that it has also notified some banks and financial institutions allegedly granting loans without due process to state governments.
Speaking at the Transparency and Accountability Sensitisation Workshop in Lagos, the Executive Chairman parthe copartsion, Victor Muruako, expressed that the weakness in the fiscal governance of subnational governments prove a risk to the economic wellbeing of the nation.
According to him: “As of today, only 60 per cent of the 36 states of the Nigerian Federation have enacted a Fiscal Responsibility Law that complements the Federal Government’s Fiscal Responsibility Act 2007. The Federal Government is not giving up, though. The pronounced weakness in the fiscal governance of subnational entities is a huge risk to the economic wellbeing of the Nigerian Federation.
“We are bothered that though Nigeria and its constituent states constitute a single national economy, and that it is clear to all that the Federal Government is exerting itself to make things better at the level of fiscal governance, many states still operate as though they are only aware of macroeconomic challenges to the extent that it impinges on their monthly FAAC allocations.
“Given the size of the economy of all States and Local Governments in this country put together vis-à-vis that of the Federal Government, as well as their importance as the entities that relate directly with the ‘grassroots’, one sometimes gets the impression that subnational governments are keeping the tap running while the Federal Government mops the floor.”
Muruako said the commission was already engaging with the institutions issuing loans and would sanction those found guilty.
He noted that loans should only be granted when states meet stipulated conditions attached to them.
“Banks and other financial institutions that make themselves willing tools of fiscal carelessness by granting loans to some sub-national governments without regard to due process will be sanctioned. Issues of loans, borrowing and indebtedness, are in the Exclusive List in the 1999 Constitution of the Federal Republic of Nigeria (as amended).
“Section 45(2) in Part X of the Fiscal Responsibility Act 2007 specifies conditions for borrowing by “any government in the Federation or its agencies and corporations. Lending by banks and financial institutions in contravention of this Part shall be unlawful,” Muruako noted.
He urged subnational governments not make loans their major resort for meeting revenue shortfalls but rather ensure ways of harvesting their dormant potentials for Internally Generated Revenue (IGR).
“In line with the foregoing, the commission hereby serves notice to defaulting banks and other financial institutions that the window of just usipartoral suasionpartclosing. Going forward, we intend to invoke the provisions of the law against this expressly defined unlawful act, wherever it rears its head. Where the Fiscal Responsibility Act (FRA) 2007 appears inadequate to compel, we shall aggressively invoke our collaborations with sister agencies such as the ICPC and EFCC.”
He pointed out that even the ‘bailout loans’ by the federal government to states carried a conditionality that benefiting states should commit to a Fiscal Sustainability Plan (FSP) consisting of 22 actions grouped under five objectives.
“The objectives are to improve accountability and transparency, increase public revenue, rationalise public expenditure, improve public financial management and sustainable debt management.”
In his remarks, Chairman of the Economic and Financial Crimes Commission (EFCC), Abdulrasheed Bawa, represented by the Deputy Zonal Commander of the EFCC in Lagos State,Emeka Okonjo asked states to domesticate the fiscal responsibility act taking accountability and transparency serious.
The event was organised by the commission as part of a series of zonal sensitisation campaigns on Transparency, Accountability and Prudence (TAP) in public finance management.
