Debating the Medium Term Expenditure Framework

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The two chambers of the National Assembly in the last two weeks, had engaged ministers as well as heads of revenue generating agencies of government to defend the revenue estimates outlined by President Muhammadu Buhari in the 2021-2023 Medium Term Expenditure Framework and Fiscal Strategy Paper submitted to it for approval, report Deji Elumoye and Udora Orizu

In line with its desire to achieve early passage of the budget to be in tandem with the January-December cycle, and open up more revenue sources to finance the country’s N12 trillion budget for 2021, the Senate and House of Representatives held a five-day interactive session on the 2021-2023 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) in Abuja with various heads of revenue generating agencies of government.

President Muhammadu Buhari had on July 21 sent the 2021-2023 MTEF/FSP to the Senate and the House of Representatives for approval. The MTEF/FSP document included N12.66 trillion budget estimate for 2021 and an estimated N5.16 trillion budget deficit for the fiscal year.

Accompanied with a covering letter from President Buhari, the MTEF/FSP document was read at plenary by the presiding officers of both chambers.

The letter read in part: ‘’It is with pleasure that I forward the 2021-2023 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) for the kind consideration and approval of the Distinguished Senate. Let me seize this opportunity to express my deep gratitude for the cooperation, support and commitment of the leadership and distinguished members of the Senate in our collective efforts to sustain the restoration of the January-December financial year.

‘’In line with our commitment, we have worked very hard to achieve an earlier submission of the MTEF/FSP. This is to allow the National Assembly enough time to perform its important constitutional duty of reviewing the framework. I herewith forward the 2021-2023 MTEF/FSP, as the 2021 budget of the federal government will be prepared based on the parameters and fiscal assumptions of the approved 2021-2023 MTEF/FSP. I seek the cooperation of the National Assembly for expeditious legislative action on the submission.’’

Buhari, however, expressed concern over the effect of the pandemic on revenue target.

The document said the federal government was determined to use innovative ways to raise revenues required for financing its expenditures and diversifying its revenue sources, thereby increasing the revenue-to-GDP ratio. The medium term target for this remains 15 per cent.

It noted that higher revenue collections would enable government to effectively deliver public services, enhance infrastructure investment and mitigate the health and economic effects of the COVID-19 pandemic.

At the beginning of the public hearing on August 19, the Senate Joint committee on Finance and National Planning led by its Chairman, Senator Olamilekan Adeola, threatened to ensure no allocation was given to the agencies whose heads fail to appear before the lawmakers¹ to defend figures it submitted as presented by the President to the National Assembly.

Some of the heads of agencies invited include the Nigeria Ports Authority (NPA), Nigerian Shippers’ Council, Nigerian Maritime Administration and Safety Agency and Nigerian Export Promotion Council, Federal Inland Revenue Service, Nigeria Deposit Insurance Corporation, (NDIC) Nigeria Liquefied Natural Gas (NLNG), Asset Management Corporation of Nigeria, (AMCON), Nigerian Communications Commission (NCC).

The Committee, in the course of interfacing with heads of government agencies, canvassed for the urgent forensic auditing of the Nigeria Television Authority (NTA) and Startimes Joint Venture account through which over N200 billion had allegedly been taken out of the country since 2008.

The federal lawmakers also directed the management of the joint venture to step aside for failing to convince the committee of the transparency of the business agreement.

They declared that the forensic audit of the account of the non- profitable venture to NTA needs to be carried out to unravel the exact sum of money that had been fraudulently taken out of the country within the last 11 years, estimated to be N200 billion.

“With what we are seeing, you people as management of the venture are collaborating with Startimes in siphoning money abroad. You need to be put under oath along with the other management team, collecting monthly salaries from NTA and working for Startimes and in the process, indulging in capital flight in collaboration with foreign staff of the company. By rough estimations, all the revenues made through the joint venture and recorded in dollar amounted to about N200 billion between 2010 and 2018,” the committee said.

The committee also described the affected management team namely Maxwell Loko, who is the Managing Director of the joint venture, and Tunde Aina, who serves as Chief Operating Officer (COO), as unpatriotic Nigerians working for Startimes but receiving monthly salaries from NTA.

It called on the NTA/Startimes management to explain why the joint venture has not yielded any profit for NTA as lamented by the Director General, Yakubu Ibn Mohammed, before the committee last Monday.

The MD of the joint venture, Loko, told the committee that he agreed that the business was not thriving, because Digital Terestial Television (DTT) operated through the venture, is capital intensive as against the Satellite model. He lamented that out of the four million subscribers that Startimes has, only 20 per cent are active, which according to him, makes the venture unprofitable for both parties (NTA and Startimes).

But the Chairman of the committee, Senator Adeola, and other members, faulted his arguments based on records obtained from the audited account reports submitted by both the NTA and the joint venture.

Adeola particularly asked the MD, why as obtainable in the audited account reports presented proceeds of transactions from the joint venture are both in dollar and naira.

He said, “Based on records made available to us, both the expenditure and revenue components of transactions made on the joint venture since 2008, have been recorded in naira and dollar, indicating capital flight intension.

“For example, as clearly stated in the audited report before us, in 2018 alone, your revenue from subscription was $36.1 million which is N11 billion. Also, in the expenditure component for the year, monies incurred were put in both dollar and naira and in that year, your expenditure (N19 billion) far exceeded the N11 billion revenue allegedly generated.”

Attempts by both the COO and Director of Tax and Audit of the venture to disabuse the minds of the committee members on any sharp practices, failed as they resolved that they must all step aside from their current positions for forensic audit to take place.

Adeola and the co-chairman of the committee, Senator Olubunmi Adetunbi, told the DG of NTA to, in his own interest and for his own good, ensure that the three affected workers of NTA on the joint venture step aside.

The Senate Committee also took a swipe at the Director- General of the Securities and Exchange Commission (SEC), Lamido Yuguda over what it described as ridiculous and unacceptable, spending of a whopping sum of N10.3 Billion to pay salaries of its staff strength of 600.

Consequently, the Senate while condemning the N10.3 Billion expended on only 600 Staff, said there must be a thorough audit of staff of the Commission with a view to ascertaining whether or not there are ghost workers.

The Senate asked the DG to look inward and told the Management that it will not be business as usual, adding that the present situation, where over N10 billion was spent to pay salaries of 600 staff was not sustainable as the government must be prudent and save money.

The lawmakers also asked Yuguda to ensure that he remits the sum of N300million into the Consolidated Revenue Fund (CRF) account of the federal government within few days and ensure that the Commission remits the sum of N1 billion to the Consolidated Account next year as part of moves to fund the Budget deficit.

At another session, the Senate mandated the Office of the Accountant General of the Federation (AGF) to probe the reported payment of the sum of $18,323,032,261.03 as dividend from Nigeria’s 53 per cent investment in the Nigeria Liquefied Natural Gas Limited (NLNG) between 2004 and 2020.

Senator Adeola gave the directive following disclosures made by an NLNG top official at the public hearing. He asked the AGF, Ahmed Idris, to among others, confirm if the amount was actually remitted to the Nigeria National Petroleum Corporation (NNPC), which represents the interest of Nigeria in the NLNG.

Other terms of reference of the Accountant General, according to Adeola, include to determine how much was actually remitted to the Federation Account, and to also find out if there was any deduction by NNPC; how much was deducted and who authorised the deductions as well as the exchange rates applied for the amount that was remitted over the years under review.

Giving the AGF two weeks to complete his assignment, the committee chairman inquired from him if he could confirm the payment of the humongous dividends to the federation account.

Responding, Idris said such could not be immediately verified as the dividends are usually paid to NNPC, which is the representative of Nigeria in the company.

The General Manager, External Relations and Sustainable Development of NLNG, Mrs. Eyono Fatai-Williams, had earlier presented a financial summary of the company from 1999 to 2019 indicating that it had paid a dividend of over $18 billion to Nigeria from 2004 to 2020, stressing that NLNG is committed to a culture of transparency and integrity.

According to her, the NLNG had in the last 16 years remitted $18 billion to the NNPC as dividends to the federal government.

She gave the breakdown of the $18 billion remitted to NNPC on behalf of the federal government to NNPC to include $278,860,715.00 for 2004; $57,425460.17 for 2005; $332,979,540.83, 2006; 2007($842,956,858.80); 2008($2,613,170,000.00); 2009($848,680,000.00); 2010($1,401,400,000.00);2011($2,509,780,000.00), and 2012($2,768,990.00). Others are 2013($1,260,704,340.00); 2014($1,389,908,436.93);2015($1,043,764,965.12); 2016($356,126,898.440; 2017($798,140,840.45);2018($904,498,502.96), and 2019($915,645,702.33).

She also revealed that the NLNG paid $9 billion as tax to the federal government from 2011 to date, while $15 billion had also been remitted for field gas to the NNPC since the inception of the company.

At the House of Representatives, the interactive session on August 19 saw the federal government warning that Nigeria faces medium-term fiscal challenges, especially with respect to its revenues, which could snowball into a debt sustainability crisis if not immediately addressed. It also said with the negative growth in the country’s second-quarter GDP, the economy could slide into a second recession in four years, with significant adverse consequences, unless the third-quarter economic performance showed better results.

It projected that Nigeria’s nominal Gross Domestic Product (GDP) will rise to N138.415 billion by 2023 and will also increase from N130.836 billion in 2020 to N 132.1254 billion in 2021.

The Minister of State for Budget and National Planning, Mr. Clement Agba, reeled off the data while presenting the draft 2021-2023 MTEF/FSP to the House of Representatives Joint Committees on Finance, Appropriation, Budget and Economic Development as well as Loans and Debt Management.

According to him, the consumption expenditure, which is projected to remain flat at N118.735 billion in 2020, will increase to N118.468 billion in 2021. It will also grow to N124.358 billion by 2023, reflecting a gradual steadiness in the recovery.

Agba, who represented the Minister for Finance, Budget and National Planning, Mrs. Zainab Ahmed, projected that inflation would remain above single digit over the medium term, given the structural issues impacting on the cost of doing business, including the high cost of food production.

He said the 2021-2023 MTEF/FSP was based on the assumptions that the oil price benchmark would be $40 per barrel with daily production standing at 1.86 million barrels and N360 to the dollar exchange rate.

The Minister stated that the economy faced serious challenges in the first half of 2020 with the microeconomic environment significantly disrupted by the COVID-19 pandemic. He added that Nigeria is currently exposed to spikes in risk in the global capital markets, which would put further pressure on the foreign exchange market as foreign portfolio investors exit the Nigerian market.

According to him, Nigeria‘s second-quarter GDP growth was negative, adding that unless the country achieves a strong third-quarter economic performance, its economy is likely to lapse into a second recession in four years, with significant adverse consequences.

He added that the Finance Bill 2020, which will accompany the 2021 Budget proposal, will contain measures to advance the Strategic Revenue Growth Initiative (SRGI) and they shall also work closely with the National Assembly to amend relevant laws that need to be amended to help with the SRGI.

Earlier in his address, Speaker of the House, Femi Gbajabiamila stressed the need for Nigeria to cut the cost of governance and improve internal revenue generation in order to build the infrastructure required to lift Nigerians out of poverty.

According to him, the country was facing a fiscal crisis, compounded by the intense disruption caused by COVID-19 pandemic.

He stated that the National Assembly had to review 2020 Appropriation Act while at the same time borrowing more to fund urgent development needs and implement interventions to help the most vulnerable citizens get through these trying times.

Chairman, House Committee on Finance, Hon James Faleke, said under no circumstances would an agency of government fully or partially funded by the Appropriations Act would be allowed to spend the revenue it generates. He said the National Assembly would henceforth expect the Accountant General of the Federation to deduct from the accounts of any defaulting ministry, department and agency such revenues.

While interfacing with the agencies, the House members decided to probe the Corporate Affairs Commission, Nigeria Electricity Regulatory Commission and some others over under-remittances to government coffers. The Committee expressed dissatisfaction with the presentations of most of the agencies when they appeared before it.

In its presentation, the Corporate Affairs Commission represented by the Director of Budget Planning, Research and Statistics, Dr. Gado Shehu said the Commission had an approved revenue budget of N15.770 billion in 2019 while the budgetary performance was N12,675bn. According to him, the Commission remitted N100 million, adding that in 2018 they had a budget of N16.621 billion but released N11 billion and remitted zero revenue.

During a session with the Nigerian Immigration Service, the lawmakers said N72 billion of over N80 billion generated from the issuance of international passports and other services by NIS were lost to foreign and other technical partners of the Service.

The Comptroller General of Immigrations, Mohammed Babandede, however, gave a breakdown of the revenue of the service to the Committee.

According to him, the agency generated N14, 772 billion in 2018, N16, 777 billion in 2019 and N5, 714 billion in 2020 from passport sales. From the revenue generated from passports in 2018, N12,181,069,761.69 billion went to Iris Smart Technologies, for 2019, N10,327,818,235.21, went to Iris, while in 2020, N3,508,830,380.61 went to the company.

From ECOWAS/AA, he said the NIS generated 126,136,960million, in 2018, N110,316,892 million in 2019, N38,372,820 million in 2020.

From the revenue generated from ECOWAS/AA, he said a technical partner, New Works Solution Limited, got N1,376,352,413.59 billion in 2018, N1,573,354,911.58billion, while in 2020, N378,833,730.40 million went to them.

For E-Pass, the NIS, Babandede said, generated N1,426,566,000.00 in 2018, N1,731,048,700,00 in 2019, and N763,249,300,00 in 2020, while a total of N20.5million, amounting to a total revenue of about N80 billion.

From the revenue generated by NIS, through E-Pass, IPTELCOM gulped NN2,442,484,334.50 in 2018, N3,343,331,440,33 billion in 2019 and N1,436,169,951.50billion in 2020, while Nigeria Security Printing and Minting Company, Federal Inland Revenue Service, Sub-Treasurer, IPTELCOM took over N4 billion from a remainder of the N68 billion generated for the years 2018- 2020 from E-Pass and other services.

Faleke, however, resolved to summon all technical partners and agencies involved.

“Comptroller-general, thank you. We will use you directly to invite all your partners to appear before this Committee on Thursday. And when they’re coming, they should come with all their tax remittances documents, from personal income tax, withholding tax, Company income tax and Value Added Tax, all from the day they signed the agreement till this day,’’ he said.