Edo, Rivers, Ogun, 10 Others Yet to Comply With Fiscal Responsibility Law

By Kayode Tokede

The Fiscal Responsibility Commission (FRC) yesterday said a total of 13 states have failed to comply with the Fiscal Responsibility Law, revealing that it has notified about 14 banks and financial institutions allegedly granting loans without due process to state governments.

The states are Edo, Rivers, Imo, Akwa Ibom, Kano, Katsina, Borno, Plateau, Ogun, Oyo, Zamfara, Ondo and Benue.
The Executive Chairman of the FRC, Mr Victor Muruako, made the disclosure at a Transparency and Accountability Sensitisation Workshop for the South West in Lagos.

According to him: “As at 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. The two-day sensitisation workshop on Fiscal Transparency, Accountability and Prudence at sub-national levels, has as its theme: “Fiscal Transparency and Sustainable Development at the Sub-Nationals.”

The event was organised by the FRC as part of a series of zonal sensitisation campaigns on Transparency, Accountability and Prudence (TAP) in public finance management.

In his welcome address, he said the commission was already engaging with the loan institutions and those proven to be guilty would be sanctioned.

Although he declined to name the banks and institutions involved, the FRC boss said the commission was still engaging them on the issue.

According to him, there are conditions that must be met by states before they can be granted loans.

“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,” he said.

He said subnational governments should not make loans their first and last consideration for meeting revenue shortfalls but should consider ways of harvesting their dormant potentials for Internally Generated Revenue (IGR).

He said, ”In line with the foregoing, the commission hereby serves notice to defaulting banks and other financial institutions that the window of just using moral suasion is closing. 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 improve accountability and transparency, increase public revenue, rationalise public expenditure, improve public financial management and sustainable debt management.”

In his goodwill message, Chairman of the Economic and Financial Crimes Commission (EFCC), Mr Abdulrasheed Bawa said states should domesticate the fiscal responsibility act.

Bawa, who was represented by Mr Emeka Okonjo, Deputy Zonal Commander of the EFCC, Lagos State, urged states government to take accountability and transparency serious.