House Proposes Penalties for Borrowing for Non-capital Expenditure, Others
Udora Orizu in Abuja
The House of Representatives is proposing impeachment, N500 million fine or three years jail time for Heads of the three tiers of government who borrow for non-capital expenditure and human development projects.
The proposal was contained in the Fiscal Responsibility Act (Amendment) Bill, 2021 which passed second reading at plenary on Tuesday. Sponsored by Hon. Sergius Ogun (PDP, Edo), the bill seeks to amend the Principal Act to make provision for specific sanctions within the Act, for failure to comply with the provisions of the law.
The principal Act provides in section 41(1) that the framework for debt management during the financial year shall be based on the following rules: “(a) Government at all tiers shall only borrow for capital expenditure and human development, provided that, such borrowing shall be on concessional terms with low interest rate and with a reasonably long amortization period subject to the approval of the appropriate legislative body where necessary; and (b) government shall ensure that the level of public debt as a proportion of national income is held at a sustainable level as prescribed by the National Assembly from time to time on the advice of the Minister.
“(2) Notwithstanding the provisions of subsection (1) of this section and subject to the approval of the National Assembly, the federal government may borrow from the capital market. (3) Non-compliance with the provisions of this section shall make the action taken an offence.”
Consequently, the bill is proposing that the Principal Act be amended to make provision that: “Non-compliance with the provisions of this section shall make the action taken an impeachable offence and the offender shall be liable on conviction to a fine of N500,000,000 or imprisonment for a term of three years or to both such fine and imprisonment.”
Leading the debate on its general principles Ogun said the Fiscal Responsibility Act 2007, remains a very important legal financial management framework, noting that there were no specific sanctions or penalties within the Act for the offence created in subsection 3 of section 41 of the law.
The lawmaker said the bill when passed into law, would address the lacuna in the Act, obviate impunity and serve as a mechanism for making government officials accountable.
He said: “The Act provides for prudent management of the nation’s resources, ensure long-term macro-economic stability of the national economy, secure greater accountability and transparency in fiscal operations within the medium-term fiscal policy framework and promote fiscal discipline.
“Despite the provision of the Principal Act, Nigeria’s recent Public Expenditure Financial Accountability Report (PEFA Report, 2019), points to the inherent weakness in public financial management.
“Some of the issues raised in the report include, low budget credibility, insufficient disclosure of public finances, lack of autonomy of auditor general, amongst others. Whereas section 41 of the Act provides the framework for debt management during every financial year and goes further to provide that non-compliance with the provisions of the section shall make any action taken to be an offence, the Act fails to specifically make provision for the sanctions of the said offence.”
When put to a voice vote by the Speaker, Hon. Femi Gbajabiamila, it got the support of majority of the lawmakers and was passed.