FRC Urges FG, States to Set Debt Ceiling, Stop Borrowing for Recurrent Expenditure

Ndubuisi Francis and Folalumi Alaran in Abuja

The Fiscal Responsibility Commission (FRC) has urged the federal and state governments to set a debt ceiling in tandem with Section 42 of the Fiscal Responsibility Act 2007, as well as stop borrowing for recurrent expenditure.

The Commission argued that such a ceiling should be defined vis-a-vis debt-to-revenue.

These were part of the recommendations contained in a paper presented in Abuja, yesterday, by the FRC Director, Legal, Investigation and Enforcement, Fiscal Responsibility Commission (FRC), Mr. Charles Abana, at a media-civil society roundtable, organised by OrderPaper Advocacy Initiative and the Growth Initiative for Fiscal Transparency (GIFT).

In the paper titled, “Borrowing, Debt and  Indebtedness in Nigeria’s 2024-2026 MTEF: A Guide from the FR.Act, 2027,”, Abana stated that the fiscal policy framework envisaged by the Fiscal Responsibility Act, 2007 was the Medium Term Expenditure Framework (MTEF).

According to him, Section 12 of the Act posits that government at all levels shall only borrow for capital expenditure and human development.

He prescribed a reduction in overhead capital and the cost of governance so as to free more resources for developmental capital.

He also recommended that more public assets should be slated for privatisation while advocating a moratorium on new debts, especially foreign ones.

The FRC chieftain advised the federal government to restructure its debts and limit the expenditures of ministries, departments, and agencies (MDAs) to reduce the percentage of retained revenue committed to debt service.

He also urged the authorities to consider state-contingent debt instruments where repayment obligations are tied to the capacity to repay, adding that should include revenue bonds and payments linked to the price of oil.

At the event, FRC, OrderPaper Advocacy Initiative, and the Growth Initiative for Fiscal Transparency (GIFT) called for amendments to the Fiscal Responsibility Act, 2007 to confer enforcement powers on the FRC to check corruption, instill prudence, transparency and accountability in the management of public finance in Nigeria.

“We believe that if the Act is strengthened and its provisions complied with, the Nigerian economy will continue to experience a reasonable degree of growth and stability which can be sustained and improved upon,” Abana said, adding that, “states and LGs in the Federation should be made to be part of the Fiscal Responsibility regime by way of a carrot and stick approach since the economy of Nigeria is one.”

Senior programme executive at OrderPaper Advocacy Initiative, Regina Udo, said her organisation was engaging the National Assembly to advocate implementation of the FRA 2007 Act at the national and sub-national levels as it relates to debt management and revenue remittances through the parliament’s public accounts committee.