The idea of having a system reform which will improve our nation’s economy in accordance with international best practices was first conceived by late President Umar Musa Yar’adua when he conscientiously signed into law, the Fiscal Responsibility Act, 2007 which gave birth to its surveillance agency, the Fiscal Responsibility Commission (FRC).
The Fiscal Responsibility Act is an act to provide for prudent management of the nation’s resources, ensure long term macro-economic stability of the national economy and secure greater accountability and transparency in fiscal operations within a medium term fiscal policy framework and the establishment of the Fiscal Responsibility Commission to ensure the promotion and enforcement of the nation’s economic objective; and other related matters. The Fiscal Responsibility Act is a limited scope law that emphasizes or elaborates on the rules and procedures relating to three important budget processes: accountability, transparency and stability.
However, it is important for states to adopt the Fiscal Responsibility Act in their fiscal operation since they operate the same economy with the Federal Government. The consolidated general budget, which comprises all the components of the budget system aggregated and consolidated to form a whole includes the states’ budget, social security budget, special funds budget, local budgets, states treasury budgets, budgets of autonomous public institutions, public institutions fully or partially funded, as appropriate from the social security budget and form the special funds budget, budgets of public institutions financed fully from own revenues, external loans budgets contracted or guaranteed by the state and whose repayment, interest and other costs are ensured from public funds, grants and all the other entities financed by more than 50 per cent from public funds. Adopting an act that seeks the effective management of the nation’s economy with the exclusion of its sub nationals (or making it discretionary) will whittle-down the effectiveness of such act.
Someone may still wonder the place of the Fiscal Responsibility Act and its surveillance agency in our nation’s financial activities today. According to Dr. S.E.O Mordi (2013), “fiscal responsibility is the principles of public finance management based on a legal framework, which mandates budgeting with conservative commodity price (oil-price base fiscal rule), introduces a medium term fiscal framework, formalises annual budget, establishes a framework for debt management and borrowing and sanctions the contravention of the provisions of the legal framework. All these are aimed at achieving government’s revenue and expenditure objectives.” He also outlines the rational for enacting the Fiscal Responsibility Act to be, the avoidance of arbitrary discretionary fiscal policy making, which is characterised by severe fiscal problems such as “time-inconsistency of government fiscal policy” boom and bust spending and lack of transparency, the avoidance of the problem of “the tragedy of the commons”, in which some states borrow and spend on special interest groups recklessly in the hope that the central government will bail them out; the avoidance of free-rider behaviour problem in which some sub national governments do not follow national fiscal policy. Some declare welfare states but have no matching resources, thereby creating growing deficit; and government wants to avoid its impulse on excessive deficit fiscal crises such as inflationary finance, sudden increase in taxes, disruption of service and increased borrowing. All these will not be achieved if we limit the Fiscal Responsibility Act to only the Federal Government and make it discretionary to states.
Now that the amendment of the Fiscal Responsibility Act, 2007 is on-going in the National Assembly, legislators should find a way of imposing it on all the states instead of making it discretionary. The Fiscal Responsibility Commission has been on the move with enlightenment campaign and workshops to states on the need to have the Fiscal Responsibility Law embedded in their fiscal operations. There is need for various stakeholders, especially, those who know how national economy works to join hands in this in order to make the various state governments realise the import of the Fiscal Responsibility Act in their financial activities.
The amendment of the Fiscal Responsibility Act 2007 in the National Assembly should be seen as a great opportunity to reposition our economy through FRC for effective operations and transparency. National Assembly should use their constitutional power to correct every anomaly inherent in the Act, which has hindered its monitoring agency from adequate performance.
In a nutshell, it is pertinent to note that the Fiscal Responsibility Act came on board due to indispensible need to strengthen the overall budgeting process from conception to passage down to implementation as well as the entire gamut of public financial management in a manner that would enhance transparency, accountability and citizens’ participation.
ILOR, Benson Igwebuike wrote from Abuja
