Need For Fiscal Responsibility Law At The States

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Need For Fiscal Responsibility Law At The States

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

KNSG Signs N2bn Deal with BOA… Netherlands to Boost Agriculture

Economic Confidential
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KNSG Signs N2bn Deal with BOA… Netherlands to Boost Agriculture

Kano state government has sealed an agreement with the Bank of Agriculture (BOA) for N2 billion counterpart fund to boost the agricultural projects in the state as The Kingdom of the Netherlands also offered to assist Kano state to revamp its agricultural sector, in view of the huge but largely untapped agricultural potentials of the state.

 

Under the agreement with BOA Kano state government will provide N1billion to access the fund, to help farmers of the state enhance their agricultural productivity.

 

Speaking shortly after signing the agreement, at the Government House Kano, the state governor, Rabi’u Musa Kwankwaso said the loan facility highlighted the seriousness of the state government in transforming the agricultural sector.

 

He explained that “peasant farmers from across the 44 local government areas of the state will be selected to benefit the loan and it is interest-free. It will go a long way in ensuring that our set goals in the agricultural sector”.

 

Governor Kwankwaso explained that agriculture is one of the priority sectors receiving serious attention from the state government, highlighting that government is taking proactive measures to exploit the numerous potentials in the sector for food security, job creation and revenue generation.

 

To improve the irrigation, he disclosed that the government decided to draw a comprehensive blueprint on utilizing the 23 dams in the state, noting that although the administration may not be able to execute the plan in totality, it will serve as a guide for the incoming administration.

 

The governor also disclosed that the government is now putting into good use the Tiga and Challawa dams by using them to generate power at cost over N14 billion.

 

On his part, the Executive Secretary of the Bank of Agriculture, Alhaji Waziri Amadu, said that BOA agreed to give the out the loan considering the seriousness of the state government in agriculture, pointing out that it is a pride for his bank to enter into the agreement.

 

Alhaji Amadu added that BOA has satisfied with various agricultural policies and programmes of Governor Kwankwaso and assured that BOA is ready to work with the Kano state to actualize its agricultural dreams.

 

Meanwhile The Kingdom of the Netherlands has offered to assist Kano state to revamp its agricultural sector, in view of the huge but largely untapped agricultural potentials of the state.

 

The Deputy Ambassador of the Kingdom in Nigeria, Mr. Haus de Brabauder, who made this known during a visit to the state governor, Rabi’u Kwankwaso in his office in Kano, explained his country has expertise in the agricultural sector that could be extended to Kano for sustainable development.

 

Netherland’s prevailing natural conditions – a temperate climate with a fair rainfall distribution (total annual average 750 mm/yr), relatively fertile soils in a flat landscape- favour a varied and productive agriculture in the country.

 

The combination of these two factors, plus a governmental policy that strongly supports a competitive agricultural sector, good entrepreneurial skills, support from a state-of-the-art agricultural research and education system, innovative supply and processing industries among other factors, has resulted in a very viable agricultural sector in the Netherlands.

 

Ambassador Brabauder therefore assured that his country, which is also the second largest net exporter of farm produce in the world, is willing to share its experience and technology with Kano, which has big agricultural potential, for mutual benefit.

 

The envoy, who said companies from his country will want to visit the state to discuss areas of mutual cooperation, also disclosed that that the Dutch Minister of Foreign Trade is likely to visit Nigeria next year and may include Kano on the itinerary in view of its strategic importance in Nigeria.

 

Responding, Governor Rabi’u Kwankwaso stated that Kano state is willing to collaborate with the Netherlands in the area of agriculture in light of the huge benefits that will accrue to the state.

 

“We have a lot to learn from you in view of your Expertise, infrastructure, and innovative agricultural technology”, said the governor, pointing out that a relationship with the Kingdom of Netherlands will be advantageous to both entities.

“Kano is an agricultural state, which is known for the production of groundnuts, vegetables and animal products. It the most irrigated state in the country with more than 3 million hectares of cultivable land, while about 75 percent of the population are engaged in agriculture”.

Dikko Suleiman: Restructuring Wobbling Education Sub-Structure

Economic Confidential
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Dikko Suleiman: Restructuring Wobbling Education Sub-Structure

When between 1995 and 1998, Alhaji Dikko Suleiman delivered three papers on “Salvaging an Economically Depressed Primary Education Through Guidance Services”, Moral Education for Good Governance”, and Strategies for Accomplishing the Objectives of Primary Education in a Crisis Environment” at workshops and seminars, little did he know that one day, he would be called upon to put these ideas to practice first in his state and later, on the national level. Today, Nigeria leads the pack of countries harbouring the highest number of out of school children with over 10.5 million of them roaming the streets. Precisely on November 25, 2013, Suleiman resumed as Executive Secretary, Universal Basic Education Commission (UBEC).

 

Born in 1957, in Danmusa Local Government Area of Katsina State, Suleima attended Katsina Teachers’ College and later Federal Advanced Teachers’ College, Kontagora, Niger State. Although he had become the headmaster of a primary school immediately after obtaining his teachers grade school certificate, the quest for improvement that made him proceed for his advance teachers’ certificate course continued to drive him. He went on to obtain his bachelor’s and master’s degrees from the universities of Sokoto and Jos respectively.

 

As the saying goes, it is impossible to build something upon nothing and recent attempts to improve upon the much acclaimed defects in the tertiary education system of Nigeria is like attempting to erect castles in the air. With some government officials and university lecturers insisting that many current university students are unable to speak or write proper language structure and generally “unemployable”, it became apparent that the country must return to restructure the system right from foundation. Even in the 21st century, some primary school children in Abuja, Lagos and other cosmopolitan states still attend classes under trees or sitting on bare floors. Many primary school classrooms are so dilapidated that roofs have been blown up or walls collapsed. In this atmosphere, teaching and learning are certainly not conducive and children may not be encouraged to continue in such so-called schools. Moreover, there is need for an improved curriculum.

 

At a moment like this, the country needed a committed, dedicated and prepared individual to lead the crusade of radical transformation or even outright revolution in the primary school management system. Part of the efforts to reduce the number of street children is the introduction of Nomadic Education and Almajiri School System and Suleiman as part of his preparation for the job even when he was unaware that an opportunity would someday emerge, he wrote papers on “Strategies for Accomplishing the Objectives of Primary Education in a Crisis Environment” and “Salvaging an Economically Depressed Primary Education Through Guidance Services”, among other very contemporaneous relevant papers.

 

To signpost his grasp of the seriousness of the work at hand, Suleiman, while addressing staff of the Commission upon resumption in office said “I am most humbly delighted to accept my appointment as the Executive Secretary of the Universal Basic Education Commission (UBEC) by President Goodluck Jonathan.” He noted that UBEC was facing a great challenge on inadequate number of qualified teachers and how to solve the situation where more than nine million school age children were out of school. The UBEC boss therefore, urged members of the commission to continue accelerated intervention programmes to ensure the nation achieved the Millennium Development Goals (MDG) in basic education. “In the spirit of Mr President’s Transformation Agenda, we will continue from where our predecessors stopped. I am conscious that the position which I have been called to fill is Herculean task.”

 

While pledging to perform his duty in line with the guiding principles, and also work diligently with a high degree of transparency, to implement UBEC’s mandate,” Suleiman said “I know most of the problems of the organisation is the denial of the rights of members of staff. During my tenure, welfare of members of staff will be given priority. Don’t be individualistic, let all of us work collectively and bring our ideas to move the commission ahead,” he appealed. In addition to all the societal issues hampering the development of education in the country, the propensity of public officers to steal from the treasury as well as lack of motivation constitutes serious threat and it is comforting that the new helmsman knew this from the beginning.

 

Suleiman who left as Chairman of Katsina State UBEB is currently pursuing his doctor of philosophy degree and is an internationally renowned scholar with dozens of papers written for academic journals, seminars, conferences and textbooks to his credit. These are aside the several books that he personally authored. He has also been Provost, College of Education, Dutsinma; Dean, Student Affairs, Federal College of Education, Katsina and head of department at various times in various institutions. He was selected as Best State Universal Basic Education Board (SUBEB) Chairman in the delivery of Basic Education in Northern Nigeria, by Pedagogical University, Kier Ukraine and is also a recipient of the Doctor of Philosophy award (PhD) by Dragomonov, Pedagogical University, Kier Ukraine.  He is married and is member of many professional and social associations.

Balanced budget as the responsible platform for MTEF

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Balanced budget as the responsible platform for MTEF

The Debt Management Office recently indicated on its website that Nigeria’s total debt is currently about N7.93tn ($50.92bn). Domestic debt accounts for almost $44bn, while external debt just falls short of US$7bn.  Thus, our consolidated national debt may currently exceed N13tn (i.e. about $80bn!), if the Asset Management Corporation of Nigeria’ s proxy debt of about N5.7tn is also captured!

 

Paradoxically, however, the current over twofold increase in national debt level, since the 2006 payment of $12bn for Paris Club debt exit is often mischievously favourably reported by our Economic Management Team as still well below the ceiling of 40 per cent debt to the GDP ratio stipulated in the Fiscal Responsibility Act 2007 by about five per cent.

 

Therefore, any discussion on the 2014-2016 Medium Term Expenditure Framework must recognise the oppressive burden of double-digit interest rate on these huge debts, in spite of their risk-free sovereign nature.  The subtle official propaganda to encourage a massive shift in favour of much cheaper external debt should also be recognised as an attempt to, once again, mortgage the interest of future generations to modern-day neocolonialists.  A more patriotic and progressive strategy would have been to adopt a constructive monetary strategy that would bring down domestic cost of borrowing to the benign level of external loans.

 

Expectedly, a responsible government should keep a lid on, and prevent even a one-kobo increase above the current oppressive debt level, while the expenditure plan must also accommodate a much more realistic framework for benignly managing the current debt burden.  Regrettably, the recent feeble consolidation of a N100bn annual sinking fund for debt repayment certainly does not provide any realistic assurance of capacity to service and repay our debts of about N13tn when due.

 

A realistic and progressive fiscal strategy that recognises the undue heavy burden of the current debt level must, therefore, necessarily be predicated on the platform of balanced annual budgets within the lifespan of government’s MTEF, which must also be squarely founded on realistic revenue projections, to avoid the need to increase the already obnoxious debt level. In short, there must be no provision for deficit financing.

 

Furthermore, in view of the significance of crude oil to our revenue profile, crude oil price and output benchmarks must be realistically projected. For example, price should not be set below $80, as in recent years, when in actual fact, prices constantly remained above 25 per cent of the benchmark at $100/barrel, while cumulatively, output may have fallen only about 10 per cent average of projections.  Inexplicably, however,  in spite of the expected attendant revenue surpluses, which actually funded the Executive’s contrived Excess Crude Account, the Federal Government still resorted to borrowing over 10 per cent of its annual budget of almost N5tn at oppressive rates, just to fund what some critics have described as ghost deficits!

 

In addition, a plausible MTEF must totally eliminate fuel subsidy as a component of expenditure, and must indeed, also consider a realistic arrangement to actually earn a minimum 10 per cent sales tax/litre of fuel sold in Nigeria, as is the case in other successful oil resource-endowed nations like the United Kingdom and the United States.

 

It would equally be inapplicable to expect positive outcome from an MTEF that does not recognise the catalytic functions of monetary variables, particularly, inflation and interest rates.  Indeed, except in recent months, the annual year-on-year inflation rate has consistently hovered around 10 per cent.  Thus, for example, if the 2014 national expenditure budget is N5tn, you will need to spend 30 per cent more for the same goods and services in 2016 because of inflation.

 

Consequently, a responsible and sustainably progressive MTEF must be underpinned by a benign inflation rate below three per cent, as in successful economies everywhere.

 

Similarly, in order to ensure reasonable cost of funds to support real sector growth, we must adopt the best practices of such successful economies, and therefore insist that the Central Bank of Nigeria’s Monetary Policy Rate (which governs commercial lending rates) does not also exceed two per cent of LIBOR (the international benchmark for cost of funds).  Thus, it must be a poor attempt by our economic managers to camouflage their failed strategies, when they assure Nigerians that our economy will soon rebound, when government eternally continues to borrow back its own deposits at double-digit interest rates while the cost of funds to the real sector is over 25 per cent.

 

The other critical factor for consideration in a viable MTEF is the applicable exchange rate benchmark. For example, since 80 per cent of current revenue comes from crude oil dollar revenue, the naira amount available for spending, therefore, will significantly be influenced by the applicable dollar exchange rate since the dollars are inappropriately substituted with naira allocations by the CBN.  However, it will be self-defeatist to attempt to increase revenue by continuous reduction of the naira exchange rate, as this will only instigate and sustain an oppressive inflationary spiral.

 

Furthermore, apart from its adverse inflationary impact, if, for example, the naira depreciates from N160 to N320=$1, fuel subsidy payments will correspondingly double, to over N4tn annually, with grievous impact on revenue provisions for social and infrastructural needs.

 

Evidently, therefore, the first object of a socially responsible exchange rate policy in the 2014/16 monetary strategy would be to ensure that the naira exchanges at a rate that would immediately eliminate any form of fuel subsidy.  Thus, if, for example, the dollar conversely exchanges for N80=$1, the price of petrol will immediately fall to below N70/litre, from the erstwhile unregulated market price of about N140/litre price without subsidy.

 

In addition, a stronger naira will significantly increase the purchasing power of the paltry incomes of all labour. Such increased purchasing power will in turn stimulate demand and drive productive industrial growth with increasing job opportunities.

 

In conclusion, in the light of our impoverished infrastructure base, a realistic and sustainable MTEF must progressively skew capital expenditure from the current level of about 30 per cent to over 50 per cent of total expenditure!  Thus, any indication that the current MTEF accommodates more than 50 per cent of budgeted revenue as recurrent expenditure must be seen as a clear signal that a certificate of failure ultimately awaits us as a result of the failed fiscal strategy underscoring the MTEF!

 

Besides, it is no mark of responsible fiscal strategy, if the fundamental assumptions underlying the 2014/16 expenditure plan have yet to be resolved between the Executive and Legislature by November ending 2013, as ultimate Presidential assent may not be realistically expected until the beginning of the second quarter of 2014 with disastrous implications for successful budget implementation!

 

Alas, it seems we love repeating the same failed budget processes annually, and expect different results.

Nigerians: Don’t be passive, gullible or scared

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As much as the citizens may try, they can never have a perfect country. All they can do, generationally and intergenerationally, is to strive for progress no matter how small or slow that might be. Hence, in many societies around the world, successive generations are cultured and socialised to do the very best they can so as to avoid stagnation, regression or a break-up.Related to the aforesaid idea is the fact that the citizens deserve a responsive and responsible government that’s keen on the rule of law, safeguards national security, and promotes the people’s welfare.

 

To this end, therefore, government cannot be for the few, but for all. And the people themselves must not be complicit in debasing the state, be idle or indifferent and hoping that their leaders will always have their best interest at heart.

 

To this end, it is expected that citizens must be involved and vigilant in terms of how their country is administered. Otherwise, they are likely to end up with what I call the “Nigerian condition:” A country where governance has been perverted and where, since 1999 at least, government and governance have become a freak show, an aberration and abomination.

 

For 53 long years, governance has been a challenge in the country. For 53 long years, the Nigerian ruling class has been making the same promises that our pre-independence leaders made. Except for cosmetic changes here and there  Nigeria has not made much progress. Fifty-three years ago, much of the Arab world was nothing but a desert. And back then, much of Taiwan, Singapore, South Korea, and Hong Kong were not that different from Nigeria.

 

To be sure, things were not always this bad. In my formative years, for instance, the availability of and access to quality education and medical care were not this limited. And the vast majority of those who went overseas for education or sightseeing returned home. Sure there were challenges and miscalculations, still, there was this pervasive hope that things would get better. There was this light-at-the-tunnel mentality. Across the world, it was estimated that by the end of the 20th century, Nigeria would, in both the economic and political senses, be in the same class as today’s Asian Tigers. Available data pointed to and validated this optimism. Something else: We were not this complacent, fatalistic, gullible and ruinous. Sure, there were the social lepers and the political urchins and the criminally-minded; but it wasn’t this bad, this terrible!

 

In essence, Nigeria was a more decent, more hopeful, and more vibrant country. Nigeria roamed the Black landscapes much the same way members of the genus Panthera  the leopard, tiger, jaguar, and lion  roamed the Savannah and elsewhere. How intolerable life would be if these big cats are defanged and declawed? That’s Nigeria for you.

 

But we didn’t get here and get to be so overnight. It took a long time coming to be this decadent, hopeless, and orphaned state. Our leaders ruined it all. And so did the people.

 

One set of the people are indifferent; while the other set acquiesces to the damage being done. And of course there is a third set that is just too happy to engage and promote all sorts of iniquities and damage. Whatever has become of our country cannot and should not be blamed squarely on the shoulders of our leaders. We the people are also guilty of bad behaviour and bad attitude  attitude and behaviour that are self-immolating and self-defeating. You and I and everyone else contributed and continue to contribute to the destruction of Nigeria in ways many may not grasp or be conscious of. A few examples will suffice.

 

First, many of us kowtow before the same people that steal from us  instead of naming and shaming, ostracising and or stoning them. Yes, stoning! While I believe in the rule of law, I ask you this: When was the last time any significant thief was arrested and prosecuted and sent to several decades of imprisonment instead of a gentle slap-on-the-wrist?

 

Second, Nigerians are grateful for inconsequential achievements. We fall over ourselves in order to praise governors and presidents over superficial accomplishments. In spite of the sufferings and stealing and malfeasances, you hear phrases such as: “Our governor is performing” or “The President is trying.” Heck, performing what? And what does “trying” mean? When roads are falling apart within two years of construction, and where there are no first class hospitals and clinics? Why do we praise mediocrity and absurdities? And why do we make excuses for failed and failing leaders?

 

My fellow Nigerians, please do not make excuses for our leaders. Never! It’s been 13 years of civilian dispensation: thirteen years of petty accomplishments, of waste and excesses and frivolities. Ask your parents, grandparents and great-grandparents: This is the worst this country has been since 1914. I can think of no time during the colonial or post-colonial period when things were this bad.

 

It’s ironic that millions of gullible and passive Nigerians believe the outright lies being told to them by politicians. They believe the half-truths being told by religious leaders. They believe the midnight tales by ethnic bigots. Don’t! We must act! You have to raise your voice, or give voice to the voiceless. You have to fight for your human and civil rights. You cannot be passive. You cannot be indifferent. And you cannot be scared. And, don’t be docile. It is your right, your life, your resources, and your country. Nigeria, after all, is the only country we have. At the very least, we owe future generations a better country and a better world. How do we accomplish these if we are passive, gullible and scared?

 

And so I tell you these: (a) You must inform on your parents if they steal from the public treasury because robbery is robbery no matter who commits it; (b) you must engage in civil disobedience if the Police or members of the judiciary or parliament violate the law; (c) you must be an active member of the civil society so as to advance common causes; and (d) you must hold those who steal your vote accountable for crime against our constitution.

 

And finally, now or in the future, you must protest against dishonest, incompetent and corruption-enabling leaders  whether or not they are from your part of the country.

 

 

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