The Federal Government may begin to clamp down on banks and other financial institutions aiding “fiscal carelessness” by granting loans to some states without regard to due process.
Executive Chairman of the Fiscal Responsibility Commission (FRC), Victor Muruako, stated this in Lagos at a Two-Day Fiscal Transparency and Accountability Sensitization Workshop.
This is just as he advised subnational governments to stop making loans their first and last consideration for meeting revenue shortfalls.
Instead, he said they should consider ways of “harvesting their dormant potentials for internally generated revenue.”
The workshop facilitated by Order Paper is being attended by representatives of state governments, members of the National Assembly and the civil society organizations (CSOs).
The organisers said it is aimed at deepening the frontiers of fiscal responsibility, transparency and accountability to sub-national levels of government in Nigeria and encouraging states who are yet to domesticate the Fiscal Responsibility Act to do so.
Daily Trust reports that no fewer than 23 states have domesticated the FRA while 13 – Edo, Rivers, Imo, Akwa Ibom, Kano, Katsina, Borno, Plateau, Ogun, Oyo, Zamfara, Ondo and Benue – are yet to pass the law.
The Executive Chairman decried the failure of states to pass the law which was one of the conditionalities for granting bailout funds with the hope that they would commit to the Federal Government’s fiscal sustainability plan anchored on improving accountability and transparency, public financial management, increasing public revenue and ensuring sustainable debt management.
Reiterating that transparency, accountability, and prudence in public finance management are prerequisites for overcoming the nation’s economic challenges, he asked states to desist from making loans as first and last resort.
He stated that the commission is moving against banks and financial institutions aiding what he called, ‘fiscal carelessness” of subnational governments.
He said, “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.
“We also wish to use this opportunity to discourage the bad habit of some subnational governments to make loans their first and last consideration for meeting revenue shortfalls rather than considering ways of harvesting their dormant potentials for Internally Generated Revenue.
“As for 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, the Commission hereby reminds them that Section 45(2) in Part X of the Fiscal Responsibility Act 2007, which specifies conditions for borrowing by “any government in the Federation or its agencies and corporations,” reads as follows: “Lending by banks and financial institutions in contravention of this Part shall be unlawful.”
“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 FRA, 2007 appears inadequate to compel, we shall aggressively invoke our collaborations with sister agencies such as the ICPC and EFCC.”
Chairman of the Coalition Against Corruption and Bad Governance (CACOBAG), Comrade Toyin Raheem, asked state governments to as a matter of importance adopt fiscal responsibility initiative.
“For us as a country to move forward, we need to fight corruption and it starts with fiscal responsibility,” he said.