Adherence To Fiscal Governance Laws
Adherence To Fiscal Governance Laws

By Eze Onyekpere

Laws, especially in a democratic system of governance, are the bedrock for good governance. The reference to laws within the context of democracy is an understanding that dictatorships formulate and enact laws that are generally against the interest of the people. And the concept of the rule of law in a democracy is to

a great extent different from encouraging obedience to laws and policies made by dictators. This discourse reviews adherence to fiscal laws and policies in the context of the relationship between plans, policies, laws and the budgeting process.

The 1999 Constitution in S.81 mandates the executive to prepare estimates of revenues and expenditures for the approval of the legislature. The budget is to be aligned with high-level national laws, plans and policies because laws and policies standing on their own cannot be implemented until resources are channeled to them through the budget. This is to be done within the concept of a fiscal year as the period running between January 1 and December 31 of every year as recognised in S.318 of the constitution and the Financial Year Act. The constitution anticipates a general sense of order and sequencing in the preparation, approval and execution of budgets as well as popular participation in the entire budgeting process.

The Fiscal Responsibility Act, being a law made to secure greater accountability, transparency and prudence in the management of the nation’s resources in S.48(1), mandates the Federal Government to ensure that its fiscal and financial affairs are conducted in a transparent manner and accordingly ensure full and timely disclosure and wide publication of all transactions and decisions involving public revenues and expenditures and their implications for its finances. By S.30, the FRA mandates the Minister of Finance, through the Budget Office of the Federation, to monitor and evaluate the implementation of the annual budget, assess the attainment of fiscal targets and report thereon on a quarterly basis to the Fiscal Responsibility Commission and the Joint Finance Committee of the National Assembly. Furthermore, the Minister of Finance shall cause the report prepared pursuant to this section to be published in the mass and electronic media and on the Ministry of Finance website, not later than 30 days after the end of each quarter.

It could be stated that a greater part of the last four years restored the January to December budget calendar. However, the 2022 federal budget was just amended in the last two months and seems to still be in operation together with the 2023 federal budget. This situation was outside the contemplation of a January to December fiscal calendar and it rubbishes the order, planning and sequencing anticipated for budget implementation, transparency and accountability. Furthermore, the first quarter budget implementation report for 2022 was only released on September 21, 2022, six months after it was due. The second quarter BIR was released on October 7, 2022, four months after it was due. The third quarter BIR was released on July 14, 2023, ten months after it was due while the fourth quarter and consolidated BIR for 2023 is still outstanding.

The 2024 Personnel Cost Budget Call Circular has been out since May 2023 while the full Federal Budget Call Circular is yet to be released. Once the full Budget Call Circular is released, ministries, departments and agencies of government will move into the thick of preparations for the 2024 federal budget. In the usual tradition, there will be no outreach or consultations with citizens and stakeholders and when the draft medium-term expenditure framework will be presented, the finance ministry will merely do a briefing rather than engagement and consultation to enrich the process. Year after year, we repeat the same mistakes and deliberate violations of the law and produce the same poor budgetary outcomes. And change does not appear to be on the agenda. However, in the preparation of budgets and macroeconomic projections by the executive and its approval by the legislature, the constitution and other laws anticipate the involvement and participation of citizens.

In the constrained fiscal space at the federal and state levels, we find the executives giving away the little available resources in the name of tax expenditures–tax waivers, rebates and purported encouragement and sweeteners for investors in the Nigerian economy. However, these tax expenditures are made without due process. Again, the FRA in S.29 states that any proposed tax expenditure shall be accompanied by an evaluation of its budgetary and financial implications in the year it becomes effective and in the next three subsequent years, and shall only be approved by the minister, if it does not adversely impair the revenue estimates in the annual budget or if it is accompanied by countervailing measures during the period mentioned in this section through revenue increasing measures such as increase in tax rate and expansion of the tax base.

In no year has the Minister of Finance produced an evaluation of the budgetary and financial implications of the tax expenditure or its three-year impact. It is now a notorious fact that these tax expenditures have adversely impaired revenue available from both recurrent and capital expenditures. After granting the tax expenditure which drastically reduces available revenue, no countervailing measures are announced. And we are left with borrowing to even pay salaries after using 100 per cent of available revenue for debt service. This is not right and it was exactly this mischief that the legislature had in mind when enacting S.29 of the FRA on tax expenditure.

In the final analysis, it is imperative for an impoverished country like Nigeria, with little or no fiscal elbow room, to stick to the ground rules of fiscal governance stated in our laws and policies. Through that approach, our fiscal policy will be evidence-led. It will be a product of the popular will of the Nigerian people and will galvanise the energy and resources of the Nigerian people for development.

There is usually this unfounded arrogant claim of expertise in the management of public resources in such a way and manner that excludes the owners of the resources while ignoring extant laws and policies. This is what has led us to this pathetic fiscal situation. Budgeting must be based on law and policies; and common sense and it must be a product of popular participation.

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