IMF, Utomi, others seek end to fiscal recklessness
FOR a new dawn to herald the country with a regime of fiscal prudence that would lift Nigeria from the current revenue crisis, a gathering of experts has enlisted the review, strengthening of Fiscal Responsibility Act and retaining of the institution as opposed to planned scrapping.
Besides, the experts reiterated that there is no auspicious time than now for a change in orientation and deliberate efforts to end financial recklessness, uncoordinated fiscal activities among the three tiers of government, rising debt overhang, lack of transparency and corrupt practices bedevilling the country.
The Senior Resident Representative, International Monetary Fund (IMF), Gene Leone, in his keynote address at the opening of the National Forum of Fiscal Responsibility Commission, titled “Fiscal Prudence: A Shared Responsibility,” noted that fiscal prudence is key to economic stability and sustained economic growth.
According to him, for development to take place, there must an integrated approach to policy direction, adding that as “every medicine does not cure all sicknesses, fiscal policies should have targets aimed at overall benefits.”
Noting that the quest for development is about goals, instruments, constraints and tradeoffs, he said that there must be a long-term vision; enabling environment that is manifest in economic, financial, political stability, institutional capacity, economic efficiency; competitiveness and productivity- human capital and technology; adequate regulatory environment; and good governance.
On the current state of the economy, he said that while the economy is diversified, the exports and revenue still depend on oil.
For example, while the oil sector’s contribution to the Gross Domestic Product is 11 per cent, the revenue contribution is 70 per cent of the nation’s total revenue; 95 per cent of exports; while non-oil revenue accounts for 4.5 per cent.
To him, dependence on crude oil created huge problem for the country, especially as it is now at the mercy of the vagaries at the international market.
“Nigeria, with huge infrastructure gap is still far behind the BRICS economies that it is desiring to join in various measures. The electricity production cannot be compared with any country in the group, the transport sector is poor, there is massive poverty and inequality, with 30 per cent of the population owning 70 per cent of the wealth, while the poverty is lopsided against the female.
“While the country is also predisposed to massive oil price shock, the country is consistently being exposed to low reserves for investment and foreign exchange buffer.
“Nigeria needs to generate investment demands through good reforms and close coordination of efforts across all tiers of government. This is the time for effective application of fiscal prudence, though it is one aspect of the whole solution,” Leone said.
He noted that Nigeria now urgently needs effective combination of fiscal, monetary and exchange rate policies, as well as foreign exchange market intervention, domestic prudential regulation, and capital controls, which are also subject to its flexibilities.
There should be a manifest commitment to fiscal discipline – fiscal policy objectives that are supported by law, provide a clear signal about a government’s commitment to monitorable fiscal policy outcomes and/or strategies.
There should be procedural rules that define the attributes and interaction of participants in the budget process to enhance transparency, accountability and fiscal management, while numerical rules, which are formal constraints on fiscal policy, must be enforced, like Nigeria which has three per cent as debt limit.
Also, a professor of Political Economy, Pat Utomi, who presented a paper titled “Setting Agenda for Fiscal Responsibility for the New Administration,” pointed out that there was need to hold people accountable for their application of national wealth.
Utomi flayed the leadership of the country for coming out of crude oil boom very wobbly, saying that at a time, he became notorious for his campaign to use low budget benchmark and save the excess crude oil price for the sake of the “rainy day” like this.
“Today, there is manifest shortfall, lack of employment and uncertain democratic dividend. There is no significant improvement in infrastructure and states are finding it difficult to pay salaries of the impoverished civil servants. It is a shame and a show of irresponsibility on the part of leadership,” he said.
He lamented that since the revenue sharing scheme was introduced, the various tiers of government relapsed onto inactivity, as they saw the revenue pool as the only source needed to power their operations, without being accountable.
“It is irresponsibility to see governors who cannot pay salaries go about with chartered aircraft, even in the midst of the acclaimed austerity measures. Worse still, the revenue allocations meant for the grassroots developments have been hijacked by state governments for frivolous expenditures.
“Fiscal rascality has thrived through leakages associated with ghost workers syndrome, which has frittered away funds capable of developing a state. The country has also suffered setback from revenue leakages as tax proceeds end up in private pockets and it is also disastrous to have 82 per cent of our budget mainly on recurrent expenditure.’’
He said the country needs to go back to the 1960s strategy, where growth was propelled from sub-national governments and leaders were competing among themselves over who would bring development programmes to their people before the other.
“We must change our orientation for public fund and be ready to call for transparency. We must at this point, stand against borrowing to fund recurrent expenditure. Fiscal responsibility is the only way out for the country now and the laws must be strengthened and enforced for us to survive these difficult times,” he added.
The Lead Director, Centre for Social Justice, Eze Onyekpere, in his welcome address, had recalled the debates that raged before the commencement of the Fiscal Responsibility Act (FRA).
While admitting that 17 states have signed into the Act since the commencement of the FRA in 2007, he noted that the current challenge remained the domestication of the principles in various activities.
“It has been eight years since the FRA was enacted and a very convenient time to review the successes and challenges and to do the Strengths, Weaknesses, Opportunities and Threats analysis of fiscal responsibility practices across the nation with a view to improving performance, share experiences and learn from the best in class.
“Now that Nigeria is facing dwindling revenues from oil prices and challenges in meeting budgetary financial targets, the fiscal responsibility principles are needed to improve revenue and budgetary performance.
“Nigerians have voted for a new government and as that administration is setting its agenda, fiscal responsibility enthusiasts owe the nation a duty to position fiscal responsibility issues in the forefront of national debates for change,” he said.
Meanwhile, the Fiscal Responsibility Commission [FRC], yesterday took a swipe at the nation’s three tiers of governments for not obeying clear fiscal rules, which has hitherto, led to reckless borrowing, debt overhang as well as poor savings culture.
‘’For decades, Nigeria’s fiscal climate was marked by the absence of clear fiscal rules, un-coordinated fiscal relations between the arms and tiers of government, reckless borrowing and debt overhang all of which has evolved poor savings culture, disregard for transparency and accountability, corrupt practices resulting in chaotic and unhealthy economic outcomes,” the Acting Chairman of the FRC, Chief Victor Muruako, said.
According to him, the coming into force of the Fiscal Responsibility Act and the subsequent inauguration of the commission crystallized the reform-oriented disposition to ending the culture of profligacy or irresponsibility in the management of public finances that had held sway for so long.
He stated that the new fiscal regime had to be rules-based rather than discretionary as there is the need for transparency rather than opaque, accountability rather than recklessness.