Review process and purpose of public debts
There have been critical debates within the trio of government, private sector and civil society over the scale, purpose and sustainability of Nigeria’s debt portfolio and proposals for new borrowing. The emerging scenario of the trio is that everyone agrees that there is nothing wrong with the idea of ââborrowing, but disagreements are over the purpose, size, sustainability and responsibility involved in the process. loan. This speech reviews Nigeria’s borrowing process and proposes processes for further borrowing within the context of the clear and unambiguous provisions of the Constitution, the Fiscal Responsibility Act, and common sense logic.
The 1999 Constitution empowers the legislature in national and state assemblies to appropriate, consider and approve executive proposals to increase revenue and incur expenditure. Therefore, the president’s or governor’s loan proposals must obtain legislative approval at the federal and state levels before proceeding any further. In the FRA where the rules governing borrowing are detailed, it is stated in Article 41 that the government at all levels will borrow only for investment expenditure and human development provided that this borrowing is on conditions concessional with a low interest rate and with a reasonably long term. amortization period subject to approval by the relevant legislative body. In addition, the government must ensure that the level of public debt as a proportion of national income is maintained at a sustainable level as prescribed by the National Assembly from time to time on the advice of the Minister.
Two key issues have arisen from the above provision of FRA. The first is the challenge of the process while the second is the substantive understanding of the provisions of the FRA. The first concerns the process for the legislator to approve the executive’s request. Should approval be done through the existing closed-loop process or should there be transparency and popular participation in the approval process? The FRA in S.48 provides a clue. It states that the federal government must 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 revenue and expenditure. and their implications for its finances.
The current process is that the FGN, through the President or Minister of Finance, simply forwards the loan request to NASS and NASS will approve it without any public input and most of the time approval. is a matter of routine that has led Nigerians to term the current NASS as a buffer for executive proposals. This contradicts S.48 of the FRA. The proper process should involve posting all of the details of the executive’s proposal to executive and legislative newspapers, websites, and portals. Full details of the claim should include specific subject matter, activities, locations, repayment terms, moratorium period, default, penalty clauses, cost-benefit analysis, etc. The post should ask any Nigerian with information or facts that negate the posting request. the same goes for the NASS review, public hearing dates, etc. This is based on the fact that these are public debts and not the private resources of the current occupants of the executive and legislative positions. In addition, some debts will have moratoriums that sometimes range from 15 to 30 years, at a time when most legislators will no longer contribute to the national economy. Some will be retirees or others will be deceased. This is an unfair process where fathers borrow money and most of the time mismanage it and leave the final repayment until they are gone. The next generation that is struggling with payments is by no means involved.
The downstream issue in the process is the obligation of the Debt Management Office under existing laws to publish loan details and make them available to the public. This obligation has been neglected in favor of a fixed documentation of debts. The same details about activities, locations, conditions, etc. should be posted on a loan-by-loan basis on the DMO website.
The second which is a good understanding of the provision of S.41 launches key indicators: borrowing is only allowed for capital expenditure and human development. Therefore, borrowing for recurrent expenses is outside the scope of FRA. The FGN has borrowed for recurring expenses for the past two years. While FRA has defined capital expenditure as the expenditure on an asset that lasts more than one fiscal year and the expenditure associated with acquiring those assets, it has been silent on human development. But the term human capital is not in the broad sense because it has been articulated to include the aptitudes, knowledge, skills, experience possessed by an individual or a population, considered in terms of value or contribution to national development. and could easily be linked to, among other things, education. and health.
The second major indicator is that the debt as a proportion of national income is maintained at a sustainable level. Debt as a proportion of national income has been interpreted by the government as a whole as the ratio of debt to gross domestic product. However, GDP is not used in debt service. The provision is contextualized and concerns the relationship and ratio of debt to income available to manage governance as well as debt service. It is argued that the first test of sustainability is the ability to use undistributed revenue for servicing and paying debts while remaining a good portion of the undistributed revenue for other governance expenses.
The third indicator is that the purpose of borrowing should not be for frivolities, inappropriate and unclear purposes. For example, NASS’s current request to approve the borrowing of $ 200 million for mosquito nets is an abuse of the debt process. How much does it cost to start a net manufacturing business that can create jobs, add value and pay taxes to the government? Isn’t environmental health awareness a more appropriate action against malaria than a mosquito net? The malaria eradication program has been going on for over ten years and we are still borrowing for mosquito nets. How will the provision of the nets grow the economy, develop skills that will facilitate the repayment of the $ 200 million? Borrowing billions of dollars for water supply and sanitation for more than a decade is also inappropriate and calls into question how states, local governments and even the Federal Ministry of Water Resources spend their allocation of revenues. not distributed. How would debts be repaid when water privatization is not on the agenda and Nigeria’s GDP tax is practically the lowest in the world? Borrowing hundreds of millions of dollars for capacity building which translates into jobs for boys for foreign consultants in fields where Nigerians have acquired enormous capacity is not only inappropriate, but also economic sabotage.
Ultimately, we need to reprogram the process and clearly define the goals of debt acquisition. It has been abused and reform is imperative.
All rights reserved. This material and any other digital content on this website may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without the express prior written permission of PUNCH.
Contact: [emailÂ protected]