Nigerian laws and debt limitation

Laws are made to guide human conduct including the institution
of government. They govern all aspects of our existence from birth
to death and how we should relate to one another and conduct the
affairs of governance. Ideally, no one is above the law and the law
ought to guide all institutions and operations of government.
Civilised societies are hallmarked by their adherence to the rule
of law in all its ramifications.

Incidentally, Nigeria’s economic and fiscal governance has
grounded various laws and policies and part of the reasons for the
country’s economic under performance over the years lies in our
refusing to be bound by rules that have been freely enacted and
adopted by our government. Nigeria freely enacted the Fiscal
Responsibility Act in 2007. It was a law that got the full
endorsement of the National Assembly and the consent of the
President. The President in 2007 freely assented to the bill for it
to become law as he did not withhold his veto. Thus, the National
Assembly did not need to override a presidential veto. Sadly, that
is where the story ended as most of the law’s provisions have been
observed in the breach.

Section 42 of the FRA specifically provides that the President
shall, within 90 days from the commencement of the Act and with
advice from Minister of Finance subject to the approval of National
Assembly, set overall limits for the amounts of consolidated debt
of the federal, state and local governments pursuant to the
provisions of Items 7 and 50 of Part I of the Second Schedule to
the Constitution and the limits and conditions approved by the
National Assembly, shall be consistent with the rules set in this
Act and with the fiscal policy objectives in the Medium Term-Fiscal
Framework. So many 90 days have passed since July 2007 when the law
commenced yet no step has been taken to fulfil the law. The word
used in the section is the mandatory “shall” and not the
discretionary “may”.

What could be responsible for this state of affairs? Evidently,
the push for this law appears to be a desire by the Obasanjo
administration to be seen to be complying with international best
practices and to be in the good books of international finance
institutions especially the Breton Wood institutions. Thus,
successive governments saw no need to be bound by any rules in the
management of national debts and borrowing. Successive presidents
acted as if the law does not exist and successive ministers of
finance have pretended they were not the addressee of the FRA. The
National Assembly may have passed some resolutions on the subject
matter and the civil society organisations issued some media
releases on the matter but that is where it ended.

The benefits of implementing this provision are legion. It
includes the fact that once the President makes a proposal for debt
limitation to the National Assembly, it will become a public issue
that will be subjected to intense debates, interrogation and public
scrutiny. Probably, there may be public hearings before legislative
approval. The impact of this is that it will lead to greater
accountability on how much is to be borrowed, the purpose of
borrowing and how it will be expended, repaid, etc. it will also
put in the public domain the parametres for setting the limits
especially its relationship with productivity, revenue, gross
domestic product, etc. Experts also raise issues about the
sustainability of the debt regime; the different pathways to
financing public works and infrastructure development through
investments, public private partnerships as against borrowing.
Thus, the cost benefit analysis of the different pathways would be
examined before a decision is reached. Essentially, this public
debate may to an extent limit the unbridled discretion to contract
new debts which the leadership of the executive easily gets when
they ask for project by project legislative approval. The big
picture would have been the subject of public interrogation.

The refusal to follow the law has led to a situation where after
the debt write-off in 2005-2006, Nigeria quickly started piling up
debts even during periods of high oil price. And the Goodluck
Jonathan administration left the national debt at N12.118tn being
the outstanding debts as of June 30, 2015, one month after the
administration left power. Strikingly, the available debt figures
from the Debt Management Office as of September 30, 2017 indicate
that our national sovereign debt has hit N20.373tn. This is an
addition of about N8.255tn in two years and three months. This
amounts to about N4tn debt accumulated every year. Upon all
parametres of reasonableness, rationality and fiscal
responsibility, this is not the way to run a sustainable fiscal
regime.

Laws are made to guide human conduct including the institution
of government. They govern all aspects of our existence from birth
to death and how we should relate to one another and conduct the
affairs of governance. Ideally, no one is above the law and the law
ought to guide all institutions and operations of government.
Civilised societies are hallmarked by their adherence to the rule
of law in all its ramifications.

Incidentally, Nigeria’s economic and fiscal governance has
grounded various laws and policies and part of the reasons for the
country’s economic under performance over the years lies in our
refusing to be bound by rules that have been freely enacted and
adopted by our government. Nigeria freely enacted the Fiscal
Responsibility Act in 2007. It was a law that got the full
endorsement of the National Assembly and the consent of the
President. The President in 2007 freely assented to the bill for it
to become law as he did not withhold his veto. Thus, the National
Assembly did not need to override a presidential veto. Sadly, that
is where the story ended as most of the law’s provisions have been
observed in the breach.

Section 42 of the FRA specifically provides that the President
shall, within 90 days from the commencement of the Act and with
advice from Minister of Finance subject to the approval of National
Assembly, set overall limits for the amounts of consolidated debt
of the federal, state and local governments pursuant to the
provisions of Items 7 and 50 of Part I of the Second Schedule to
the Constitution and the limits and conditions approved by the
National Assembly, shall be consistent with the rules set in this
Act and with the fiscal policy objectives in the Medium Term-Fiscal
Framework. So many 90 days have passed since July 2007 when the law
commenced yet no step has been taken to fulfil the law. The word
used in the section is the mandatory “shall” and not the
discretionary “may”.

What could be responsible for this state of affairs? Evidently,
the push for this law appears to be a desire by the Obasanjo
administration to be seen to be complying with international best
practices and to be in the good books of international finance
institutions especially the Breton Wood institutions. Thus,
successive governments saw no need to be bound by any rules in the
management of national debts and borrowing. Successive presidents
acted as if the law does not exist and successive ministers of
finance have pretended they were not the addressee of the FRA. The
National Assembly may have passed some resolutions on the subject
matter and the civil society organisations issued some media
releases on the matter but that is where it ended.

The benefits of implementing this provision are legion. It
includes the fact that once the President makes a proposal for debt
limitation to the National Assembly, it will become a public issue
that will be subjected to intense debates, interrogation and public
scrutiny. Probably, there may be public hearings before legislative
approval. The impact of this is that it will lead to greater
accountability on how much is to be borrowed, the purpose of
borrowing and how it will be expended, repaid, etc. it will also
put in the public domain the parametres for setting the limits
especially its relationship with productivity, revenue, gross
domestic product, etc. Experts also raise issues about the
sustainability of the debt regime; the different pathways to
financing public works and infrastructure development through
investments, public private partnerships as against borrowing.
Thus, the cost benefit analysis of the different pathways would be
examined before a decision is reached. Essentially, this public
debate may to an extent limit the unbridled discretion to contract
new debts which the leadership of the executive easily gets when
they ask for project by project legislative approval. The big
picture would have been the subject of public interrogation.

The refusal to follow the law has led to a situation where after
the debt write-off in 2005-2006, Nigeria quickly started piling up
debts even during periods of high oil price. And the Goodluck
Jonathan administration left the national debt at N12.118tn being
the outstanding debts as of June 30, 2015, one month after the
administration left power. Strikingly, the available debt figures
from the Debt Management Office as of September 30, 2017 indicate
that our national sovereign debt has hit N20.373tn. This is an
addition of about N8.255tn in two years and three months. This
amounts to about N4tn debt accumulated every year. Upon all
parametres of reasonableness, rationality and fiscal
responsibility, this is not the way to run a sustainable fiscal
regime.