The Fiscal Responsibility Commission has advised the federal government to restructure its debts and limit the expenditures of ministries, departments, and agencies to reduce the percentage of retained revenue committed to debt service.
The FRAC also urged the authorities to consider state-contingent debt instruments where repayment obligations are tied to the capacity to repay and this should include revenue bonds and payments linked to the price of oil.
“Restructure debts to ensure a longer period of amortisation in a bid to reduce the percentage of retained revenue committed to debt service. Target not more than 50% of retained revenue for debt service in the medium term of four years,” deputy director and head, directorate of legal, investigation, and enforcement at the commission, barrister Charles Abana said yesterday at a media/civil society roundtable on fiscal responsibility and debt management.
The International Monetary Fund (IMF) had in 2022, said as a country with a high debt level, Nigeria should take proactive measures to restructure its debts to evade default in repayment.
The FRC, OrderPaper Advocacy Initiative, and the Growth Initiative for Fiscal Transparency (GIFT) are also seeking amendments to the Fiscal Responsibility Act 2007 to confer enforcement powers on the FRC to check corruption, instil prudence, transparency and accountability in the management of public finance in Nigeria.
Senior programme executive at OrderPaper Advocacy Initiative, Regina Udo said her organisation is engaging the National Assembly to advocate implementation of the FRA 2007 Act at the national and two sub-national levels as it relates to debt management and revenue remittances through the assembly’s public accounts committee.
Speaking to a paper titled ‘Borrowing, Debt & Indebtedness in Nigeria’s 2024-2026 MTEF: A Guide from the F.R. Act, 2007’, Abana the proposed amendment to the Act will help to remedy the inherent errors, loopholes and weaknesses observed in the present F.R.A, 2007; enhance the structure, funding and operation of the commission and appropriately articulate and streamline the powers of the commission for optimum performance.
“We believe that if the Act is strengthened and its provisions complied with, the Nigerian economy will continue to experience a reasonable degree of growth and stability which can be sustained and improved upon,” Mr Abana said, adding that “states and L.Gs in the Federation should be made to be part of the Fiscal Responsibility regime by way of a carrot and stick approach since the economy of Nigeria is one.”
Apart from that, it is believed that the amendment will streamline the cap/limit on the expenditures of MDAs from their gross revenue and bring them in tandem with the Finance ACT; create specific offences and penalties for infractions and violations of the provisions of the Act; and strengthen the budgetary planning, accountability and operations of schedule corporations for a greater yield of independent revenue into the CRF of the federal government.
Speakers at the Abuja event said more public assets should be slated for privatisation to increase resources expected from the privatisation exercise while reducing new sovereign borrowing.
“The comatose public refineries are candidates for privatisation. Furthermore, more public infrastructure projects should be considered under the public-private partnership model to reduce the pressure for public funding through debt,” Abana said.
Speaking to the 2024-2026 MTEF, he said there should be a moratorium on new debts, especially foreign debts, except if exceptional circumstances justify the new debt.
According to him, the MTEF needs to set targets and make projections on employment creation, capital importation & FDI.
Executive director of OrderPaper, Oke Epia said Nigeria needs to be mindful of the rising debt stock which is currently about N80 trillion. He said it was unhealthy for Nigeria to continue to borrow, especially for recurrent expenditures.
