Economic Confidential, November, 2009

Exclusive Interview

No more Needless Borrowing in Public Offices

- Aliyu Yelwa, Chairman Fiscal Responsibility Commission

Born more than 60 years ago in Kebbi  State, the new Chairman of Fiscal Responsibility Commission Alhaji Aliyu Jibril Yelwa (Sardaunar Yauri) attended Barewa College, Zaria and  Achimota College, in the then Gold Coast (Ghana) where he cut his teeth in the Accountancy practice with the ACCA.  He also attended the Scottish College of Commerce, Glasgow and Strathclyde University, United Kingdom in 1962.  He had also worked in various capacities in private and public sectors. He started his accounting career with an accountancy firm known as Crawdsol  and Hardy in 1959. He later worked in as Revenue Officer in the Northern Regional Ministry of Finance and as Deputy Bursar of Ahmadu Bello University, Zaria before he was appointed Commissioner for Finance and Economic Development, and that of Establishment and Service Matters in Sokoto State.

A former Executive Director at the Central Bank of Nigeria, Alhaji Yelwa  was Auditor of the defunct National Republican Congress and a Delegate to the 1994/95 Constitutional Conference before he was appointed Minister of Water Resources and Rural Development during the administration of Gen. Sani Abacha. In this Interview granted to the Economic Confidential magazine, Alhaji Yelwa says it all on the mandates of the new agency. Excerpts….

EC: What could have been the reason for the establishment of FRC?

It is well known that Nigeria is one of the world’s largest producers of oil; therefore we should not have business with poverty. One may ask; what have we done with our oil revenue? What happens to the revenue generated from taxation, customs duty, agriculture and the like? The answer is simple; mismanagement of funds by successive administrations. That is why the administration of President Umar Musa Yar’Adua has decided to fight this scourge with all the weapons at its disposal, hence the establishment of the Fiscal Responsibility Commission backed by the Fiscal Responsibility Act 2007. If the Fiscal Responsibility Commission had been established before now, Nigeria would have long achieved its vision 20:2020, let me take you through memory lane, in 1962 Nigeria experimented with the National Economic Planning, but due to administrative and political imbalances the National Economic Planning was abandoned, but this commission is poised to take Nigeria to greater economic heights.

EC: How is the membership composition like?

The Commission is made up of 11 Members of which seven, who represent the six geopolitical zones and the chairman are permanent members, while four are non-permanent members representing the organized private sector, Labour, Civil Society Groups and the Federal Ministry of Finance.

EC: What are the mandates of Fiscal Responsibility Commission as a new agency of government?  

Look, we are reformers; we are unlike other agencies like EFCC and ICPC that run after the nation’s economic criminals. We do not run after economic and financial criminals, we try to make sure that these economic crimes are not committed especially within the government sector. Our major responsibility is to implement the Fiscal Responsibility Act 2007. We need to bring orderliness in handling the economic and financial resources of this country; it is the lack of orderliness in economic and financial resources of this country that brought about poverty. Like I said earlier, we do not chase the criminals rather we work with the operators – Ministries, Departments and Agencies of Government so as to avoid mismanagement of funds. We monitor their budget implementation to ensure that they are doing what the budgets were approved for. If proper monitoring is done at the budget implementation level, there won’t be need to chase economic and financial criminals. For instance, if budget is approved for building a hospital, it is our duty to monitor and ensure that the hospital is built according to specification and no fund is mismanaged.

EC: In essence what do all these mandates translate to?

Key features of the laws which the Commission will superintend include the conduction of budgeting with the Medium Term Expenditure framework with more than one year in mind.  This process reconciles needs with available resources, and gives agencies a more consistent source of funding.  It also ensures allocation of money to strategic priorities. The Commission will have to ensure effective collection and remittance of all statutorily levied taxes as well as creating new revenue bases. It will also set rational and prudent guidelines for incurring expenditures and curtailing commitments when necessary. The commission will also monitor and guard against borrowing and ensure that new debts be based on cost benefit analysis and hinged on growth and development of the economy.  While entrenching accountability in the utilization of borrowed monies, the commission is expected to guarantee access to information of public debt. The commission is expected to subject medium-term economic plans and budgets of each tier of government to debate in public hearings,  prepare and appraise budgets in accordance with International Standards, publish budget implementation reports and provide audited statements  of accounts to its legislative arm.

EC: Is Nigeria the first country to adopt this type of legal framework on fiscal responsibility?

No. Brazil also has one. For instance, before the passage of fiscal responsibility law in Brazil in 2000, there was chaotic fiscal planning and widespread corruption. With the passage of the law, which included minimum standards on state budgeting and debt management, Brazil’s economy has begun improving. In India, the world’s biggest democracy, a Fiscal Responsibility and Budget Management Bill was signed into law in 2003. The law requires that revenue deficit be eliminated by 2010. It obliges the government to present its medium term fiscal policy, strategy and macro-economic framework before both houses of parliament. This is another goal of the Fiscal Responsibility Bill 2004. In 2004, California (the world’s sixth largest economy) passed Proposition 58, the California Balanced Budget Act, which requires the Governor and legislators of the state to pass a balanced budget. The Act has called for the creation of a special "Rainy Day" reserve that will protect California in case of financial trouble, an account similar in nature to the commodity/natural resource price envisaged by the Nigerian Fiscal Responsibility Law.

EC: How do you hope to achieve this enormous task?

In order for us to achieve results, we draw up plans that will enable us achieve success, for instance we have long term, medium term and short term plans, note that these terms are renewable. For instance we could have a plan for the next three years 2010 – 2013, when we breakdown the period into short terms, it becomes easier to monitor. Within this three years period, we produce reports for every quota on budget implementation, in this budget implementation report we will state our findings and what actions we have taken regarding our findings, also, this report should be published for the public to see. Consultation is another tool that we apply in order to achieve results. We ensure that everyone is carried along in our plans, whether long, medium or short terms; we begin by consulting with all the stakeholders – Federal, State and Local Government and the general public on a particular project. We do this to avoid a situation where some people will come up tomorrow and say that they were not aware. We ensure that all parties involved are happy. We also regulate borrowing, a ceiling has been set for borrowing, and this commission will not allow any institution to borrow beyond the set ceiling. We keep track of every institution when it comes to borrowing; if you are borrowing we would like to know the purpose for which you are borrowing, when you would likely pay back and your pay back plans. It becomes an offence if any institution decides to borrow beyond the set ceiling. Note that this commission is not a political office, it is a national office, and the nation has empowered me to go and monitor it, and I will ensure I do my job.

EC: What are your challenges?

Our major challenge is seeing that the law is implemented. It is a very difficult task, but we have to do it, especially now that Nigerians are not operationally familiar with the Fiscal Responsibility Act of 2007. As a new organization, there was the problem of facilities, as you may be aware we recently moved in to this place. You cannot begin to employ people if the facilities are not there, and this commission is a highly professional one in the sense that we work with professionals like accountants, lawyers, engineers and project managers, you have to have knowledge on economics, finance, law and other related disciplines in order to be able to achieve results. If we are not well grounded in the related fields the operators which we are expected to monitor will escape our grip, hence we need regular update in our knowledge. There are 28 ministries, 36 states, 774 local government areas and 31 agencies; they are the main operators that we superintend, so you can now see how large our responsibility is, it therefore means that we require huge resources to be able to carry out our job successfully.

EC: You said operationally the act is not known by many Nigerians, how do you intend to change this?

Yes, operationally the law is about 10 months old and the law is operationally not known by many Nigerians, so what we are doing is to organize stakeholders forums at various levels – Federal, State and Local government levels, the general public, Non Governmental Organisations and the media are obviously very important in our effort at sensitizing Nigerians of the Fiscal Responsibility Act of 2007, therefore they must be involved in our awareness plan. For instance we have organized such forum with the Centre for Social Justice. We will also give our own interpretation of this law to Nigerians.

EC: How far have you gone in your mandate?

We have the right to request information from the operators; we have the willingness and courage to confront them. Recently, we have requested that all the ministries, departments and agencies of government send us their report on expenditures, look, what do we have here? (Pointing to the stack of files on his table), these files we sent in from various ministries, this is a good starting point. For the fact that they sent in their expenditure reports shows that something is happening at the commission. We will analyze these reports for ourselves and take actions based on our findings. Every agency is expected to publish its annual reports, but some of them do not bother to put such report together and nobody questions them for failing to make such report available. Now here I am with files containing their reports.

EC: How is the quality of submissions so far from some of the agencies?

Well, I must express our dissatisfaction with the submissions of most agencies of government to the commission. Though 75 percent of scheduled corporations responded to the commission's enquiries by submitting their annual reports, approved budgets and audited accounts for verification, a good number of such reports were not satisfactory. Most of the fiscal performance report submitted by the agencies were riddled with material inconsistencies, over spending, under spending , under utilisation of funds, misapplication of funds, revenue sub-optimality, outright revenue leakages, etc. Their reports, in short, fell short of the standard and world best practices in financial and accountings reporting system.

EC: So what are you doing to address that?

Having observed some lapses in the 1st quarter Budget Implementation Report, 2009, we designed a format, which we forwarded to the appropriate quarters, before we under take on- the-spot visits to physically verify and confirm actual existence of projects.

EC: Are you receiving supports from states and Local Government Councils on the Act?

It is unfortunate that states and local governments are yet to fully buy themselves into the Fiscal Responsibility Act. Most stakeholders tend to think that the Act is only applicable to the Federal Government alone even sSome state governments kicked against the law on the grounds that it is against the principle of fiscal federalism practiced in Nigeria. The novelty of the Act makes the implementation of the Fiscal Responsibility legislation at the states and local government daunting, especially as the state and local governments lacked technical capacity and legal framework for fiscal discipline. Presently they do not have the existing models and templates, records, processes or examples on which to build. We as a commission are willing to guide and assist operators of public financial management on their responsibility as provided for under 54 of the Act. State governments are all bound by the provisions for the preparation of the medium term expenditure framework, savings and assets management and the excess crude account, debt and indebtedness and borrowing as they benefit from 48 per cent of the nationally shared resources..

EC: Any penalty for breaching the law?

Any breach of the provisions of the Fiscal Responsibility Act is liable to prosecution. The Act criminalises all acts of slothfulness in the course of budget preparation, implementation, monitoring, and reporting.  Essentially, the Fiscal Management Commission will be responsible for monitoring and enforcement.   It will investigate and forward violations to the Attorney – General for prosecution. There is a one year imprisonment and N500,000 fine stipulated for officers who fail to perform obligations or make false statements and 3 years minimum jail sentence for contraventions. In fact Ministers and Commissioners, as the case may be, would be held liable for institutional breaches and subject to punishment.