The distribution of revenue accruing to the three tiers of government for the month of June 2023 last week, at the Federation Account Allocation Committee, and resolutions from the National Economic Council raised some interesting policy and legal issues which appeared to have been swept under the carpet by popular media reportage. This discourse reviews some of these critical issues and their implications and challenges for economic and social life. It contains recommendations for these challenges going forward.
The first is the fact that over N1.9tn was available for sharing in the distributable pool account by the three tiers of government and only N907bn was actually shared. There was a resolution to save N790bn while the remainder will be used for statutory deductions. The minimisation of the impact of the increased revenues occasioned by subsidy removal and exchange rate unification on money supply as well as inflation and the exchange rate were given as part of the reasons for the savings. While it is commendable to save for the future, there seems to be no policy or legal framework guiding this decision. Is this done under the Excess Crude Account set up by the Fiscal Responsibility Act or under which law or policy framework? It will be recalled that savings under the statutory ECA were challenged by the states on the grounds of its unconstitutionality and the argument was that what the 1999 Constitution set up under Section 162 (1) was a distributable pool account and not a savings account. Section 162 (3) of the constitution states, “Any amount standing to the credit of the Federation Account shall be distributed among the federal and state governments and the local government councils in each state on such terms and in such manner as may be prescribed by the National Assembly.”
Section 162(4) of the constitution provides that, “Any amount standing to the credit of the states in the Federation Account shall be distributed among the states on such terms and in such manner as may be prescribed by the National Assembly.” The only law the National Assembly has so far made for savings at this level is the ECA but the money to be saved is not the proceeds of the reference commodity price rising above the predetermined level set in the Appropriation Act.
To stand the test of legality, this new and unprecedented savings fund must be based on a clear legal and policy framework approved through the law-making powers of the National Assembly, based on agreements between the federal and state governments, showing how the funds will be managed, including its distribution, accruing interest and investment by the three tiers of government. The reasons stated for withholding this money may be part of the objectives of the new law and this is essentially about creating a convergence between fiscal and monetary policy, etc.
The second issue is about the Infrastructure Support Fund set up by pronouncement. It is stated that the ISF would enable states to intervene and invest in critical areas so as to improve economic competitiveness, create jobs and deliver economic prosperity. Again, the ISF is without a legal and policy foundation. No law has been passed by the National Assembly in this regard and the humungous amount to be managed by this fund calls for legislative authority for its establishment, operation, and management. It also calls for agreement among the owners of the fund- federal, state, and local governments. Otherwise, it would seem that the Federal Government is usurping the power and domain of the states to manage their resources through the concert of state executive and legislative action. Complaints would likely arise in the future, especially from states run by opposition political parties who may feel short-changed in this scenario of fluidity where the funds would be managed and disbursed at the pleasure of the Federal Government.
The third issue is the decision of the National Economic Council to discard the National Social Register used by the previous administration for conditional cash transfer, citing integrity concerns raises a lot of issues. The existing register was not produced arbitrarily by the Federal Government. It was compiled by the Federal Government and states with the support of development partners. It would be foolhardy to deny that the register had no issues or challenges. But these are challenges that can be rectified by honesty of purpose and the political decision of members of NEC, especially state governors. Unfortunately, states voted and decided to prepare their own registers. This approach, from the conduct of governors so far, may potentially lead to registers based on political patronage and opaque rules. Since the governors had identified the challenges in the existing register, they should have come up with comprehensive criteria applicable across all states of the federation, to determine the poorest of the poor and most vulnerable, while curing the mischief in the existing framework. This will ensure that the register is credible and truly serves its intended purpose. The expectation is that states would clean and correct the lapses identified in the existing register. This would not take more than two months. Starting the compilation of a fresh register by states will require not less than four to six months to complete at a time Nigerians are already in dire straits and need immediate action to ameliorate the hardship arising from fuel subsidy removal and unification of the exchange rate. This proposal suggests that governors do not understand the magnitude of the hardship or they are cocooned in government houses and do not feel the pulse of the masses.
The fourth issue is that it is now clear that the federal, state and local governments will have more nominal revenue to share at FAAC. The hardship in the land demands the greatest value for money in the allocation, expenditure and management of public finances. It is time to reintroduce the practice of publishing allocations to states and local governments in major newspapers and on the website of the Federal Ministry of Finance. Increased transparency in revenue allocation will enhance public awareness and promote accountability in the use of public resources.
The fifth issue is the fact that exchange difference revenue constituted the largest part of the N907bn distributed among the three tiers of government. This is a clear testimony of the distortion in the old exchange rate policy before the unification. Thus, the unification of the exchange rate should be implemented to the letter and the government should focus on policies that facilitate the generation of sufficient foreign exchange to meet demand.
Finally, all Nigerians, civil society organisations, organised labour, professional groups, media, faith groups and leaders, women’s groups, etc., should actively monitor and report on the use of government revenue at the federal, state, and local levels. The emphasis should not be on the Federal Government alone. By promoting transparency and discouraging the abuse of public resources, Nigerians can collectively work towards a more accountable and responsible fiscal governance system. The Federal Government and the states should ensure the rule of law, transparent allocation and use of public funds, and prioritise the sustainable welfare and benefit of all Nigerians in the management of public resources.
