Buhari Fails To Set Borrowing Limits As States Lose N359.32bn Statutory Revenue To Debt Servicing

President Muhammadu Buhari, like two other presidents, Umar Yar’Adua and Goodluck Jonathan before him, has failed to set debt limits for the federal and subnational governments. This may have accounted for increasing debts incurred by the three tiers of government in the past four years.

Section 42 (1) of the Fiscal Responsibility Act 2007 stipulates: “The President shall, within 90 days from the commencement of the Act and with advice from the Minister of Finance subject to approval of National Assembly, set overall limits for the amounts of consolidated debt of the three tiers of government.”

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The Fiscal Responsibility Commission in its 2017 Annual Report and Audited Accounts obtained by our correspondent in Abuja on Tuesday said that this limit has never been set by any president.

The commission said its letters to remind Ministers of Finance that this limits had never been set had not produced the required result; meaning that such letters had been ignored either at the minister’s level or at the Presidency.

As a result of the failure of the president to set the limits, the commission had also not been able to publish on quarterly basis the list of governments that had exceeded their borrowing limits as required by the FRA 2007.

The report said, “Since the enactment of the Fiscal Responsibility Act 2007, the overall limit for the consolidated debts of Federal, States and Local Governments is yet to be set by the President.

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“The commission, in a bid to ensure that this all-important requirement of the Act is fulfilled, has written several letters and reminders to the Honourable Minister of Finance. The limit is yet to be set.

“Section 42 (4) of the FRA 2007 mandate the commission to publish on a quarterly basis, a list of the governments of the federation that have exceeded the ceiling of their respective debt limits, indicating the amount by which the limit was exceeded.

“However, for this essential function to be performed, the overall debt limits of the tiers of governments have to be set.”

The report also showed that the 36 states of the federation lost N359.32bn of their statutory revenues in 2007 from the federation account to the debt servicing deductions from source.

This is the difference between the gross statutory revenues and their net statutory revenues. States that enter into different debt agreements with banks or external bodies that are approved by the Federal Government have their gross statutory revenues deducted for debt servicing before they receive the net revenues.

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Osun State, for instance, had a gross statutory revenue of N39, 427,491,639.62 in 2017. However, it had a net revenue of N10, 436,789,071.78. This means that its statutory revenue from the federation account was debited with the sum of N28, 990,702,567.84 for debt servicing.

The report said, “The total gross statutory revenue of the 36 states amounted to N2, 098,615,470,240.44 at the end of 2017 while their combined net statutory revenue stood at N1, 739,290,877,423.07.

“Akwa Ibom and Rivers had the highest share of N156, 685,320,476.79 gross statutory revenue while, Delta and Rivers followed with N139, 480,327,720.37 and N138, 146,967,672.43, representing 6.65 per cent and 6.58 per cent respectively of the total gross statutory revenue.

“Lagos State also followed closely with N123, 421,828,999.47 accounting for 5.88 per cent of the total gross statutory revenue.

“The high level of the gross statutory revenue of the three states (Viz, Akwa Ibom, Delta and Rivers) is explained by the 13 per cent derivation revenue which is earned by oil producing states.

“However, the high revenue of Lagos State is explained by her internally generated revenue generation drive especially Value Added Tax revenue. Lagos earns the highest VAT income in the country.”

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The report added that Kwara State had the least gross statutory revenue in 2007, with a total of N37, 658,120,654.65 accounting for 1.79 per cent of the total gross statutory revenue of the states.

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