October 21, 2004
FINANCIAL AUTONOMY FOR JUDICIARY AND LEGISLATURE
The Chairman Senate Committee on National Planning and Poverty Alleviation, Senator Saleh Usman Danboyi has commended Revenue Mobilisation Allocation and Fiscal Commission for discharging its duties creditably without fear or favour. Senator Danboyi, who led members of the Committee on oversight visit to the Commission, said the body has made positive impact in the fiscal development of the nation through its policy formulation and revenue monitoring. He added that the National Assembly was aware of the financial predicament of the Commission that has grossly hampered its activities but promised that the mistakes of the past would not be repeated. While receiving the senators on behalf of other commissioners, Chief Emeka Wogu, who is also Chairman of Legal Committee, said that the Commission in its recently submitted revenue allocation formula recommended financial autonomy to judiciary and legislative arms at federal and state levels to enable them perform their constitutional responsibilities efficiently and transparently. Some very sensitive constitutional bodies too may also derive their funding from the consolidated account if the Revenue Bill is passed into law. He also mentioned other achievements of the Commission to include Remuneration Packages for Public Officers, Reconciliation of External Debts of governments, Proposal on Economic Diversification and monitoring of all sources of revenue to the Federation Account.
Also contributing at the meeting, Alhaji Ahmad Iliyasu who is the Chairman of Non-Oil Committee of the Commission, expressed the plight of the Commission where non of its members has office accommodation as the building project for that purpose may be abandoned due to non-provision of capital in the 2004 Budget. He also pointed out that there are many activities and exercise line up by the Commission that may be disrupted due to the lean financial position of the Commission. This include visitation to verified oil wells for the application of derivation to littorals states, the monthly visitation to State for Joint Account Allocation Committee and also monitoring of accruals and disbursement of revenue to and from Federation Account. Alhaji Iliyasu concluded that as a patriotic agency, the Commission most of the time has to make some sacrifices to survive but said there is limit to sacrifices when one is completely weakened and starved.
September 26, 2004
REVENUE COMMISSION IS NOT DISSOLVED
It is observed recently that there were wrong media insinuations to the effect that the Revenue Mobilization Allocation and Fiscal Commission has been dissolved. By the virtue of relevant Sections of the Constitution, the Commission is made of a Chairman and representatives from each state of the Federation and Federal Capital Territory for five years tenure. Within the period of its inauguration in September 1999, some members had resigned while other died in service, which were subsequently replaced by new members. The expiration of the five-year tenure only affected those who were inaugurated in 1999, while those who joined the Commission later as replacements are still serving and performing their constitutional responsibilities. Pending the filling of the vacancies through the President and Commander in Chief, the operation of the Commission is continuous, as it is not dissolved.
Signed: Mr. Boniface Enunwa
Secretary to the Commission
September 5, 2004
NEW REVENUE FORMULA TO BE OUT THIS WEEK
The Revenue Mobilization Allocation and Fiscal Commission (RMAFC) has confirmed the completion of a proposed new Revenue Allocation Formula which will be submitted to President Olusegun Obasanjo this week. The proposal was the outcome of the 23rd Plenary Session of the Commission at the weekend where the members fine-tuned all memos and data received from the tiers of government and relevant agencies. At the end of the session, Alhaji Ahmed Iliyasu, Chairman Non-oil Committee of the Commission, who addressed the press, stated that the Commission had in the past submitted two proposals which were circumstantially overtaken by events. He said the Commission in this final proposal took into cognizance the request of stakeholders and reexamined the Assigned Weights to Constitutional Responsibilities of Tiers and Net Effect Analysis for the sharing of revenue from the Federation Account. He said the new formula for submission is scientifically analyzed and statistically presented which make it fair and just devoid of emotion and sentiments.
Alhaji Iliyasu further pointed out that it would be extreme difficult to fault the new revenue formula because all economic variables, political climate and factual data were considered in the exercise. He added that the proposal if passed into law would ensure that the current resources are distributed fairly, equitably and justly to all beneficiaries, while it would also ensure national growth, development and cohesion. On the monetization for political and public office holders, the Commission observed that there is positive impact from the policy as it has minimized wastages of public funds for perks of office. He pointed out that upon reflections on the economic realities on the ground, it was observed that salary structure in the public sector is generally below poverty level due to inflationary trend, weak GDP, increase in petroleum product and services amongst other economic parameters. It was in view of these and to further reduce corruption in governance with emphasis on sacrifice, the Commission is in the process of undertaking further review of some aspects of the policy for general acceptability.
On Economic Diversification, Alhaji Iliyasu said Commission is producing a booklet for circulation to serve as a guide and plan of action for full implementation by the government and relevant bodies. The booklet is the outcome of exercises conducted by the Commission that involved seminars, researches and visitations on better method to diverse the economy. The booklet would help policy makers and local entrepreneurs to design effective mechanisms towards diversification of the economy to agricultural and mineral resources for a better future for the young and unborn generation.
July 25, 2004
INADEQUATE FUNDS THREATEN RMAFC'S OPERATIONS
The Revenue Mobilization Allocation and Fiscal Commission has appealed to National Assembly over the 85% deduction in its Overhead cost and Zero-Capital Allocation in its 2004 Budget which threaten the Commission’s operation for the year. A federal Commissioner, Alhaji Magaji Muazu who represented the Chairman of the Commission made the appeal at a courtesy call to the Speaker of House of Representatives Alhaji Bello Masari at the weekend.
Alhaji Muazu disclosed that the Commission made a budget proposal of N296millions for the Overhead in the 2004 fiscal year but was shocked to observe that the 2004 Appropriation Act contained only N30 million as Overhead Costs for the Commission, which is a reduction by 85 per cent over the N189 million approved and released to the Commission in the 2003 Appropriation Act. Even with the last year N188million, which had proved inadequate, the Commission had to make occasional appeals for extra budgetary releases to pull through the year. The Commission strongly believes that if the situation is not rectified through a supplementary appropriation or special grants, most of its activities would be put on hold for the rest of the year considering that as at 31st March, 2004, the sum of N23,616,639.00k had been released to the Commission as Overhead Costs out of the N30million contained in the approved budget.
Alhaji Muazu disclosed that the Commission spends about N10 million annually in renting office accommodations for its Head Office Annex in Abuja, which accommodates two Departments of the Commission as well as its four Zonal Offices at Calabar, Kaduna, Maiduguri and Umuahia for lack of space in the Federal Secretariats but only N810,800.00k was provided for rent of Office Accommodations in the Overhead Cost. He cited NEPA bills for January-April 2004 for the Head Office alone which amount to N1.4million but the 2004 budget provides just N500,096.00k for the whole year. For telephone services the Appropriation Act 2004 provides the sum of N250,000.00k, which would not meet the bills for 2 months as the Commission constantly communicates with the relevant tiers, and arms of government and other relevant stakeholders.
He further stated that in line with the Federal Government’s policy on insurance, the Commission insures all its assets and has received a Debit Insurance Note from Messrs President Insurance Brokers indicating the sum of N16,6million as premium but only a disappointing N381,086.00 was approved for this. The duties of the Commission such as verification of indices and monitoring of accruals into the Federation Account involve a lot of field activities in the 36 States and 774 Local Governments of the country yet only N500,172.00k was provided for these activities in budget 2004.
The Commission operates in a Committee System like the National Assembly, but besides its Chairman and his Deputy none of the 36 Commissioners has an office. For this reason the Commission had obtained a Due Process Certificate for the construction of Phase II of the Head Office and service works at a cost of N912 million, unfortunately, the approved capital budget for year 2004 contains a zero capital allocation for the Commission whereas the commission had submitted a capital budget proposal of N1.3 billion that would move forward the project and other capital works of the Commission.
July 11, 2004
RMAFC WARNS COMMERCIAL BANKS
The Revenue Mobilisation Allocation and Fiscal Commission has warned commercial banks over delay in remitting revenues collected on behalf of federal revenue agencies to the Central Bank of Nigeria. This it said shortchanges the Federation Account of billions of Naira. The Chairman of Non-Oil Sector Committee of Revenue Mobilisation Allocation and Fiscal Commission, who is also a federal commissioner with RMAFC, Alhaji Ahmad Iliyasu made the disclosure after a visitation exercise to some Customs formations in South-Western Nigeria. He pointed out that late and irregular remittance of revenue proceeds to the CBN in a fiscal year could affect budget implementation.
Alhaji Iliyasu while giving example of a commercial bank that had retained billions of Naira from oil revenue without remitting it to the Central Bank of Nigeria, said defaulting banks would soon be made to account for revenue and may be blacklisted from collection of revenue on behalf of government agencies. The Federal commissioner said the visit of the Committee to revenue agencies including the formation and offices of Nigerian Customs Service and Federal Inland revenue Service was to find a way of boosting non-oil revenues by way of blocking loopholes through an assessment of revenue generation and collection machinery of the agencies concerned. While assessing the mode of operations of the Customs service and its financial dealings with operators, Alhaji Iliyasu urged the commands to ensure that everyone adheres to laid down procedures by conducting regular reconciliation of accounts so that defaulters would be reprimanded.
Alhaji Ahmed Iliyasu regretted the physical condition of some of the visited formations, which he described as pathetic. He assured that the commission would take up the issue with relevant authorities for better funding of the services to motivate the servicemen and boost their morale for efficient and effective revenue generation. During the visits, the Committee noted the problems bedeviling the customs service which included poor electricity supply, insufficient arms to check smugglers who are always fully armed at border areas, meager monthly allocation that do not meet logistics, lack of proper computerization and online service to ensure efficiency and speed to meet the demand of modern age.
Some of the formations visited include Zone A, Tincan Island Area Command, Ashaye Container Terminals, Lagos Industrial Command, Tincan Island Port and Apapa Port. The Committee were well received by Assistant Comptroller General, Ahmed Adamu Atiku, Customs Area Comptroller Olu Adeniyi, and Comptroller R.M. Ako.
July 4, 2004
RMAFC URGES STATES TO GIVE LGS THEIR DUES
The Revenue Mobilization Allocation and Fiscal Commission (RMAFC) said it regrets that some states have taken advantage of its insistence that they operate the constitutionally required State Joint Local Government Account to short-change the Local Government Councils. The Chairman of the Commission, Engr. Hamman Tukur made the remark at the 3rd Annual Public Finance Lecture hosted by the Lagos State House of Assembly. He noted with dismay the allegations that some States are tampering with the statutory allocations to Local Governments from the Federation Accounts thereby leaving them with little or nothing to settle recurrent, how much less the capital expenditure. He recalled that the Commission was in the forefront of those who called on states to enact laws that would facilitate the opening of their respective State Joint Local Government Accounts and the establishment of State Allocation Committees for such Accounts on the understanding that it would provide opportunities for states to make the constitutionally required contributions to the finances of Local Governments in their domain as required by Section 162(7) of the 1999 Constitution.
Though the RMAFC is aware that only few states have been paying some portion of their revenues to local councils, as determined by their respective Houses of Assembly, it is, however, handicapped by the misinterpretations by some governors of the provisions of Section 162 of the Constitution. The Chairman also notes that the provisions of Section162 (5) appear to contradict the provisions of Section 162 (3), which stated specifically that funds from the Federation Account are allocated to States for the benefits of the Local Government Councils instead of stating that the allocations are to be paid directly to specific Local Government Councils adding that this contradiction has the States Governments to under-pay the Local Governments of their respective allocations from the Federation Accounts. The provisions of Section 162 (7) of the same Constitution also appears equivocal, as it is not clear from which ‘total revenue’ the proportion mentioned therein is to be taken. The question then arises: is the proportion to be taken from the total of a State’s Allocation from the Federation Account and States Internally Generated Revenue put together or from the State Internally Generated Revenue only? In the opinion of the Chairman of the Commission, Section 162(8) of the Constitution appears ambiguous because it would amount to a redistribution of the Federation Account by the House of Assembly of what had already been distributed by the National Assembly.
The RMAFC is of the view that these seeming ambiguities and contradictions in the Constitution have aided some State Governments in diverting funds meant for the Local Government Councils and is convinced that transparency in the administration of Local Government funds would be unsuccessful unless the provisions of the earlier quoted Section are complied with by all and sundry. On the implication of loans on service delivery, Engr. Tukur expressed concern over the impact of repayment of loans on the fiscal capacity of the States to deliver needed services and dividends of democracy to the people because when public debts are high, the well-being of the entire nation is mortgaged as the funds available to governments for development are almost proportionately low. He said that the sources and causes of Nigeria’s debts and some of the projects for which the loans were obtained and spent are worrisome as most of Nigeria’s debts arose out of extensive budgetary malpractices, lack of adequate expenditure framework, lack of transparency and accountability in the management of public funds and poor management of budget deficits.
The Chairman states that the current debt burden of Nigeria is blamed on past government especially between 1980-1983 which was the high season for the scramble for external loans and accumulation of debts. More worrisome in the present democratic dispensation is the fact that most Federal and State run deficit budgets that are further financed with loans. The Commission notes that the sheer magnitude of Nigeria’s debt is alarming and has plunged the nation into a vicious cycle of perpetual debts as interest payment charges and penalties, on compound interest terms, have accrued and continue to do so on the entire stock of loans to the extent that the cumulative liabilities have virtually become quadruple of the original loan amount. Engr. Tukur pointed out that the results of a debt reconciliation exercise between the States of the Federation and the Debt Management Office, which the Commission had supervised in 2002 were so frightening that the Commission was compelled to recommend that embargo should be placed on further loans for 20 years so as to encourage Federal and State Governments to look inwards for resource mobilization. The nation’s current external debt profile as at 31st December, 2003 stands at $32.916 billion and of this, the Federal Government’s share is $25.258 billion (76.7%) while the States have a combined share of $7.658 billion (23.3%).
July 4, 2004
RMAFC TO RESOLVE EXCESS CRUDE CONTROVERSY
The Revenue Mobilization Allocation and Fiscal Commission (RMAFC) may soon canvass the support of the National Economic Council (NEC) in resolving the raging controversies surrounding the fate of the excess crude revenues, as it believes that this can only be done through dialogue amongst the beneficiaries of the Federation Account in the spirit of our current democratic dispensation. The Chairman of Committee on Fiscal and Budget Implementation of the Commission, Mr. John Udeh made the position known at the weekend, adding that the Commission has suggested that the excess funds be kept in an escrow account until the beneficiaries of the account mutually reach some consensus on its release and spending for a genuine cause.
Mr. John Udeh also calls on state governments to take advantage of the Commission’s expertise and experience in budgets and fiscal efficiencies and consult it in their pre-budget preliminaries as the Commission has, as part of its constitutional responsibility routinely undertakes analysis of federal and state budgets because of their far-reaching implications on the overall national economy. While the Commission has always channeled its views through pre-budget memoranda to the Federal Ministry of Finance and the National Assembly in respect of the Federal Government of Nigeria (FGN) and the corresponding states, it laments that it has not been receiving the expected level of cooperation from the States and Local Governments to enable it contribute meaningfully to their Pre-budget preliminaries.
He said that Commission was instrumental to the National Assembly’s review of the crude oil price benchmark from the Federal Government’s $23 per barrel to $25 even though the Commission, through critical analysis, had recommended $26. Happenings in the International Market were later to vindicate the Commission as crude oil prices rose substantially. Though state government’s budgets on revenues were based on the $23/barrel benchmark, with the adoption of $25 by the National Assembly all State Governments and their Local Councils are expected to share the $2 excess funds which would come handy and help in financing some of the their deficits.
Mr. Udeh also warned on the high level of fiscal dependence of the sub-national government on statutory allocations to the relegation and detriment of internal revenue mobilization. The sharing of funds from the Federation Account in Nigeria has, therefore, been characterized by intense competition by the three levels of government, each trying to secure as much share of the statutory allocations as possible. This high dependence is manifest in the way virtually all the States and Local Governments in the country wait prayerfully for monthly Federation Account Allocation Committee (FAAC) distribution in order to carry out routine recurrent expenditure responsibilities such as payment of salaries. He therefore advised all the tiers of government to diversify their economy to agricultural and productive sectors in employment generation and for social stability.
July 1, 2004
RMAFC TO RESOLVE CONTROVERSY OVER EXCESS CRUDE FUNDS
The Revenue Mobilization Allocation and Fiscal Commission (RMAFC) would soon canvass the support of the National Economic Council (NEC) in resolving the raging controversies surrounding the fate of the excess crude revenues, as it believes that this can only be done through dialogue amongst the beneficiaries of the Federation Account in the spirit of our current democratic dispensation.
The Commission, therefore, supports the Ministry of Finances’ position that the excess funds are kept in an escrow account until the beneficiaries of the account mutually reach some consensus. The Commission also calls on state governments to take advantage of the Commission’s expertise and experience in budgets and fiscal efficiencies and consult it in their pre-budget preliminaries as the Commission has as part of its constitutional responsibility routinely undertakes analysis of federal and state budgets because of their far reaching implications on the overall national economy.
While the Commission has always channeled its views through pre-budget memoranda to the Federal Ministry of Finance and the National Assembly in respect of the Federal Government of Nigeria (FGN) and the corresponding states, it laments that it has not been receiving the expected level of cooperation from the States and Local Governments to enable it contribute meaningfully to their Pre-budget preliminaries.
The Commission’s role in the 2004 budget, for example, was to examine national revenue profile such that the revenues of all tiers of government can be substantially increased and recalls that the Commission was instrumental to the National Assembly’s review of the crude oil price benchmark from the Federal Government’s $23 per barrel to $25 even though the Commission, through critical analysis, had recommended $26. Happenings in the International Market were later to vindicate the Commission as crude oil prices raised substantially. Though state government’s budgets on revenues were based on the $23/barrel benchmark, with the adoption of $25 by the National Assembly all State Governments and their Local Councils are expected to share the $2 excess funds which would come handy and help in financing some of the their deficits.
July 1, 2004
RMAFC URGES STATES TO GOVE LGS THEIR DUES
The Revenue Mobilization Allocation and Fiscal Commission (RMAFC) regrets that some states have taken advantage of its insistence that they operate the constitutionally required State Joint Local Government Account to short-change the Local Government Councils. The Commission notes with dismay the allegations that States are tampering with the statutory allocations to Local Governments from the Federation Accounts thereby leaving them with little or nothing to settle recurrent, how much less the capital expenditure. The Commission was in the forefront of those who called on states to enact laws that would facilitate the opening of their respective State Joint Local Government Accounts and the establishment of State Allocation Committees for such Accounts on the understanding that it would provide opportunities for states to make the constitutionally required contributions to the finances of Local Governments in their domain as required by Section 162(7) of the 1999 Constitution.
Though the Commission is aware that only few states have been paying some portion of their revenues to local councils, as determined by their respective Houses of Assembly, it is, however, handicapped by the misinterpretations by some governors of the provisions of Section 162 (3), (5), (6), (7) and (8) of the Constitution. The Commission also notes that the provisions of Section162 (5) appear to contradict the provisions of Section 162 (3), which stated specifically that funds from the Federation Account are allocated to States for the benefits of the Local Government Councils instead of stating that the allocations are to be paid directly to specific Local Government Councils adding that this contradiction has the States Governments to under-pay the Local Governments of their respective allocations from the Federation Accounts.
The provisions of Section 162 (7) of the same Constitution also appears equivocal, as it is not clear from which ‘total revenue’ the proportion mentioned therein is to be taken. The question then arises: is the proportion to be taken from the total of a State’s Allocation from the Federation Account and States Internally Generated Revenue put together or from the State Internally Generated Revenue only?
In the opinion of the Commission Section 162(8) of the Constitution appears ambiguous because it would amount to a redistribution of the Federation Account by the House of Assembly of what had already been distributed by the National Assembly. The RMAFC is of the view that these seeming ambiguities and contradictions in the Constitution have aided some State Governments in diverting funds meant for the Local Government Councils and is convinced that transparency in the administration of Local Government funds would be unsuccessful unless the provisions of the earlier quoted Section are complied with by all and sundry.
July 1, 2004
THE IMPLICATIONS OF LOANS ON SERVICE DELIVERY
The Revenue Mobilization Allocation and Fiscal Commission (RMAFC) wishes to state its concern over the impact of repayment of loans on the fiscal capacity of the States to deliver needed services and dividends of democracy to the people because when public debts are high the implication is that the wellbeing of the entire nation is mortgaged as the funds available to governments for development are almost proportionately low.
The sources and causes of Nigeria’s debts and some of the projects for which the loans were obtained and spent are worrisome as economic analysts believe that most of Nigeria’s debts arose out of extensive budgetary malpractices, lack of adequate expenditure framework, lack of transparency and accountability in the management of public funds and poor management of budget deficits.
The Commission states clearly that the current debt burden of Nigeria cannot be blamed on current governments as 1980-1983 stands out clearly as the high season for the scramble for external loans and accumulation of debts it is still worried that most Federal and State budgets, even in the present times, are deficit budgets expected to be financed with loans.
The Commission notes that the sheer magnitude of Nigeria’s debt is alarming and worrisome and has plunged the nation into a vicious cycle of perpetual debts as interest payment charges and penalties, on compound interest terms, have accrued and continue to do so on the entire stock of loans to the extent that the cumulative liabilities have virtually become quadruple of the original loan amount.
The nation’s current external debt profile as declared by the Debt Management Office (DMO) shows that Nigeria’s total external debt as at 31st December, 2003 stands at $32.916 billion and of this, the Federal Government’s share is $25.258 billion (76.7%) while the States have a combined share of $7.658 billion (23.3%).
The results of a debt reconciliation exercise between the States of the Federation and the Debt Management Office, which the Commission had supervised in 2002 were so frightening that the Commission was compelled to recommend that embargo should be placed on further loans for 20 years so as to encourage Federal and State Governments to look inwards for resource mobilization.
July 1, 2004
STATES MUST EMPHASIZE ON INTERNALLY GENERATED REVENUE
The Revenue Mobilization Allocation and Fiscal Commission (RMAFC) has noted a high level of fiscal dependence of the sub-national government on statutory allocations from the Federation Account to the relegation and detriment of internal revenue mobilization. The sharing of funds from the Federation Account in Nigeria has, therefore, been characterized by intense competition by the three levels of government, each trying to secure as much share of the statutory allocations as possible.
Though the Commission is mandated by Section 32(1) in part 1 of the Third Schedule to the 1999 Constitution of the Federal Republic of Nigeria to review from time to time, the revenue allocation formula and principles in operation to ensure conformity with changing realities attempts by the Commission since 1999 to introduce a fair just and equitable revenue have been victims of the dynamics of legislative-executive controversies and judicial pronouncements with resultant delays in the enactment of appropriate laws. This high dependence is manifest in the way virtually all the States and Local Governments in the country wait prayerfully for monthly Federation Account Allocation Committee (FAAC) distribution in order to carry out routine recurrent expenditure responsibilities such as payment of salaries.
June 6, 2004
RMAFC INAUGURATES SUB-COMMITTEE ON FAAC
The Revenue Mobilisation Allocation and Fiscal Commission has inaugurated a Sub Committee on the Federation Account to minimize friction among tiers of government over revenue and fiscal issues. The subcommittee, which was inaugurated by the Chairman of the Commission, Engr. Hamman Tukur, has six commissioners of finance representing each geopolitical zone, representatives of the Federal Ministry of Finance, other stakeholders as well as members of FAAC of the Commission, headed by Otunba Ayora Kuforuji Olubi.
The sub- committee according to Engr. Tukur, is to regularly examine and analyse submissions made in respect of the accruals into the Federation Account by both the collecting and accounting agencies. The findings of the sub- committee, he added would be reported at the next earliest opportunity of the FAAC meeting, which is chaired by Hon. Minister of finance. The committee may also consider and advise the beneficiary governments on policy matters affecting both accruals and disbursements from the Federation Account.
Engr. Tukur pointed out that the subcommittee will critically scrutinize the Federation Account so as to promote the transparency policies of Obasanjo administration with additional advantage of building confidence amongst the beneficiaries of the Account. He added that it would also promote foreign government confidence in our financial and economic profiles thus encouraging foreign investments to the advantage of Nigerians.
Responding on behalf of the commissioners of finance, Mr. Bright Omokhodion of Edo State commended the Commission for the inauguration, which he described as timely. He agreed that since governance must continue, the only way to ensure the transparency advocated as cardinal principle of the administration is for the setting up of the Sub-Committee to carry-out a detailed post-mortem examination of the submissions made by the revenue and accounting agencies with RMAFC as an impartial umpire. Mr. Bright also noted that because of inability of full deliberation at FAAC meetings, beneficiaries hardly have time to know much about the accruals and disbursements of the fund.
Meanwhile in another development, the Governor of Delta State, Chief James Ibori on a visit to the Chairman of the Commission has called on the revenue agency to be fair and just in resolving disputed oil wells amongst the littoral states. He said his state’s clamour for fairness on the lingering border crises with a neighboring state is not for pecuniary gains but rather for peaceful coexistence. He therefore, enjoined the Commission to remain steadfast and committed to its constitutional responsibilities, which it has so far discharged to the satisfaction of all the stakeholders.
February 10-11, 2004
COMMUNIQUE ON BUDGET 2004 AND FISCAL ISSUES
The Commission held an Emergency Plenary Session on February 11, 2004 to deliberate on recent development on the Revenue Allocation Formula and other fiscal issues relating to the Budget 2004. It deliberated and took positions on the followings:
Executive Orders for Revenue Sharing
a. The Commission noted that since the Supreme Court verdict of April 2002, two versions of Executive Orders were promulgated in the sharing of Federation Account in addition to its adjustment in Budget 2004. This issue was critically examined and resolved that the First Executive Order which gives the Federal Government 56% remains legal and valid. The reason is that all the items transferred to the share of Federal
Government are supported by law. For instance the Stabilization Fund is for rainy day of all tiers of government, while Ecology is meant for disaster, which may cut across State boundaries. So also is the Solid Mineral Development Fund, which is part of the Nation
to diversify its economic base.
b. In view of the above, the only way to make amendment to the Executive Order and for the recent grants to be feasible, is for the National Assembly to repeal or amend the Executive Order, which is now an Act of the National Assembly for legal framework and all lawful purposes. It is commendable the magnanimity of Federal Government to make concession or grants to other tiers but that should be appropriated through the legal instruments as provided for in the Constitution.
Benchmark for Crude Oil Price
c. The Commission also examines the benchmark for crude oil price in Budget 2004 where it studies the trends in the last three years. In an effort to adopt a more realistic crude oil price benchmark for this year’s budget, it noted that in the past three years there were positive variances in the selling prices of crude oil, which were higher than the budgeted prices. For instance, the yearly averages of actual prices in 2001, 2002 and 2003(January-October) were $24.1500, $25.0184 and $28.7029 respectively even though in several cases it goes higher than that. Therefore to derive the budget benchmark price for Budget 2004, the market average crude oil prices for 2001-2003 was taking into consideration as follows:
Average Market Price = 24.1500 + 25.0184 + 28.7029 ¸
3
=$25.9571bbl
»$26.0
\ Forecast =$26.0bbl
d. It in view of the average crude oil price for the previous three years (2001-2003) and other parameters and the trends in the global market that the Commission strongly proposes $26.00/bbl as a convenient price and benchmark for year 2004 budget.
If it is approved, it would also minimize the recurrent agitations for sharing of Excess Crude at the FAAC Meetings. That could save enough for rainy days and reduced the impasse.
Revenue Formula and Joint Account
e. On the review of Revenue Allocation Formula, the consultation with the stakeholders is ongoing and will soon be submitted so as to ensure a quick passage for the benefit of generality of Nigerians.
f. There are a lot of consultations on the Issue of State Local Government Joint Account and the Commission will strict to the law and constitutionality in making sure that no tier is cheated from its share from the Federation Account.
Monetisation
g. On the Monetisation of Public Officers’ Pay, there were encouraging developments at the Federal level especially the compliance by members of legislative arms and some part of the executive and judiciary. If fully implemented for political office holders, as recommended by the Commission, it will minimize wastages of public funds. Though the Commission is not responsible for monetisation of salaries of civil servants, it recommends that the process should be gradual for economic and social benefits for those to be affected.
December 14, 2003
COMMUNIQUE ON CONSTITUTIONAL COMMUNITIES
1. The Commission held its 21st Plenary Session from December 10-12, 2003 where it deliberated on various issues regarding its constitutional responsibilities.
It deliberated and took positions on the followings:
2. In line with its mandates and for efficiency and transparency in its administration the constitutional committees in the Commission were restructured with additional committees for JVC, Cash Calls, and Federation Account for proper monitoring, transparency, equity and fairness in the system. The restructuring of the committee is to reflect issues that are current in the Nigerian economy. For example, the Federal Government has through a letter from the Secretary to the Government of the Federation requested the Commission to closely monitor JVC operations on behalf of all beneficiaries. There is also the need to now actively pursue monitoring of all accruals to and disbursement of revenue from the Federation Account not only to establish fairness and transparency but to also build confidence on all beneficiaries of the Federation Account.
3. The committees and the highlights of their functions are as followed:
OIL AND GAS COMMITTEE (OR ‘O & G' COMMITTEE) To be
able to monitor accruals `into the Federation Account, the Commission will require to accurately monitor the production of the crude oil and the gas that contributes to the Federation Account. It is intended that this Committee should be a field activity based Committee. The main function of the Committee is therefore to generate data on Oil and Gas production, accurately analyse them and vouch for their authenticity. The Committee will be required to segregate production in various States and Local Governments and pass such segregated data to the Indices and Disbursements Committee. The Committee is to continuously up date field data for application by various other Committees and other bodies.
NON OIL AND ROYALTIES COMMITTEE (N.O&R COMMITTEE) This
Committee is also intended to be a field oriented activity committee that continuously generates and updates field data on all revenue collectors of the Federation Account other than revenues derived directly from sale of crude oil. Such revenues include but not limited to those collected by FIRS such PPT etc, Customs duties and Royalties etc. collected by DPR. In this regard, the Committee shall constantly and at predetermined regular intervals monitor all customs activities and in so doing acquire, analyse and vouch for data from all.
DISBURSEMENTS AND INDICES COMMITTEE: Acquisition and generation of data, and computation of indices for revenue allocation. The data is in respect of the proxies for horizontal revenue sharing in the case of the Federation Account and both vertical and horizontal revenue sharing in respect of the 13% Derivation Funds. Indices/proxies for main formula:
Land mass for each State and Local Government;
Population for each State and Local Government;
Population density for each State and Local
Government; Primary school enrolment for each Local
Government; Hospital beds for each Local Government;
Potable Water – number of people with access to potable water in each Local Government or Number of functional taps of water (artisan well will attract one point similar to ordinary taps.) Development of additional Kilometre of roads/inland waterways per predetermined interval of time (e.g. quarterly or annually or etc)
FISCAL EFFICIENCY AND BUDGET COMMITTEE OR (FE & B
COMMITTEE) One of the constitutional requirements of the Commission is to “advice the Federal and state governments on fiscal efficiency and methods by which their revenue can be increased.” This term of monitoring all issues pertaining to the fiscal efficiency of governance at all tiers of governments. The committee has to therefore not only keep abreast of world trends of economic fortunes of countries but also design ideal fiscal policies that will move Nigerians out of their poverty, squalor, corruption and mismanagement of resources and assist in establishing solid economic base for the Nation through sustainable Fiscal policies. This shall include methods of diversifying the economic base of the governments.
REMUNERATION AND MONETISATION COMMITTEE (‘R & M'
COMMITTEE) Undertake the Revision of Remuneration packages as may be required by the Constitution on the approval of the Commission. Before such an exercise is undertaken, the Committee shall undertake wide consultations with all Government's of the Federation, the Judiciaries, the National and State Assemblies, Professional economic bodies and Nigerians in general such as to satisfy the democratic principle of governance.
EXPLORATION OF MINERALS COMMITTEE (JVC,PSC, SR ETC)
The Secretary to the Government of the Federation has written to the Commission to monitor the JVC on behalf of both the FGN and the State Governments. An Ad Hoc Committee for this purpose was set up under the Chairmanship of Dr. Abam and one of the recommendations of the Committee approved by the Plenary Session is that the JVC problem is too complex to be treated under Ad Hoc arrangement. There is therefore the need for this Constitutional Committee. The main responsibility of this Committee is to ensure that the Federal Government of Nigeria and hence all its beneficiary governments get a fair deal from the foreign partners and all those involved in the exploitation of crude oil as well as solid minerals in Nigeria both onshore and offshore. In this regard, the Committee should very closely study and analyse the agreements and ensure fairness to the Federation with particular reference to all Memorandum of Understanding (MOU), Joint Operation Agreement (JOA) and Examine and certify Profit Sharing Arrangements. On the Solid Mineral it will investigate, enquire and acquire data on practices in the Solid Minerals sector (including bitumen) what mineral(s) is being explored and exploited and by who and under what agreements (foreign or local) and the taxing system and how the
Federation Account is benefiting (if at all).
FEDERATION ACCOUNT COMMITTEE
The very first major constitutional responsibility of this Commission is to "monitor the accruals to and disbursement of revenue from the Federation Account." Thus unless the Commission gets really involved in the transactions into and out of the Federation Account there is no way it can monitor the accruals into the Account. The Committee will therefore strictly monitor how funds get into it, both foreign and local, how many accounts are there and what is the role of CBN and all our foreign accounts. The Committee therefore, has the most sensitive assignment and yet crucial to establish confidence of beneficiaries on the accuracy and transparency of the Account.
4. The Commission is greatly concerned about raging discord over the funding of Primary Education between the states and local government councils. The Commission will re-examine the sole or level of joint responsibilities/participation of the two tiers on the funding based on constitutional provisions.
5. The session has also approved the implementation of new indices for revenue formula which would take effect from December Allocation to be disbursed in
January 2004. These indices include those concerned with social services that have direct bearings on the common man. Some of the indices approved include those on primary school enrolment, portable water, hospital beds, internally generated revenue rural roads and inland water ways amongst others.
6. The Session also deliberated on the need for Local Government Councils to devise acceptable strategies to improve their internal revenue effort through blockage
of leakages in the collection machinery
7. The Commission was recently mandated by the National Economic Council (NEC) to carry out a reconciliation exercise of all outstanding tax liabilities. The exercise which will involve visits and consultations will be undertaken immediately in the new year.
8. On the recovered looted funds, the Commission recommends the transfer of the fund to the Federation Account, unless the source of the looting is specified and traced to the accounts’ origin either from consolidated revenue of Federal Government or that of
States.
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