The Centre for Social Justice (CENSOJ) has described the proposed 2016-2018 and 2017-2019 medium term borrowing plans of the federal government as violations of the Fiscal Responsibility Act.
The Lead director of the group, Eze Onyekpere, who spoke in Abuja on Monday faulted the government’s plans, saying medium term expenditure framework MTEF) for 2017-2019 did not capture fully the capital expenditure forecast for the three years.
Mr. Onyekpere said while about N1.765 trillion was provided in the proposed 2017–2019 MTEF as estimate expenditure on capital projects in 2017 fiscal year, about N1.8 trillion was provided for similar projects in 2018, and N1.85 trillion in 2019.
He said in total, the federal government proposed to spend about N5.415 trillion on capital projects between 2017 and 2019.
However, the group noted that when about N1.588 trillion in the 2016 budget for approved capital projects is added to the total amount proposed in the 2017–2019 MTEF, it meant the government planned to spend about N7.003 trillion on capital projects between 2016 and 2019 fiscal years.
Considering that government’s proposed medium term borrowing plan only covered the period of 2016–2018, and the MTEF 2017–2019 fiscal years, the group said the proposed capital expenditures for 2019 in the MTEF and those in 2016 were not separated, to determine what the plan covered.
The group said the 2016 approved federal budget appropriated about N1.588 trillion for capital projects, against about N1.765 trillion proposed in the MTEF for capital projects in 2017, N1.8 trillion in 2018, totaling about N5.153 trillion for capital projects between 2016 and 2018 fiscal years.
Using the current exchange rate and the forecast in the MTEF, the group said the proposed total external loan $29.96 billion was equivalent to about N8.688 trillion.
Comparing the amount with the calculated sum of capital expenditures between 2016 and 2018 fiscal years of N5.153 trillion, the group said the difference of N3.536 trillion was unaccounted for in the proposed loan request.
The group said its assumption was that the proposed loan was for the period of the proposed MTEF (2017–2019) in view of the time lag required for approval of the request by the National Assembly.
“Even if the loan spreads between 2016 and 2019, we observe a variance of up to N1.686 trillion of unaccounted amounts in the proposed loan, based on the difference between the requested loan amount of N8.688 trillion and N7.002 trillion,” the group said.
The group said the proposed $29.9 billion loan request submitted by the President to the National Assembly for approval was not only “way above all known capital projects conceivable by this administration”, it violated Section 44(2) of the Fiscal Responsibility Act.
Making reference to the FRA, the group said the law required that “each borrowing shall comply with the (a) the existence of prior authorization in the Appropriation or other Act or Law for the purpose for which the borrowing is to be utilized; and (b) the proceeds of such borrowing shall solely be applied towards long-term capital expenditures.”
If the provisions of FRA was binding on all tiers of government, the group said the federal government was acting in contravention of the law in requesting for a loan sum of up to N8.688 trillion in the medium term of 2016–2018 fiscal years.
“This is because the 2016 approved capital budget of the Federal Government and the capital expenditures estimate of the Federal Government for 2017 and 2018 (as contained in the MTEF) only sum up to N5.153 trillion,” the group noted.
The group asked the National Assembly to invite the Director-General, Debt Management Office, Abraham Nwankwo, to clarify the basis of the baseline scenarios in the Debt Sustainability Analysis that guided the request for the loan.
Besides, the group urged the President to follow the requirement in the FRA, by waiting for the full approval of the submitted MTEF2017–2019, for the basis for borrowing proposal.
The group equally called for the proposed amount in the 2016–2018 medium term borrowing plan to be revised downwards, to correspond with the total capital budget and proposed capital expenditures within those years.