Thinking Inside the Box on some Basic Fiscal Federalism Issues

Nigeria practices fiscal federalism with the federal, state and local governments as the tiers making up the FEDERATION. The Fiscal Responsibility Act (FRA) 2007 in sections 17, 20, 31, 36(1), 40 and 54 explain, according to the subjects in those segments, the fiscal independence of the subnationals. The goal of this write-up is to elicit discussions as to why some federal government fiscal institutions like the Office of the Accountant-General of the Federation, Office of the Auditor-General of the Federation and Budget Office of the Federation, have the tag FEDERATION in their names. The view herein is that apart from the Office of the Accountant-General of the Federation, it may be contradictory to have FEDERATION in the names of both the Office of the Auditor-General and the Budget Office.

The Office of the Accountant-General of the Federation was set up under the Civil Service re-organization Decree No. 43 of 1988 and its mandate include maintaining and operating the Federation Account. Section 80(1) of the 1999 Constitution provides that: ‘All revenues or other moneys raised or received by the Federation….shall be paid into and form one Consolidated Revenue Fund of the Federation’. The Federation Account is thus distributable among the federal, state and local governments and having the Office of the Accountant-General of the FEDERATION is appropriate.

The powers, duties and responsibilities of the Office of the Auditor-General for the Federation are provided in Section 85(2) of the 1999 Constitution which states that: ‘The public accounts of the Federation and of all offices and courts of the Federation shall be audited and reported on by the Auditor-General…’. However, Section 125(2) provides that ‘The public accounts of a State and of all offices and courts of the State shall be audited by the Auditor-General for the State…’. This means that the Auditor-General of the Federation does not audit the accounts of the states but only those of the federal government and its Ministries, Departments and Agencies. This is reinforced by the fact that the Annual Report of the Auditor-General for the Federation on the Accounts of the Federation of Nigeria for the Year-Ended 31st December 2018 was mainly an audit of the federal government accounts. The 422-page document did not in any section or paragraph mention or analyse any state government accounts. Besides, the report was submitted to the National Assembly on October 16, 2020 with a covering letter referenced C/AR.2018/CONF/VOL.1/01 and titled: ‘Annual Report of the Auditor-General for the Federation on the Accounts of the Federal Government of Nigeria for the Year Ended 31st December 2018’. It may thus be proper to have a name that reflects the fact that the Office audits only the accounts of the federal government. This will however require a constitutional amendment.

Another federal fiscal institution that has the tag of FEDERATION is the Budget Office. Unlike the Office of the Accountant-General and the Office of the Auditor-General, the Budget Office is not established by any enabling legislation. This accounts for why over the years, prior to the merging of the National Planning Commission and the Ministry of Finance, the battle for the control of the Budget Office was usually a source of conflict. The Budget Office does not oversee the budgets of the subnationals and should at best be described as a division in the Ministry of Finance, Budget and National Planning. The contradiction in the name is clear even on the Budget Office website where it is stated that ‘The Budget Office of the Federation was established to provide budget function and implement budget and fiscal policies of the Federal Government of Nigeria’. This description is inconsistent because on the one hand, it is Budget Office of the Federation, and on the other hand, it provides budget function of the federal government. Also, Section 30(1) of the FRA 2007 explains that the Minister of Finance, through the Budget Office of the Federation shall monitor and evaluate the implementation of the Annual Budget. However, the budget referred to is the federal government’s annual budget described in Section 18 of the Act.

To correct this anomaly, there are two options. First, the government may consider reorganizing the Ministry of Finance, Budget and National Planning to have three divisions namely Finance, Budget and Planning divisions. The implication is that the Budget Office will cease to operate with the name Budget Office of the Federation and also stop using letterheads, stamps, etc., with that name, and will no longer have its own website. In Ghana, the Ministry of Finance has eight divisions, of which the Budget Division is one of them; the National Treasury of South Africa has the Budget Division as part of its nine sections; and the National Treasury and Planning of Kenya has six directorates that include the Directorate of Budget, Fiscal and Economic Affairs. Second, the government may consider enacting a legal framework that will make the Budget Office have operational independence but still under the supervision of the Minister of Finance. However, this will come with an appropriate name that will reflect the fact that its responsibility is strictly to the federal government and not the FEDERATION.

Finally, the government cannot at the moment commit time and resources to issues such as names of its fiscal institutions as there are more demanding fiscal matters to contend with. But the more challenging matters may be difficult to address if basic fiscal federalism topics are not handled properly. We do not need to always think outside the box to solve such uncomplicated problems, thinking inside the box might help. Kamaru Usman, the Nigerian UFC fighter after defeating Jorge Masvidal in the UFC 261 fight night said he did nothing extraordinary but only applied the fundamentals of the game. Nigeria needs to adhere to the basics of fiscal federalism if we are to have an efficient fiscal framework that will take us out of the woods.

Dr. Ekor wrote from Abuja, +2348053810403; [email protected]