Critical Analysis of the Fiscal Responsibility Act of Nigeria 2007: an Overview

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CRITICAL ANALYSIS OF THE FISCAL RESPONSIBILITY ACT OF NIGERIA 2007: AN OVERVIEW

BEING

ASSIGNMENT SUBMITTED ON PUBLIC FINANCE (BKF 624) (FIRST SEMESTER COURSE WORK)

BY

ALAJEKWU UDOKA BERNARD 2008 162 001

MSc PROGRAMME DEPARTMENT OF BANKING AND FINANCE FACULTY OF MANAGEMENT SCIENCE SCHOOL OF POSTGRADUATE STUDIES ANAMBRA STATE UNIVERSITY

LECTURER: DR. EZEABASILI V. N.

OCTOBER, 2009
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ABSTRACT Fiscal Responsibility Act 2007 was designed to regulate and supervise the fiscal activities of public office holders in the country. This paper critically analyses the effectiveness and efficiency of the implementation of the Act; the machinery for implementation; the powers and tenor of the members of the Fiscal Responsibility Board; the appointment of members of the Board; Fiscal policy/activity uniformity in/among the various tiers of

government; the fiscal control on borrowing; the key features of the Fiscal Responsibility Act; the consequences of the Fiscal Responsibility Act; the protection of officeholders, among others. The paper hoped that Nigeria’s Fiscal Responsibility Act will strengthen the nation’s financial reporting and ensue better management of its resources. The paper then concluded that the FRA provided the much needed deterrent to stop public officers dipping their hands in the states till and then made some recommendations for improvement.

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Introduction Following the incessant misappropriation, mismanagement, and lack of stewardship and accountability in the nation’s public sector, the Fiscal Responsibility Bill was proposed for consideration by the President Obasanjo administration through the then Minister of Finance – Prof. Okonjo-Iwuala N. The Bill was passed into law in 2007 as the Fiscal Responsibility Act, 2007. The Fiscal Responsibility Act provides for a body known as the Fiscal Management Council that comprises the Fiscal Responsibility Council and the Governing Board. The Council is charged with the responsibility of monitoring and enforcing the provisions of the Act to ensure accountability, transparency and prudence in the management of the nation’s resources by all tiers of government, government corporations or companies and agencies. Therefore, the Fiscal Responsibility Council is the regulatory and supervisory body in the public sector. By this Act, it is expected that the Public Sector would have a definite regulatory structure to act as watch dog on the activities of the public office holders and as checks on financial encroachment between/among tiers of government. This is expected to bring sanity and responsiveness into the public sector and among the various tiers of government in Nigeria. The Fiscal Responsibility Act (2007) is a law to “redirect government at all levels to imbibe a fiscal behaviour that will promote prudence and sound financial management in the system” (http://www.budgetmonitoring.org/ Page 3 of 19

Spotlights/2007/02/26/News11618/). The Fiscal Responsibility Act seeks to ensure that the Federal Government will never commit itself to spending money without ensuring that it has the necessary funds in place to begin with (Nwanma, Vincent, 2007). Afemikhe, (2005:6), fingered the poor performance of the public sector despite abundance of mineral resources in the country and blamed all on corruption and mismanagement. Posited thus: “how is it that a country with abundant human and natural resources, that held so much promise at independence and was trumpeted with significant economic achievements in the decade following the oil boom has so rapidly fallen from grace to grass and indeed appears to have completely lost its way and its focus? The answer lies in the twin evils of corruption and poor public expenditure management”.

Afemikhe was not alone in accusing Nigeria of poor management, Africafront.com/news also decried our polity thus: “our fiscal policies have been largely characterised by poor planning, massive...
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