Reps to criminalise govt loan abuse, excess public debt

The House of Representatives has passed a bill for a second reading that aims to criminalize the abuse of the Fiscal Responsibility Act (FRA) of 2007, particularly in relation to borrowing and public debt. This proposed legislation suggests imposing a three-year prison sentence and a fine of N500 million on any public official found in violation of Section 41 of the FRA. The bill’s sponsor, Sergius Ogun, emphasized during the debate on Tuesday that the intention is to amend the FRA to include specific sanctions for non-compliance with its provisions.

Currently, Section 41 of the FRA outlines the framework for debt management within a financial year. It states that government entities at all levels may only borrow for capital expenditures and human development, with such borrowing needing to be on concessional terms, characterized by low interest rates and extended amortization periods, subject to legislative approval. Additionally, it mandates that public debt be maintained at a sustainable level as determined by the National Assembly, based on the Minister’s advice. The section also indicates that non-compliance with these rules constitutes an offense.

The bill seeks to amend Section 41(3) to classify non-compliance as an impeachable offense, with penalties including a fine of N500 million or a three-year prison term, or both. Ogun argued that enacting this bill would address gaps in the existing law, eliminate impunity, and enhance accountability among government officials. He noted the importance of the Fiscal Responsibility Act as a critical framework for financial management in the country. However, he pointed out that the Act currently lacks specific sanctions for the offenses outlined in Subsection 3 of Section 41.

Ogun further explained that the FRA is designed to promote prudent management of national resources, ensure long-term macroeconomic stability, and enhance accountability and transparency in fiscal operations. Despite these intentions, the recent Public Expenditure Financial Accountability Report (PEFA Report, 2019) highlights significant weaknesses in public financial management in Nigeria, including low budget credibility, inadequate disclosure of public finances, and a lack of autonomy for the auditor general. While Section 41 provides a framework for debt management and states that non-compliance is an offense, it fails to specify the sanctions for such offenses.