The Fiscal Responsibility Commission (FRC) has urged the government to channel the proceeds from its borrowing to long-term capital expenditures, News About Nigeria reports.
The Executive Chairman of the FRC, Victor Muruako, made this call while speaking at the National Summit of Fiscal Responsibility Agencies in Nigeria, held on Thursday, at the NAF Conference Centre, Abuja.
He warned against the misapplication of borrowing proceeds, emphasising the need for greater fiscal discipline and adherence to the Fiscal Responsibility Act.
Maruako maintained that it is important for borrowing proceeds to be used solely for long-term capital expenditures, as outlined in Section 44(2)(b) of the Fiscal Responsibility Act.
The FRC chairman further expressed concern over the lack of adherence to the conditions stipulated in the Fiscal Responsibility Act, particularly by subnational governments.
He stated, “The proceeds of public sector borrowing shall solely be applied towards long-term capital expenditures,” he reiterated, highlighting frequent violations of this provision by various levels of government.
“We do not see sufficient adherence by subnational governments to the conditions for borrowing as stipulated in the Fiscal Responsibility Act. It is incumbent upon state governments and lending institutions to operate within these parameters, ensuring that fiscal discipline is maintained and that our national debt remains within manageable limits.
“Section 44(1) of the FRA requires any Government in the Federation or its agencies and corporations desirous of borrowing to ‘specify the purpose for which the borrowing is intended and present a cost-benefit analysis, detailing the economic and social benefits of the purpose to which the intended borrowing is to be applied.’ This is generally observed in the breach. And it shouldn’t be so.”
