A report by the Fiscal Responsibility Commission said non- compliance with the provision had resulted in the abuse of the procedure for the demand and procurement of loans by the federal and state governments .
It has also made it difficult for the FRC to carry out its constitutional role of monitoring excesses and infringements by government in loan procurement .
Section 42( 1) of the Fiscal Responsibility Act, 2007, provides that “ The President shall, within 90 days from the commencement of the Act and with advice from the Minister of Finance subject to approval of National Assembly , set overall limits for the amounts of consolidated debt of the three tiers of government ” .
However, since the enactment of the FRA , 2007, the consolidated debt limits of the federal , states and local governments have not been set by any President .
The FRC , in its 2018 Annual Report, disclosed that efforts to ensure that a limit was set on the consolidated debt of the three tiers of government , for a more sustainable management of public debt, have not been successful.
“ The commission, in a bid to ensure that this all - important requirement of the Act is fulfilled , has engaged the Minister of Finance through memos and reminders, yet, the situation remains unchanged .
” This limit has not been fixed and this action has resulted in the abuse of procedure for the demand and procurement of loans by all the three tiers of government .
“ When the limit is set , it becomes easier to monitor excesses and infringements of various governments , ” the FRC said in the report .
Section 41( 1) ( a) of FRA , 2007, specified that borrowings by the governments in the federation should be for capital expenditure and human development.
Also , Section 42( 4) of FRA , 2007, mandated the FRC to compile and publish , on a quarterly basis , a list of the governments in the federation which have exceeded the limits of their respective debts by indicating the amount by which the limits were exceeded .
The FRC report explained that “ as the debt limits have not been set , it becomes difficult for the commission to execute this mandate. ”
Series of loans collected by the federal and state governments in recent years have jerked up Nigeria ’ s public debt portfolio .
The Federal Government and the 36 states , as well as the Federal Capital Territory , owed a total of N 27. 4tn as at December 2019, according to latest figures released by the Debt Management Office .
The absence of consolidated debt limits for the three tiers of government has also impacted on public debt sustainability .
Section 41( 1) ( b ) of Fiscal Responsibility Act, 2007, provides that, on the advice of the Minister of Finance and with the prescription of the National Assembly , from time to time , the government shall ensure that the level of public debt as a proportion of national income is held at a sustainable level.
However, the absence of consolidated debt limits for the three tiers of government has undermined the objectives of the provision .
Currently, Nigeria is grappling with a very high cost of debt service , a development which resulted from the country ’ s low revenue generation capacity.
Nigeria spent $1. 12bn on external debt service payment in 10 months – between January and October 2019, according to figures from the Central Bank of Nigeria .
The FRC also reported that the amounts spent on external loan servicing in 2017 and 2018 were $464. 04m and $1, 472. 05m respectively .
Also , according to the FRC , N 1, 797. 90bn was used to service the FGN domestic debt in 2018, a 21. 79 per cent increase from N 1, 476. 22bn paid for the same purpose in 2017.
The state governments ’ preference for commercial bank loans, which come with higher debt service costs , was identified as one of the reasons for the rise in the amount spent in servicing domestic debt.
The FRC report noted that no state government borrowed from the capital market, which has lower debt servicing costs , in 2018.
Section 42( 1) of the FRA said the President is to set the consolidated debt limit of the federal and state governments with advice from the Minister of Finance.
Officials of the Ministry of Finance declined comments when contacted by our correspondent over the report by the FRC that reminders sent to the minister of finance on the need to set the consolidated debt limits were not acted on .
In response to our correspondent’ s enquiries , Mr Yunusa Abdullahi , Special Adviser , Media , to the Finance Minister, said “ No comment please . ”
In the same vein , our correspondent also contacted the Debt Management Office to ascertain why the consolidated debt limits of the three tiers of government had not been set .
DMO explained that work on preparation of the consolidated debt limits of the Federal Government and the states was ‘ still ongoing’ .
In response to an email from our correspondent , the Director, Policy, Strategy and Risk Management Department, Joe Ugoala , noted that the computation of the consolidated debt limits required data on key micro variables namely national GDP , FGN ’ s total debt ( domestic and external) , states and FCT’ s total debt ( domestic and external) and states and FCT ’ s GDPs.
Our correspondent learnt that the absence of GDP for states was a major constraint in the computation , as Nigeria currently only has a national GDP – a situation which has made it difficult to determine the debt sustainability of state governments on the basis of the proportion of debt to GDP .
Ugoala, however , noted that “ some states ’ GDP data have been computed under a programme driven by the Planning Division of the Federal Ministry of Finance , Budget and National Planning in collaboration with the National Bureau of Statistics . ”
“ This exercise has made remarkable progress and it is still on - going, ” he added .
In the absence of consolidated debt limits for the three tiers of government , as stipulated by the FRA , 2007, Ugoala said the Federal Government had come up with “ its self -imposed debt limit for the entire federation of 25 per cent for the ratio of total public debt to GDP, ” which he said would be revised this year .
He described the ratio as very conservative when compared to the ratio of 55 per cent that was recommended by the World Bank and the International Monetary Fund for countries in Nigeria ’ s peer group .
Responding to observations that the absence of consolidated debt limits for the three tiers of government had contributed to the country’ s rising public debt stock , the DMO official said the Federal Government only borrowed to meet its financing needs.
He said , “ On the issue of Nigeria ’ s rising debt profile , it would be helpful to note that this is driven mainly by the huge financing needs of the government .
“ These debts include subnational debt, issuance of Promissory Notes ( about N 1. 0tn ) meant to settle arrears of previous administrations , consecutive annual budget deficits, and spending on infrastructure. ”
Meanwhile, further checks by our correspondent revealed that the Federal Government had refused to comply with a March 2018 order in which an Abuja Federal High Court compelled it to set the limits of the consolidated debt of the federal , state and local governments , in line with Section 42( 1) of the FRA .
The order came in Suit No . FHC/ABJ/CS/302/2013 between the plaintiff, Centre for Social Justice, and the defendants – the President of the Federal Republic of Nigeria , the Senate , the House of Representatives , the Minister of Finance and the Attorney General of the Federation and Minister of Justice.
The court held that each tier of government should be bound by its consolidated debt limit , in order to check reckless borrowings and accumulation of obligations for successive governments , particularly at the state.
Director of the Centre for Social Justice, Eze Onyekpere , said the group had gone back to court in a bid to compel the Federal Government to abide by the order given.
Onyekpere noted that the huge amounts being spent on debt servicing showed that government at all levels had mismanaged borrowings .