The Fiscal Responsibility Commission (FRC) has stated that it will penalize about 14 banks and financial institutions over alleged issuing of loans to state governments without following due process.
According to a NAN report, the FRC chairman, Victor Muruako, stated this during Monday in Lagos at a transparency and accountability sensitization workshop organized for the south-east zone.
The event was organized by the FRC as part of its zonal sensitization campaigns on Transparency, Accountability and Prudence (TAP) in public finance management.
In his welcome address, Muruako noted that the FRC was already engaging with loan institutions on the issue.
The FRC Chairman however declined to disclose the names of the banks and institutions involved, he said the commission was still engaging them.
According to him, some conditions must be met by states before they can be granted loans.
“Banks and other financial institutions (OFIs) that make themselves willing tools of fiscal carelessness by granting loans to some sub-national governments without regard to due process will be sanctioned,” he said.
“Issues of loans, borrowing and indebtedness are in the Exclusive List in the 1999 Constitution of the Federal Republic of Nigeria (as amended).
“Section 45(2) in Part X of the Fiscal Responsibility Act 2007 specifies conditions for borrowing by “any government in the Federation or its agencies and corporations.
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“Lending by banks and financial institutions in contravention of this Part shall be unlawful.”
Muruako said subnational governments should not make loans their first and last consideration for meeting revenue shortfalls but should consider ways of harvesting their dormant potentials for internally generated revenue (IGR).
”In line with the foregoing, the commission hereby serves notice to defaulting banks and other financial institutions that the window of just using moral suasion is closing,” he added.
“Going forward, we intend to invoke the provisions of the law against this expressly defined unlawful act, wherever it rears its head.
“Where the Fiscal Responsibility Act (FRA) 2007 appears inadequate to compel, we shall aggressively invoke our collaborations with sister agencies such as the ICPC and EFCC.”
He pointed out that even the “bailout loans” by the federal government to states carried a conditionality that benefiting states should commit to a fiscal sustainability plan (FSP), consisting of 22 actions grouped under five objectives.
“The objectives are improving accountability and transparency, increasing public revenue, rationalizing public expenditure, improving public financial management and sustainable debt management,” he said.
Also speaking at the event, Abdulrasheed Bawa, chairman of the Economic and Financial Crimes Commission (EFCC), said states should domesticate the Fiscal Responsibility Act.
Bawa, represented by Emeka Okonjo, deputy zonal commander of the EFCC, Lagos state, further advised states must take accountability and transparency seriously.
