Majority of federal government’s revenue generating agencies are yet to meet their yearly revenue targets in the last three years, a Senate report has revealed.
Accordingly, the Red Chamber has resolved to commence immediate legislative action to amend the Fiscal Responsibility Act (FRA, 2007) to improve revenue generating and remittance capacity of Agencies of the federal government.
According to the report obtained by LEADERSHIP, majority of the revenue generating agencies of the federal government are engaged in what it described as “arbitrary and frivolous expenditure”, making it difficult to determine the actual federal government revenue, with a large percentage of these expenditure being extra-budgetary.
However, the agencies that have been consistent in remitting revenue generated to government’s coffers include the Nigerian National Petroleum Corporation (NNPC) and other revenue drivers of the federal government in the Oil and Gas sector, Central Bank of Nigeria (CBN), Nigerian Customs Service (NCS), and the Federal Inland Revenue Service (FIRS).
These, among others, were part of the findings of the Senate Joint Committee on Finance and National Planning and Economic Affairs contained in a report on the 2021-2023 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) submitted to the National Assembly for consideration by President Muhammadu Buhari ahead of the presentation of the proposed 2021 budget.
Consequently, 76 Government-Owned Enterprises (GOEs) and revenue-generating agencies and the Ministry of Finance, Budget and National Planning; Ministry of Power; the Budget Office of the Federation, Debt Management Office (DMO), the Central Bank of Nigeria (CBN); the Accountant-General of the Federation, among others, were invited to a 5-day Stakeholders’ Interactive Session on the fiscal documents between August 19 and 25, 2020.
In the report, which was considered by the Senate last week, 68 revenue-generating Agencies were indicted for engaging either in outright non–remittance or under-remittance of operating surpluses due to the Consolidated Revenue Fund (CRF) account, in breach of the Fiscal Responsibility Act, 2007 and the extant laws that established them.
Although the names of the erring MDAs were not mentioned by the Joint Committee, credible sources confided in our reporter that about 90 per cent of the 76 agencies invited defaulted in their revenue targets between 2018 and 2020. “The sum of N1.4 billion outstanding remittance was discovered in the case of just one of these agencies between 2018 and 2019,” the Senate Joint Committee said.
LEADERSHIP reports that based on the extent of funding from the annual budget and their respective revenue-generating potential, agencies of the federal government were classified into three namely fully-funded, partially-funded and the self-funded agencies.
Agencies like the National Lottery Regulatory Commission (NLRC), Nigerian Broadcasting Commission (NBC) and the Nigeria Export Promotion Council (NEPC) etc are fully funded, while Nigerian Television Authority (NTA), Nigerian Investment Promotion Council (NIPC), among others, are partially-funded.
The committee therefore recommended that many of the partially-funded government agencies needed to be removed from the budget, to which the Senate has resolved to commence relevant amendments to their extant laws and in some cases certain sections of the 1999 Constitution in order to effect the recommendation.
The Senate report stated: “Many revenue generating agencies expended enormous funds on overhead and recurrent expenditure, including huge personnel costs that was difficult to reconcile with the number of staff on their nominal roll, thereby reducing their operating surpluses. “Many agencies generate and expend revenues under sundry administrative guidelines, unknown to the National Assembly, and at variance with the extant laws establishing these Agencies, as well as other financial regulations applicable to the public service”.
The upper chamber added that the cost of collection of revenue by the majority of the revenue generating agencies were too high, at 4% in many cases, creating a large pool of funds, far in excess, of the operating needs of the agencies.
The Senate further observed non-implementation of the International Public Sector Accounting Standards (IPSAS) and general significant weaknesses in expenditure control, accounting, financial reporting and lack of completeness and accuracy of the consolidated financial statements of the revenue-generating agencies.
It also noted that the unremitted and under-remitted funds due the CRF, were not only revenues earned by government through the agencies but included profits and earnings resulting from foreign and domestic borrowings invested in or through the erring agencies between 2018 and 2020.
The report further noted: “A number of revenue-generating agencies of the federal government, were also found to be in Joint Venture Agreements with other local and foreign companies, without posting any profit over many years of such agreements, with some still being funded by the Budget; “There exists inadequate deployment of Information and Communication Technology (ICT) in revenue collections, in many of the agencies, including the collection of Stamp Duties”.
The Senate also observed that the average cost of production of a barrel of oil in Nigeria is one of the highest among other oil producing countries which currently stands $31 to $33 per unit cost.
It said it will commence the immediate legislative actions to amend the Fiscal Responsibility Act (FRA, 2007) to improve revenue generating and remittance capacity of Agencies of the federal government. According to the resolutions of the Senate, the sections in the law to be affected in particular are Section 21 (1) and Section 22(1)(2) of the FRA, 2007.
The upper legislative chamber also resolved that immediate steps should be taken by its relevant Standing Committees to examine the laws guiding the operations of all revenue-generating agencies under their oversight to determine specific sections/clauses requiring amendment with a view to plugging wastages and boosting revenue generation capacity of government.
It called on the federal government to streamline all stamp duty collection activities by the MDAs and domiciled with FIRS to eliminate loss and to deploy ICT in the collection of these stamp duties.
The Senate further resolved that there was need to institute sanctions for inability to meet revenue targets, where it is established that there are no visible constraints for such non-performance, while positive performance in revenue generation by MDAs should be rewarded. “That the federal government should direct that all outstanding remittances currently held by revenue-generating agencies be remitted not less than thirty days (30 days) of this resolution into the Consolidated Revenue Fund (CRF),” the Senate said.
On spending of operating surpluses beyond limit, the Senate suggested to the federal government to direct the accountant-general of the Federation to develop templates for strict cost-control measures for all revenue-generating agencies of government, with clear sanctions for non-compliance. “That the federal government should ensure that all statutory transfers due to agencies of government be paid forthwith to enhance their overall performance,” it added.
A source also told LEADERSHIP that the MDAs who refused to honour the Senate Joint Committee’s invitation to the interactive session on the MTEF will be invited to reappear. “Many of the MDAs invited did not turn up and the Senate Committee on Finance intends to invite all that did not turn up afresh to review their revenue profiles over the years,” the source said.
On the $33 oil production cost, the Senate resolved that the NNPC “should devise strategies to reduce the Corporation’s average cost of production in accordance with the international best practices, which currently hovers at $31 barrel per day.”