23

Mar

GOVERNORS’ DEMAND FOR DOLLAR PAYMENTS: THE WAY FORWARD! 18112019

2019-11-18

The discussion, in last week’s column, was about the intention of State Governors to, henceforth, demand payment of their monthly portions of fiscal allocations, in the currency in which the revenue was earned. It is not clear, why CBN and the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC), have consistently, for so long, audaciously breached, subsisting Constitutional provisions for the disbursement of Government revenue, even when this breach is, evidently, responsible for our present prostrate economy.

It is however, unlikely, that the silent beneficiaries of, this clearly disruptive and oppressive, payment strategy, will simply give up the honey pot, to make revenue allocations constitutionally compliant, even if this will facilitate the realisation of a progressive economy with increasing job opportunities!

However, if CBN’s resistance to existing Constitutional provisions continues, State Governors will probably be best served, to reinforce the legality of their demand, by resuscitating and actively, following through an earlier bill sponsored, in 2016, by Senator Francis Alimikhena (APC Edo North). Senator Alimikhena’s bill is clearly in consonance with Section 162 of the Constitution and the Governors’ intent to receive fiscal allocations in the original currency earned. Regrettably, the bill only scaled the 2nd Reading, before the dissolution of the National Assembly in 2018.

The object of the Distinguished Senator’s bill, is to give Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) the power “to monitor the accruals to and disbursement of Revenue, from the Federation Account, in the currency in which the revenue was earned.” The bill suggests that this proposal is not only “in accord with section 162(3) of the 1999 Constitution, but will, also hopefully, reverse the continuous Naira depreciation against Dollar, as the three tiers of Government will have direct access to Dollar allocations, paid into forex domiciliary accounts from which the State may draw, from time to time and convert to Naira to meet personnel and other running costs, while beneficiaries can also make direct transfers, to third parties to meet approved Dollar denominated financial obligations.” The Bill therefore, recognizes, the negative impact of the continuous allocations of only the Naira equivalent to the three tiers of Government, even though the Federation Account consists of both Naira and Dollar sourced currency components.” “The enactment of this Bill, according to the Sponsor, will cause a fundamental paradigm shift in the nation’s fiscal and monetary modeling, as the Dollar will, for once, begin to chase the Naira when the three tiers of Government (the biggest spenders in the economy) bid for Naira from Banks, with part of their dollar allocations, to cover Naira expenditure – both capital and overhead.”

Senator Alimikhena’s bill is cited as “the Revenue Mobilisation, Allocation and Fiscal Commission Act (Amendment) Bill, 2016”; the following is a summary of the operational and Technical Details which support the call for its enactment.

To begin with, the proposed bill notes that “Section 162(1) of the 1999 Constitution, states that the Federation shall maintain a special account to be called the “Federation Account”, into which shall be paid all revenues collected by the Government of the Federation…etc.” Furthermore, Section 162(3) also states that “any amount, standing to the credit of the Federation Account, shall be distributed among the Federal, State and Local Governments, on such terms and in such manner as may be prescribed by the National Assembly”. The pertinent question therefore, according to the bill is “whether or not this constitutional provision has been complied with in its entire ramification. The answer is NO, because, what has always been distributed, is what CBN determines to be the equivalent amount, after the Dollar component of the Federation Account is ILLEGALLY converted by CBN before distribution.”

Again, “it is important, according to the bill, “to ask ourselves that, if individuals and corporate entities are allowed to operate domiciliary accounts into which their foreign exchange earnings are deposited,” why is it then that “the Federal, States and Local Governments, cannot similarly maintain their own CBN domiciliary accounts, into which their respective shares of Dollar allocations are paid?” In response to this question, the Sponsor, argues that since there is no “provision in our laws that prohibits such forex allocations, why should CBN then arrogate, to itself, the power to take custody and ownership of Dollar revenue, belonging to the three tiers of Government and then issue Naira equivalents instead, for sharing every month?” Furthermore, the technical explanations attached to the bill, similarly observes that “this practice has over the years, greatly harmed the Naira value, as the same Naira, with lower exchange parity with Dollar, is repaid to banks by the respective Federating units, for exchange into Dollars, to meet their foreign currency obligations.” This practice is condemned as “an economic paradigm that has suffered paralysis and therefore needs a paradigm shift.”

This payment process, according to the bill, is also injurious to the Naira rate and the economy, as the federating units are forced to buy back their own dollars (with a weaker Naira rate) to pay for their imports of vital equipment and supplies.” In fact, the bill describes this practice as “the worst form of Round-tripping, which has become primarily responsible for weaker Naira rates, even when, crude price and output, ironically, exceeded expectations.” Consequently, the bill’s Sponsor, is concerned that this, clearly, inchoate and disruptive payments framework will, invariably, subsist unless the provision of Section 162, of the 1999 Constitution is complied with.

Furthermore, the bill warns that “it is spurious to deny payment of dollar allocations, to the Federal, State and Local Governments, because of the fear that this will facilitate treasury looting”; the relevant question, should be, whether or not CBN Officials, who have, illegally, usurped custody and control of our export dollar revenue are “angels from outer space, or whether CBN itself is corruption free?”

Although, Senator Alimikhena, concludes that the economic damage caused by the present payment system is unquantifiable, he however, makes a patriotic call, to arrest further depreciation of the Naira rate, which has alarmingly, sunk, from less than 70 kobo in 1980 to almost N400/$ presently.

Furthermore, the proposed bill warns, that if this ‘strategic’ madness of a self-destructive payments system persists, we may, ultimately, need a wheelbarrow of useless Naira notes to buy a tuber of yam and our hope for economic growth and diversification with increasing job opportunities, will therefore remain a pipe dream!

Finally, the Distinguished Senator’s bill recalls, that “the CBN has experimented with various FOREX models since 1986, and is still, in fact, experimenting till today, yet no conducive solution has been found. Madness, they say, is doing the same thing over and over again and expecting a different result.” Consequently, Alimikhena recommended that in addition to their usual Naira accounts for the settlement of domestic expenditure, “the common sense step to take is for the Federating Units to also be empowered by legislation to open and maintain Domiciliary Accounts into which their share of Dollar allocations are paid.”  
 
In retrospect, a fellow compatriot Adaighofua Ojomaikre, and this writer, had approached the Chambers of Femi Falana SAN, in 2012, to file a case with Suit No. FHC/L/CS/388/12 to compel the CBN to cease the same illegal wholesale capture of the federation’s dollar revenue, as succinctly explained, in the above bill; regrettably, after two adjournments, the case is yet to come up for hearing since then!

Nevertheless, CBN’s resistance to change of the present ‘diabolical’ payments system will arguably be quickly dispelled, if Mr. President, simply directs CBN Governor, Godwin Emefiele, to strictly obey the existing law and pay dollar allocations to the federating units as prescribed! Shikena! Surely, if Mr. President understands the significant import of such a simple directive, that could rapidly change the trajectory of our undeniably sick economy, it is inconceivable that he would not eagerly wave this priceless ‘magic ward’! 


SAVE THE NAIRA, SAVE NIGERIANS!!!