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The Fiscal Responsibility Commission (FRC) has revealed that it will sanction about 14 banks and financial institutions allegedly granting loans without due process to state governments.
According to NAN, Victor Muruako, FRC chairman, said this at a transparency and accountability sensitisation workshop for the south-east zone held in Lagos on Monday.
The FRC organised the event as part of its zonal sensitisation campaigns on Transparency, Accountability and Prudence (TAP) in public finance management.
In his welcome address, Muruako said the commission was already engaging with loan institutions on the issue.
Although he declined to name the banks and institutions involved, the FRC boss 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.
“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, rationalising public expenditure, improving public financial management and sustainable debt management,” he said.
Also speaking at the event chairman of the Economic and Financial Crimes Commission (EFCC), Abdulrasheed Bawa, said states should domesticate the Fiscal Responsibility Act.