The Federal Government has vowed to crack down on banks lending to state governments without adhering to the provisions of the Fiscal Responsibility Act (FRA). In a firm move to ensure financial discipline, the government has also directed the Fiscal Responsibility Commission (FRC) to provide enhanced technical support to local government councils. This directive comes in the wake of recent developments granting local councils financial autonomy, ensuring they manage their resources independently of state governments.
The government’s renewed commitment to fiscal responsibility follows two significant events. First, the Supreme Court’s recent ruling, which granted financial independence to local governments, marks a historic shift in Nigeria’s financial governance structure. Second, the federal government is keen to avoid any future embarrassment, such as the recent threat by a Chinese company to seize national assets after a state government defaulted on a financial agreement.
At the National Summit on Fiscal Responsibility held last week in Abuja, the Chairman of the Fiscal Responsibility Commission, Barrister Victor Muruako, raised alarm over the role of banks in violating the FRA by providing loans to state governments outside of the legal framework. He stressed that such actions have far-reaching implications for Nigeria’s financial stability and accountability.
The government’s directive for the FRC to strengthen local councils’ financial management comes as part of broader reforms aimed at ensuring that public resources are used effectively and in compliance with legal standards. These measures are seen as crucial for promoting transparency and avoiding potential financial crises in the future.
As local governments gain financial autonomy, these efforts are expected to improve the efficiency of resource allocation and foster sustainable economic growth at the grassroots level.
