NIGERIA IS BROKE, SAYS REVENUE COMMISSION BOSS
The Chairman of the Revenue Mobilization, Allocation and Fiscal Commission (RMAFC), Engr Mahmud Tukur, has raised the alarm that the nation's reserve has gone dangerously low to the point that if drastic measures were not taken immediately to stem the tide, the 2010 budget would be a stillbirth, dead on arrival.
Speaking with Daily Sun , he blamed the situation on the government's decision to place its commitment to Joint Venture Partners through its Joint Venture Cashcalls (JVC) over the interest of the nation. According to him, payment for JVC has wiped out the entire $20.1billion in the excess crude (oil revenue) and slashed the excess domestic (non-oil revenue) from N322billion to N1.47billion all within one year, January to December 2009.
Tukur, who was at one-time Permanent Secretary, Ministry of Petroleum, also said that the revenue formula currently in use, was illegal.
The RMAFC boss, while explaining why the nation was having problem in the energy sector, also dropped a bombshell that the gas needed to power the thermal stations have been sold for 20 years and the little left, the multinationals consider it more economical to be flared.
Tukur, a former Chief Executive of NEPA spoke on other issues.
Functions in RMAFC
Let me say that it is a long name. First, Mobilization, Allocation and then Fiscal. The Revenue Mobilization , Allocation and Fiscal Commission is one of the 14 executive bodies set up by the Constitution directly. It is not as a result of a law made by the National Assembly.
The other bodies are like INEC, National Population Commission, Federal Character Commission, Federal Service Commission, National Judicial Council , National Council of State and so on. These bodies are like offices of the Federal Republic of Nigeria. They are not under any tier of government, whether the federal, state or local governments. We are answerable to Mr President not as head of government but as President and Commander-in-Chief of the Armed Forces.
So, this Commission, one of its fundamental responsibilities as directly specified in the Constitution, is to mobilise all funds in what is called a Federation Account. The Federation Account is the basket of money that belongs to the Federal Republic Nigeria and not to any government tier . Now, when the monies are disbursed to governments they become Consolidated Revenue Funds of the federal, state or local governments. That's when legislative Assemblies now come in to pass appropriations. So, the appropriation of each tier of government is when they get the Consolidated Revenue Fund belonging to that tier of government.
Now that basket is what we mobilize. How do we mobilize it? That's the first part of our name. We now get to NNPC to look at crude oil, how much are you getting from there? Inland Revenue Service, Company Income Tax, all Customs dues will also come to that basket. Then, we go to the Department of Petroleum Resources (DPR) for royalty on oil. These are some of the major sources. Of course, there are other sources of revenue. Now that basket is called Federation Account.
To do the Allocation, that is the second part of our name, we design a revenue formula. That formula looks at the three tiers of government. That's how we see them in the Commission. Federal Government is tier number one. 36 states, tier number two. 774 local governments, tier number three. So, we draw a vertical formula to disburse that basket to these three tiers of government guided by the Constitution. When we do it, to now divide the money among the states and local governments, we design a horizontal formula.
The horizontal formula now looks at things like population, land mass and so on within the Constitution and then social factors. In designing the horizontal formula, we try to see how the ordinary Nigerian on the street can benefit from that basket. So, we now include criteria like primary school enrolment because our children must go to school, water, health. This is done so that the ordinary Nigerian on the street can benefit from the basket called the Federation Account. We combine the two formulae and pass to Mr President.
There is a section of the Constitution which says that 'on receipt of the advice from the Revenue Commission, the President shall table to the National Assembly, not his opinion, but what he got from the Revenue Commission. So, it is not a Federal Government bill to the National Assembly. No. It's advice received from the Commission based on our vertical and horizontal formulae-vertical among governments and horizontal within states and local governments to divide the money among them.
Every month when allocation is made, every single local government is given an amount of money from the Federation Account directly and by name. What state governments do with the money is neither here nor there. But a state Assembly cannot pass a law to over-ride a federal law. Any local government anywhere is by name a federal law. What a state Assembly can do to affect a local government allocation is by law. Every state government has to contribute two per cent of its total revenue to its local governments.
The state Assembly can now pass a law to disburse that two percent donated by the state. That is the role of the State Assembly. It cannot make a law covering every revenue coming to the local government. No, only revenue coming from the state contribution. But there is no discipline in the country and this issue is not being observed in majority of the local governments.
That is why the local governments suffer from the shortage of funds and the Commission has been trying to fight this for a long time. Sometimes we win, sometimes we lose, depending on the political exigencies of the particular state. That's the allocation part I explained. Then when you come to fiscal commission we now look at the efficiency in which, how these resources are being utilized. Now under the fiscal efficiency, we fix the salaries and allowances of all the legislators in the country, when we do this, the Constitution says the Revenue Commission shall determine the salaries and allowances of all legislators throughout Nigeria and they cannot even contest that in court. So, if we now say, the President of the Senate shall receive N10, it is not contestable in any court. It is not subject to any law whatsoever. And if we say it is N100million, there is nothing anybody can do. Constitutionally, it's binding throughout the country.
Parameters used in determining their remunerations
That's the problem. Relativity in protocol is what we use. But probably, we look at, having experienced democracy in three transitions, we now begin to look at criteria, the number of times they sit, the efficiency, how many bills they pass into law, may be attendance. These criteria can now be developed . But when we came, democracy was new. We now looked at how to sort legislators within the Executive and the Judiciary to provide parity and credibility. That was a major criterion.
We also fix the salaries of the executive arm, the President and all the welfare issues as well as the Judiciary. Now with the Judiciary and the Executive arms at both federal and state levels, what we propose is subject to National Assembly approval or State Assembly approvals in respect of governors and so on. But it is conditional in the constitution, they cannot increase what we propose.
For instance, if we say that the governor of a state shall receive half a million naira, the President shall receive a salary of one million naira, the Assemblies cannot increase that but they can reduce it. Constitution allows them to reduce it. So, it is one of the major functions to determine salaries and allowances of all legislators as well as the executive and the judicial arms. When we determine that of the Legislature it's non-negotiable. If we determine that of the Executive and Judiciary, what we recommend can be reduced, but not increased.
When you come to the fiscal efficiency, we look at the budget and the efficient ways resources are being used by the country to make sure there is development in the country and we advise governments on how to improve their revenues. It is under that heading that we now advise governments, all legislatures and executives throughout the country to stop certain practices in budgeting processes.
We say do not prepare budgets twice. Like every executive arm calls its ministries, departments and agencies to prepare the budget because they are competent to do so, they know the economy, they are specialists, they've been trained, they know the bureaucracy. The budget, let's take the federal, the government calls every ministry, department and agency to come and propose a budget and defend it. They now put a package and the President tables it at the National Assembly.
The Commission's view is that don't repeat that process. Yes, appropriation is the responsibility of the Legislature, if there is anything you don't understand, you call the executive as an entity because they treat you the legislative arm as an entity. The President does not submit the budget to committees of the National Assembly. It's to the National Assembly. If they are not sure of anything, they call the executive to come and explain. But don't call ministries, departments and agencies to come and re-negotiate the budget and increase it. To begin with, there are transparency issues involved in legislators inviting individuals to come and defend their budgets. It becomes a negotiated budget and could lead to some corruption.
By the way, who defends the budget of the National Assembly, who approves it? What kind of democracy is that? They say every Nigerian is dishonest, the executive is dishonest, bring your budget. Now how can't they subject their budget to defence and approval? There must be checks and balances in a democracy. They jost insert their own budget and then take it to the President for signature. This is public fund. Go and defend it.
The legislative arm should make their own budget proposal to the executive arm so that they could look at the entire economy to see what can be accommodated and what cannot be accommodated. Don't wait until the Executive gives you the budget and then you begin to make insertions. This is some of the weaknesses in the system. Each arm must respect and limit itself to its own roles. Legislature make laws, Executive runs the economy. If the Executive said I can only afford a budget of N4trillion, that's it. Because they did research to arrive at that figure. You can't say it has to be N4.2trillion.
You are not competent to make that adjustment. If the Legislature does not accept the figure proposed by the Executive arm, then it has to return the bill to it with suggestions. By all means, don't insert anything into it and insist that he must sign it and if he doesn't sign it you begin to threaten him with impeachment. What kind of democracy is that? Separation of powers must be emphasized if we are to develop in Nigeria and minimise corruption.
Let's first define what's a constituency. Every local councillor has a ward as his constituency. Ditto for chairman of local government, state Assembly members, governors, National Assembly members up to the President. So, Nigerians will not hold you responsible for the development of your constituency. So, those talking about projects for my constituency don't understand. The projects are what constitute capital development of a government. It is not the individuals. The accounting officer at the federal level is the President.
The accounting officer in each state is the governor. If there is no development, Nigerians will shout at the governor. If thee is no power, no rail line who do Nigerians blame? The President. They do not go to the individual members in that constituency. It therefore, calls to question the efficiency of these constituency projects. It encourages lack of transparency, inefficiency within budget implementation and there are a lot of question marks. And we say stop it. This is all under fiscal efficiency.
Major challenges as you see, discipline, transparency are major problems. Let me put this way, Nigeria has been through military dictatorship for several years. Some of you young chaps do not know any other form of government except dictatorship. Then, we now woke up and went into presidential system of governance. Now, the dictatorial tendency has remained with us which brought about indiscipline. To now adopt democratic procedures in doing things, in accounting for whatever you do to the public is one of the major issues of Nigeria and in Nigerians. It is one of the big challenges. It may require so many democratic transitions for us to mature into democratic practices.
Reducing cost of democracy
Nothing. We are not even competent to do anything about it. It is purely political arrangement. May be we should have gone to parliamentary democracy before we go into the American system. If it were a parliamentary system, every minister will defend what he did yesterday on the floor of the parliament. But the presidential system is a different issue altogether. The governor of a state is in charge of everything. His commissioners are answerable to him not to the people on the floor of the Assembly.
We should have transited from military to parliamentary before coming to the presidential. Then we would have been able to control issues. The commission is not in a position to do anything because we are operating within the provisions of the 1999 Constitution. It is purely a presidential Constitution. Never mind the dictates of our functions, this is purely political. The system is obviously too expensive.
You see Nigeria has got too much free money so, it encourages corruption. Nigerians do not appreciate the value of the money they have because it is not taxed from them. You see, every month, the multi-nationals give us oil money we meet, share it and we get billions. The ordinary Nigerian is not aware because it is not his sweat. If the government functionary spends the money, the man in the street doesn't care because it is not his tax money. But if it were his tax money and you spent it, believe me, he will make you account for it. Because if you come to him for tax, he will ask you what did you do with the one he gave you earlier. But now this is free money.
Issue of revenue formula
On the distribution of the pool money by formula, the formula being used now is completely illegal. As at now, Nigeria has no legal revenue formula. We have been agitating for a new revenue allocation formula. Unfortunately, the formula in use now is not legal. It is obsolete, we have done amendment to the formula, sent a new formula to the Executive.
It was sent to the National Assembly and up till now, it has not seen the light of the day .What we have now is a formula based on a circular from the former Minister of Finance which is totally illegal and totally unacceptable to the Commission and to Nigerians. If you give us an acceptable formula, all the issues particularly those affecting the Niger Delta would be resolved. A new revenue formula could have given them a certain percentage that would have solved the problems of militancy in the area. We have talked, made representations, written the National Assembly, we have gone to the President, the National Economic Council, anywhere you think we should go, we have gone. But nothing seem to be coming out of it.
The truth about it is that we sent the revenue formula to President Umaru Yar'Adua quoting the Constitution. He wrote us back. But we discovered that his National Assembly Liaison Officer tabled it only to the Senate. He did not take it to the House of Representatives. In it we reduced the percentage of what the Federal Government gets in favour of states- we pushed it up to 31 per cent from 24 to make sure development goes to the grassroot. So, the Economic Team went and withdrew it unofficially from the Senate.
When we now wrote National Assembly telling them that we are waiting, the Speaker wrote back that he was not aware of having received any proposed revenue formula from the President. They withdrew it illegally and unofficially, because the formula once submitted cannot be withdrawn. Now, it is a constitutional issue. When they withdrew it, they invited the Commission for a negotiation and we said no. And that is why till date, there is no formula.
Because the House did not receive it. The Senate because the Liaison Officer was their colleague, withdrew it illegally. You see this is the primitive nature of the Nigeria's democracy. Instead of the rule of law, we adopt this primitive approach to the rule of law. A country must respect its Constitution. That means rule of law. If you don't, you pay for it. If you don't want the Constitution you are operating, change it. But if you don't change it, use it. You must obey it.
Excess crude account
First of all, let us define what is Excess Crude Account. The account is from four different sources. Excess crude is divided into two parts. There is a dollar part which arises from the sale of crude outside Nigeria by NNPC. We call it equity foreign crude. Part two of excess crude comes from domestic crude sales. Everyday, NNPC picks 445,000 barrels of crude oil with the intention of refining it in the domestic arena. That one, when they sell it, they pay in naira into the Federation.
Excess arises from there. One in dollars, the other in naira, both of them crude. So, we called those Excess Crude Account. We now go to the non-oil part-petroleum profit tax(PPT) it is exclusively in dollars . There is also excess in it. Similarly for royalty. It is also in dollars. We now have non-oil excess revenue. Oil excess revenue. How does excess arise? For benchmark, for instance, Executive proposed N57 while the legislature fixed it at N67. When you fix that price, normally, the Commission sends its own advice on benchmark for each budget.
I think we proposed N63. If you sold your excess crude in the external market above the benchmark, you kept it in the Excess Crude Account. The Constitution said that every naira or dollar in the Federation Account shall be disbursed to the three tiers of government. Therefore, there cannot be any excess. That is why in that formula, we provided for stabilization account in case we get into trouble with the fluctuations in the oil market.
You can then take money from there and cushion the effect. But the government in its wisdom reintroduced additional excess. On the non-oil, we are still trying to find out who fixes the benchmark. But what we found out is that the Federacy Inland Revenue Service (FIRS) is given a target every year by the Executive. Anything they generate after that amount is now kept as excess. Whereas, all excess crude, the Commission calls it excess account. And the balances were very high as at January, 2009.
I think it was about $20.1 billion. With this, the commission wrote governments and legislatures across the country to say, this excess, do what other countries with oil resources are doing, they use their oil money to develop their country. We said use it to develop the strategic sectors like the rail, energy, infrastructure, etc and then you will see the oil revenue being translated directly to infrastructural development. But they instead took the money and just disburse it every month for it to be used for overheads.
We cited some countries like Malaysia, Indonesia, Brazil and so on. That's what they did to translate a fading out resource into reality which will generate employment etc. Don't misuse it. Fix it for that particular purpose. But what they did was that every month, they withdraw part of it to pay Joint Venture Cashcalls (JVC).That is the money which, if you take Shell, Mobil etc, Nigeria has 60 per cent shareholding, 40 per cent to the multinationals. So we contribute that kind of money for Joint Venture Cashcalls. It's the money they use for the exploration and exploitation purposes.
In January, they took 57 per cent of that particular amount ($20.1billion). In February again, 74 per cent of what is left of that money was taken out. And then in April, 98 per cent of what is left was taken out. And then from July to December 100 per cent. All the crude oil sales in Nigeria is being used to pay JVC. And as if that was not enough, they now went to the excess domestic which had a total balance of N322billion to take money every month from July to December and now the balance is about N1.47billion down from N322billion. So, the commission's opinion is that you cannot use all your resources to pay JVC to the detriment of the development of the nation. By the way, what is this JVC, who determines it, who designed the methodology of deductions so that we can meet our obligations with JVC?
Happily enough, recently, former Finance Minister, Ngozi Okonjo-Iweala, said at a public forum that 2010 budget may not be practicable if we continue with this trend. She is emphasizing what the Commission has been talking about. We told them that the 2010 budget cannot operate because if we continue with those deductions, there will be no money to operate the budget. It is one thing to make a budget but the consolidated revenue fund, the basket from which you hope to finance the budget, is empty.
There is no money from oil that will finance the budget in 2010 because all the money is going to JVC. These multinationals operating this JVC, they bring their budget which is supposed to be approved by, I think, NAPIMS of NNPC. The deduction is done every month but the payment to JVC does not take immediate effect. When you are to pay is when you should make the deduction. Don't go and keep the money with JP Morgan (a foreign Bank). Give us the money for development, let's go and do coal as a source of energy. You see our power sector is in trouble. We have taken more than $20billion over the years still no power.
The reason is that the gas we want to use for thermal stations is not available, we sold it. Liquefied Natural Gas (LNG) train number seven is being built. We sold the Nigerian gas for the next 20 years. So where are you going to get the gas to run these power stations? It is an irreversible agreement with several countries in Europe and America. Go to coal, 40 percent of world energy is supplied by coal . Also use water, hydro. These cannot be sabotaged. How can you close Enugu coal mine for instance.
You cannot break a pipe if you are generating from either of these. Use it because it lasts years and years. The return on investment is there. Nigeria needs to diversify for her own security . Don't put all hope on gas, the day you don't have gas, what happens? We need to have options gas, water, coal. Gas, gas, gas how many years, how much in dollars, yet no result. And there cannot be result because we sold it, we signed.
Worse, we are a minority shareholder in LNG. Those of us technocrats warned the politicians, don't lose our majority shareholding. Now, no matter what they do, we cannot control it, we cannot change it, we cannot pass anything because we are a minority. The remaining gas, it is cheaper to flare it. Which multinational will be that stupid instead of paying that little token for flaring will harness it for running your power station. It is not economical for them. And they won't do it. Now, it is Engr Mahmud Tukur talking. My engineering is electrical and its power. Chief Executive of NEPA for sometime.
Allowances of the Acting President
We wrote the Accountant-General of the Federation that the position of the Acting President shall attract so , so and so. It is our job. Even these out-gone ministers, the Commission is going to determine if they are entitled to a severance allowance. Acting Governors are not entitled to anything may be because the situation has not arisen. Also, impeached governors are entitled to nothing .We don' recognize them. But if he resigns or leaves voluntarily, we pay him. So, like Shagari, Ekwueme, Obasanjo, Atiku are being paid what they are entitled to.