G overnors’ Demand For Dollar Payments: The Way Forward!

By: Sir Henry Olujimi Boyo (Les Leba) first published in November 2019

 Intro:

Last week this column repub­lished “Forex Accruals: Finally, State Governors Remove Their Blinkers!!” It discusses the mone­tary policies at the root of Naira depreciation and maintains a clear argument for how to put an end to this.

(See www.betternaijanow. com for this series and more articles by the Late Sir Henry Boyo)

Today’s republication emphasiz­es some of the issues presented in the previous article, and begins by highlighting the concern that the dysfunction in the Nigerian econ­omy although a detriment to the general populace, serves as a bene­fit to a minute percentage that have orchestrated a system of devalua­tion for their personal benefit.

As you read through the below article taking note of previous events or rates, keep in mind its year of publication (2019), a clear indication that Nigeria’s economic situation is yet to improve even after all this time.

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’!