Setting a Legislative Framework for High Performance Economy

Muda Yusuf, DG, LCCIOctober. 2015

National Planning Commission

• Intro & Context– The role of Legislature– Key Concerns– Essential Bills for the private Sector

• Budget & Appropriation

• Frameworks for Effective Legislation

– Legislative & legal Framework

– Private Sector Role

– Oversight, Monitoring & Evaluation

• Conclusion

Outline

Introduction [The role of Legislature and Context]:

• Making, Amendments and Repeal of laws.

• Budgetary Appropriations

• Representation

• Oversight of the Executive through monitoring and evaluation

• Suffered the biggest disruptions during military interventions.

• This affected the institutional growth of the Legislature

Introduction Cont’d

Key Concerns:

• Capacity gaps in understanding the dynamics of the economy, sectoral issues, fiscal and monetary policies; macro economic issues and their implications for the business and citizens welfare.

• Weak capacity to enforce compliance on numerous legislative resolutions, bills, summons etc.

Introduction [Key Concerns]

• Conflict between Economic Value of legislative functions and the Electoral value. Developmental expectations from constituencies and the law making functions of the legislators remain a delicate balance.

• For most of their constituents, things like boreholes, empowerment programmes, scholarships, transportation, cash transfers etc are of greater significance. These have higher electoral value than quality legislative functions.

Introduction Cont’d [Key Concerns]

• Collaboration between the legislatures and the organized private sector remains weak and highly fragmented.

• Process issues in the passage of Bills in the National Assembly. In the seventh Assembly the processes were delayed for the consideration of Bills.

• At the 7th Assembly, 46 bills were passed at a sitting within few hours in the last day of the life of the assembly. This was unprecedented in the history of law making.

Introduction Contd [Key Concerns]

• There is no sustainable platform to channel and articulate private sector positions with the legislature. Best opportunities are often the public hearings which are sometimes not well structured.

• Moral Authority for effective oversight is critical. There are adverse perception issues about the quality of oversight.

Essential Bills for Key Sectoral Reforms

It is widely believed that the following bills will make huge impact on the private sector and the economy if passed:

• Petroleum Industry Bill (1st introduced in the NASS in 2003)• Railway Bill• Inland Waterways Bill,• Ports and Harbour Bill,• National Transport Commission Bill, • Competition and Consumer Protection Bill• Courier & Postal Sector Reform Bill.

The above bills when passed will provide the much needed legal leeway for private sector to create economic opportunities in the country

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Budget and Appropriation

POWER OF APPROPRIATION

• This is perhaps the most important power of the legislature.

• No expenditure can be incurred without authorization by legislature.

• This implies that the legislature has a critical role to ensure the judicious use of the nations resources.

• Resource allocation has a great deal of impact on the economy.

POWER OF APPROPRIATION• Truth is the legislature has not been able to exercise

this power effectively.• There are so many expenditure taking place without

appropriation. So much impunity has taken place and perhaps still taking place.

• For instance subsidy appropriation this year was N200 billion for PMS and N91.03 billion Certainly subsidy payments have exceeded these provisions substantially.

• CBN also committed funds to bail out the states. Was there any appropriation ?

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• Approximately 70% of total spending in the Nigerian economy is tied to the public sector and this underscores the essence of FG budget on the tempo of economic activities.

• Seldom during the past decade, has the FG budget commenced in January of any fiscal year due to preparation and approval delays by the executives and the legislature.

• It is a well know fact that unpredictable budget approval timelines lead to uncertainty among economic agents and private sector operators.

Budget Delay Hurts the Economy

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Cost of Budget Delay on the Economy

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Budgetary Lags: Year 2000 to 2012 Average

• Approval lag (No budget Period): Time lag between start of the fiscal year to President assent (signing) of the Annual Appropriation Bill = 4months 7days;

• Submission lags: Time lag between start of fiscal year and submission of draft budget by the executive to the legislature = 1 month 7days (International benchmark is minimum of 3 months with legal backing);

• Consideration lag: Time lag between submission of draft budget to legislators by the executive and legislative approval of the budget = 3 months 18 days;

• Signing lag: Time lag between legislative approval of the budget by the legislature and signing of the approved budget by the President = 19 days

Budget Lags

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Budget Timelines – Nigeria Vs Others

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Average quarterly capital budget implementation levels (2000 to 2012):Q1-1%, Q2-8%, Q3-22% & Q4-41% (25% is the ideal quarterly implementation threshold).

Q1 Q2 Q3 Q40.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

1%8%

22%

41%

Source: Budget Office of Nigeria (BoF), Mike Obadan (2011); Nwani, Vincent (2015)

Budget Implementation Issues

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Framework for Effective Legislation

Legislative & Legal Frameworks for Effective Budgetary System

• Constitutional review of time frame for: Budget presentation, NASS consideration, Presidential approval/signature, Release of funds, time allowed for usage of Consolidated Revenue Fund (CRF) in default of appropriation and Post Budget Implementation Reports

• Enact law or amend the constitution to back the operation of Excess crude Account (ECA)

• Amend the FRC Act (2007) to strengthen oversight and monitoring

Source: Nwani, Vincent (2015)

LEGISLATIVE FRAMEWORK [CONTD]

• Judicial interpretation on the budgetary roles of the executive and legislatures including the limits of their respective roles.

• Set legal timelines specifying deliverable milestones for all budgetary stages

• Judicial clarification necessary to determine which arm of government has a final say on the budget.

LEGISLATIVE FRAMEWORK [CONTD]

• Amend Legislative rules and practices (Senate Rules and House Standing Orders) of the NASS relating to budget consideration and approval guidelines

• Establish Budget office in the NASS to prepare robust background papers on the budget.

• Creation of platform for stakeholder engagement with the legislature on the budget.

BUDGET STRUCTURE• Scrap Service Votes which is one of the headings for

perpetration of corruption.• Review the relativity of recurrent and capital budget.

Currently budget is lopsided in favour recurrent expenditure.

• An estimated 80% of budget is committed to recurrent spending to the detriment of capital spending.

• Need for a review of debt management strategy. Public debt growth over the last 5 years is worrisome

• Domestic debt grew from N795 billion in 1999 to N8.4 trillion in 2015

PRIVATE SECTOR ROLE

• Private sector to be more proactive in sponsoring bills that impacts the economy

• Early submission of technical memorandum on the draft budget to the legislators by the OPS

• Early engagement of legislators and the fiscal committees on budget details

• Local civil society to participate more in Public hearing of draft appropriation bill

PRIVATE SECTOR ROLE [CONTD]• Strong Coalition of Private Sector Bodies is

imperative for an effective engagement with the legislature.

• Provision of feedback on Economic policy impact on business and the economy.

• Better structured private sector input into policy formulation and implementation.

• Provision of platform for regular dialogue with the Legislature

CONCEPT OF LOBBYING• Lobbying is an integral part of the Democratic

Process.• From time to time, there will be need to lobby the

legislature on important bills affecting the economy.• Current perception is negative and this has to be

corrected.• There is a need to properly define this concept in the

context of the Nigerian democracy.• There should be a well articulated framework for

lobbying that is transparent and in line with global best practice.

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Library of Congress: largest library in the world with nearly 150 million items including books, films, maps, photographs, music, manuscripts, graphics, and materials in 470 languages.

Congressional Research Service: provides detailed, up-to-date and non-partisan research for senators, representatives, and their staff to help them carry out their official duties. It has been called the "House's think tank" has staff of about 900 employees

Congressional Budget Office: Provides economic data to Congress. It helps Congress estimate revenue inflows from taxes and helps the budgeting process. It prepares an annual Economic and Budget Outlook with a mid-year update and writes An Analysis of the President's Budgetary Proposals for the Senate's Appropriations Committee.

US Congress Support Departments:

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• There is need for the legislature to set a new performance driven targets for itself.

• Using the frameworks specifies above, the legislature must a anchored its targets on two main goals:

1. Achieving a stable and growing democracy2. Achieving a high performance and

prosperous economy

Conclusion

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Thank You