Way back in 2004, Dr. Ngozi Okonjo-Iweala, then finance minister, sought to redirect governments at all levels to imbibe a fiscal behaviour that will promote prudence and sound financial management in the system. The whole idea was to put in place as consistent and proactive fiscal management. To this end, she canvassed vigorously for a fiscal responsibility law which aims at ensuring transparency and strengthening accountability, promoting greater macroeconomic stability and creating conducive climate for generating growth and reducing poverty among other reasons. However, her successor, Mrs. Nenadi E. Usman, has continued from where she stopped.

Recently, at a public hearing on fiscal responsibility bill held in Abuja, she explained further the import of fiscal responsibility law. Excerpts:

PRIOR to the present reform efforts, the operations of our fiscal policies have been with little or no regards to prudence. Our system of public expenditure was weak, unstructured and characterized by unsustainable spending, with little or no regards to the concept of value for money in project execution. Uncontrolled recurrent spending and a huge debt burden, which impaired our ability to invest in capital projects that will make our economy to begin to operate on the supply-side, was also prevalent. We paid little attention to coordinating the financial interaction among the tiers of government to the detriment of Nigerians.

Working together with the National Assembly and the other tiers of government, we have since moved away from this history of fiscal imprudence and have made significant strides towards strengthening our system of public expenditure management. These positive changes, which are already delivering strong economic results, are what we seek to strengthen and institutionalise through the Fiscal Responsibility Bill. I will now proceed to provide clarification to the questions that I raised earlier to guide our discussion and appraisal of this crucial bill.

The bill and its objectives: Typically, the Bill contains a set of rules embodied in legislation with the core objective of committing all tiers of government to a well-defined and structured economic regime that ensures economic growth through economic stability. The objectives of this Bill are simple and straightforward. The Bill seeks to: institutionalize sound and prudent management of public resources; ensure better coordination of fiscal affairs among the federal, states and local governments; embed transparency and accountability in the management of public resources; and ensure value for money for government spending.

Unlike private companies, governments at all levels provide basic public services - such as education, health, police, infrastructure, etc. - that are essential to the general welfare of the population in their jurisdictions and to the functioning of the national economy. The fiscal health of these governments is, thus, essential to the stability and efficiency of the country's entire public finance system. However, central governments often have limited information on sub-national public finance for the purpose of assessing local fiscal risks and planning for fiscal emergencies.

This Bill provides a framework which will ensure that all tiers of government fulfil this primary purpose and provide a stable macro-economic environment, which will help stimulate investment, growth in output, wealth creation, and employment generation, thereby improving the well being of the ordinary Nigerian. In addition, this Bill seeks to safeguard Nigerian citizens from the debilitating effects of imprudent management of our nation's resources. We are all witnesses to the damaging effects of the huge debt burden foisted on Nigerian citizens by the imprudent management of our resources.

Key features of the fiscal responsibility bill: The Bill prescribes a comprehensive and holistic public expenditure management system premised on: proper linkage of annual budgets with long and medium term strategies; sustainable spending; adherence to well-defined fiscal rules and limits; clear rules for timely financial reporting; value for money; and monitoring and evaluation. A fiscal management Commission to enforce the implementation of the provisions of the Bill. I will now explain each of these features in turn.

Proper linkage with long and medium term strategies: The Bill provides for a comprehensive budgetary planning process derived from Medium Term Expenditure Framework (MTEF). This is a tool for linking policy, planning and budgeting over a medium-term -usually three years at the government -wide level. An MTEF takes account of government's long and medium term strategies and resources available to actualise these strategies over a three-year horizon.

Strategic priorities

It also allocates resources to strategic priorities among and within sectors and it commences with the preparation of a macro-economic framework and guidelines. It equally ensures that annual revenue and expenditure estimates are consistent with its provisions, which requires that rules on cost, cost control and evaluation of results of programmes financed are observed. The MTEF will be updated annually to reflect policy and macro-economic changes.

The principal components of the MTEF, as prescribed by the Bill, are as follows: medium-term revenue framework; medium-term expenditure framework; fiscal strategy paper, which spells out the fiscal strategy for the planning horizon in focus(three years); medium term sector strategies with projects and programmes linked to long and medium term plans, which will, in turn, feed into the annual budget. •submission of a comprehensive Appropriation Bill that ensures all parameters such as growth rate, employment, inflation and balance of payments as well as prudent ratio between personnel expenditure and net current revenue guide the formulation of budgets. We are already implementing the MTEF at the level of the Federal Government and the Bill merely seeks to codify this comprehensive planning framework.

Sustainable spending: Sustainability of government spending lies at the heart of the Fiscal Responsibility Bill. The Bill recognises the unpredictable nature of our principal revenue source ; crude oil - and, accordingly, prescribes fiscal rules for protecting government spending from unstable prices. The Bill requires all tiers of government to plan their spending based on a commodity price that is sustainable instead of the market price which, historically, has been highly unpredictable and volatile. Earnings from any favourable price variance are required to be saved in the "Excess Crude Account" and can only be distributed to augment current year shortfall in revenue and to fund capital expenditure in the subsequent years. This fiscal rule is simple and straightforward.

It is designed to insulate government spending from oil price volatility and ensure predictability of government spending, avoiding the damaging trap of boom-bust cycle. This regime of sustainable spending is already being implemented with the concurrence of the other tiers of Government and with the kind understanding of the National Assembly. The Bill seeks to formalise and codify this invaluable rule.

Clear rules for timely financial reporting: To embed accountability and transparency, our newly evolved public expenditure management system and to afford the Nigerian citizen timely information on the management of public resources, the Bill prescribes a comprehensive regime of timely financial reporting. Specifically, all tiers and arms of government are required to publish audited accounts within 6 months of year-end and to publish their consolidated accounts in the mass media within nine months of year-end. Similarly, all tiers of government are required to publish quarterly budget implementation reports and summarised annual budget execution reports.

In addition, the Bill encourages the holding of public hearings during budget discussions and the wide publication of the fiscal affairs of all tiers of government. We are currently weak in this area. When I say we, I mean the Federal, State and Local Governments. The prescriptions of the Bill, in this area, will obligate all tiers of government to lay bare comprehensive and timely information on their fiscal affairs. Armed with such information, the Nigerian citizen will be better placed to hold budget holders accountable for the allocation and utilization of public resources.

Value for money: The Bill requires all tiers and arms of government to maximize value for money on government spending. In this regard, the Bill prescribes ground rules for the admission of capital projects into the annual budget. These rules require capital project proposals to be subjected to cost-benefit-analysis, due process and other government procurement and contract award guidelines.

Monitoring and evaluation: Monitoring and evaluation are critical aspects of a sound system of public expenditure management. The Bill prescribes a monitoring and evaluation process targeted at ensuring better management of projects and programmes and for holding budget holders accountable for planned outputs and outcomes.

Why the fiscal responsibility bill?

Our history of fiscal imprudence - typified by macro-economic instability, poor implementation and, indeed, outright abandonment of capital projects, and an unsustainable debt burden - more than any other consideration, makes the passage of the Bill imperative. The need to continue to improve the management of the national economy and key economic indicators for sustained macroeconomic stability also makes the Bill compelling. Our developmental aspirations can only be realised in an environment conducive for businesses to thrive, wealth creation, employment generation and thereby helping in reducing poverty.

Our Constitution obligates us to control the national economy in such manner as to secure the maximum welfare for our citizens. We can only achieve this through better control of the macro-economic variables that affect the well-being of the national economy and better coordination of the fiscal affairs of all three tiers of government - albeit- without prejudice to the financial autonomy of each tier. The fiscal actions of all tiers of government affect these macro-economic variables to varying degrees. It is, therefore, only prudent that we all prescribe and adhere to simple rules of financial management to safeguard the well being of the national economy. There is, indeed, only one national economy.

What benefits will accrue to Nigerians?

The evidence of the benefits accruable is compelling. We have reduced our national debt to manageable levels, the national economy is stronger than at any time in the past two decades. Exchange rates have stabilised, inflation is well within control and interest rates are on the decline. I invite you to imagine how much better off we would fare if all tiers of government adhere to and faithfully implement the gamut of the rules of fiscal prudence prescribed in the Fiscal Responsibility Bill. Undoubtedly, the Bill will enable us accelerate the attainment of our developmental aspirations as documented in the National Economic Empowerment and Development Strategies (NEEDS) and the Millennium Development Goals (MDGs).

We would be better placed to ensure that government discharges its primary function of providing public goods and services to her citizens in an efficient and timely manner and generally improve the quality of life of Nigerians.

Mechanisms for enforcement: The Fiscal Management Council to be established by the Bill will be responsible for monitoring and enforcement of the Law. It will have specific powers that include investigation and forwarding of violators to the attorney general of the Federation for prosecution.

The Bill stipulates fines and imprisonment for non-compliance with the law by relevant persons such as the Minister of Finance, State Commissioners for Finance, Local Government Treasurers, the Accountant-General at the Federal and State levels and Chief Executives of Parastatals and Government Agencies.