Why the Fiscal Responsibility Act fails and what must change
When Nigeria enacted the Fiscal Responsibility Act (FRA) in 2007, it was supposed to draw a firm line between fiscal prudence and recklessness. The law promised transparency, debt sustainability, and an end to borrowing for the wrong reasons. It was anchored in the 1999 Constitution’s declaration that “the security and welfare of the people shall be the primary purpose of government” (Section 14(2)(b)), recognising that fiscal policy is not abstract economics but a constitutional duty. Eighteen years on, the FRA is more honoured in breach than in observance. Its key provisions are routinely ignored, and the institutions meant to enforce it have been rendered toothless.
The FRA is clear. Section 41(1) limits borrowing at all levels of government to capital projects and human development, and only on concessional or reasonable terms. Section 30(1) requires the Finance Minister to publish quarterly budget implementation reports within 30 days of each quarter’s end. These are binding obligations, yet successive governments have borrowed to fund salaries and other recurrent costs, in breach of Section 41. Budget reports, when released, are often late and insufficiently detailed for genuine public accountability.
The Fiscal Responsibility Commission (FRC), established under Part II of the FRA, is supposed to monitor and enforce compliance. Yet, the FRA denies it prosecutorial powers. It can “advise” and “recommend” but cannot compel or sanction. The result is that fiscal violations have become cost-free political choices. This is where the FRA fails the constitutional test of effectiveness. The CFRN’s Section 15(5) says: “The State shall abolish all corrupt practices and abuse of power.” Allowing blatant statutory breaches without consequences undermines that constitutional command.
From a political economy perspective, Nigeria’s fiscal rules operate in a marketplace of political bargaining. Debt is not merely a financing tool, it is a political resource. Governors and ministers use borrowing to fund patronage and secure political loyalty, while legislatures, often controlled by the executive, rarely exercise fiscal oversight.
At the subnational level, the problem deepens. Many states have not domesticated the FRA, and those that have often treat it as optional. State assemblies seldom challenge fiscal indiscipline, even when debt levels breach prudent thresholds.
Several countries in the Global South demonstrate that fiscal responsibility laws can work when backed by real enforcement. In Brazil, violations under the Lei de Responsabilidade Fiscal attract personal criminal and administrative sanctions, with all budget execution data published online in real time. South Africa’s Public Finance Management Act (PFMA) makes reporting deadlines legally binding, with penalties for non-compliance, while Kenya’s 2012 Public Finance Management Act empowers the Controller of Budget to block unlawful spending. The common thread is not the language of the law alone, but its enforcement through sanctions, transparency, and independent oversight. Nigeria has also pledged to meet global fiscal standards, from the IMF Fiscal Transparency Code and OECD Best Practices for Budget Transparency, to the Extractive Industries Transparency Initiative (EITI) and the African Peer Review Mechanism, yet these commitments are consistently undermined when domestic laws like the FRA are ignored.
Recent borrowing approvals by the National Assembly have further exposed the gap between the Fiscal Responsibility Act’s intent and its application. In July 2025, the Senate approved over $21 billion in external loans for 2025–2026, alongside large domestic borrowings, following a $2.2 billion Eurobond approval in late 2024. These approvals raise red flags under Section 41 of the FRA, which restricts borrowing to capital expenditure and human development, and under Nigeria’s Medium-Term Expenditure Framework obligations to maintain a debt-to-GDP ratio within prudent limits. With Nigeria’s debt-to-GDP ratio already edging toward the government’s own 40 percent ceiling, and debt service consuming a disproportionate share of revenue, such borrowings risk breaching both the legal thresholds and the fiscal sustainability objectives the FRA was designed to protect. More troubling is that these massive loans were passed with minimal public debate, undermining the transparency and accountability standards Nigeria has pledged under international fiscal frameworks.
The opacity surrounding these borrowings is further illustrated by the experience of the Centre for Social Justice, a nonprofit think tank, which formally wrote to the National Assembly requesting a copy of the letters and attached schedule sent by President Bola Ahmed Tinubu seeking approval for additional loans and bonds. In its June 12, 2025 reply, the National Assembly stated: “your request cannot be granted, given that the National Assembly is not the author of the subject matter, copy of which you seek. You may approach the author for the same.” This response not only sidesteps the spirit of transparency envisaged by Section 30 of the FRA but also undermines public access to information on matters of significant fiscal consequence. By deflecting responsibility to the executive, the legislature abdicates its accountability role in scrutinizing and publicly justifying borrowing decisions. In effect, both arms of government shield the details of Nigeria’s debt commitments from citizen oversight, thereby weakening the rule of law and eroding trust in fiscal governance.
Breaching fiscal rules is not just a technocratic failing, it is a governance failure. Borrowing for recurrent expenditure is intergenerational injustice: saddling future Nigerians with debt that delivers no lasting assets. It worsens debt sustainability, erodes investor confidence, and deepens macroeconomic fragility. Repeated breaches without sanctions corrode the rule of law. If governments can flout clear statutory limits with impunity, they reinforce the perception that laws in Nigeria are optional for the powerful.
If the FRA is to matter, reforms must go beyond cosmetic amendments. The Act should be amended to give the Fiscal Responsibility Commission prosecutorial authority, along with clear and enforceable sanctions for violations. Compliance must be tied to federal allocations, so that states breaching FRA provisions face conditional transfers. Transparency should be institutionalised through real-time publication of budget execution and debt data, as practiced in Brazil. Legislative oversight needs strengthening by equipping and incentivizing parliaments to challenge fiscal indiscipline. Finally, the FRA must be domesticated in all states with harmonized sanctions and robust enforcement mechanisms, ensuring nationwide fiscal discipline and restoring public trust.
Fiscal responsibility is not merely an economic choice; it is both a constitutional duty and a moral imperative. Section 16(1) (a) of the CFRN obliges the State to utilize the nation’s resources to foster prosperity and build an efficient, dynamic, and self-reliant economy. Without real enforcement, the FRA will remain just another broken rule in Nigeria’s governance playbook. And as every constitutional lawyer knows, when rules break without consequence, it is not just the law that is in danger, but the republic itself.
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