Nigeria's savings from oil exports from its average production of 2.3 million barrels per day as estimated by the CIA World Factbook should be showing a healthy balance. Unfortunately, this is not the case. The Excess Crude Account, where the extra income from oil sales is domiciled, had been depleted to $2 billion by June this year, down from $11 billion in December 2012. This has triggered a bitter dispute between some state governors, led by Adams Oshiomhole of Edo State and the immediate past Minister of Finance, Ngozi Okonjo-Iweala. The authorities must get to the root of the matter and unravel how exactly public revenues were appropriated and spent.
Although the ECA has often been mired in controversy since it was established in 2004 by the Olusegun Obasanjo administration, the current row revolves around the alleged unilateral withdrawal of $2.1 billion from the account in the last days of the Goodluck Jonathan government. According to Oshiomhole, Okonjo-Iweala withdrew the money from the account sometime between January and May 2015 without the approval of the National Economic Council, a body of the 36 state governors and the Central Bank of Nigeria governor, which is chaired by the Vice-President.
The Edo governor, arguing that the last time money was shared from the ECA among the three tiers of government before December 2014, was in May 2013, said after the 58th NEC meeting in July, “We looked at the numbers … the last time the former Minister of Finance reported to the council, as it is in the minutes, she reported by November 2014 that we had $4.1 billion. Today, the Accountant-General’s office reported that we have $2.0 billion. Which means the minister spent $2.1 billion without authority of the NEC….”
But Okonjo-Iweala, the finance minister from 2011 to May 2015, has countered Oshiomhole, just as she did with Rotimi Amaechi, the former Rivers State governor, who had alleged in 2013 that $5 billion was missing from the ECA. At first, she explained that the money was shared with the knowledge of the governors and asked them to explain what they did with their allocations. But the governors, bristling with rage, refuted her charge and set up a committee of four to investigate the matter.
It was at this point that Okonjo-Iweala changed her narrative, stressing that the Federation Account Allocation Committee, whose membership comprises the Accountant-General of the Federation, the 36 state Commissioners of Finance and the Finance Minister, discussed the matter and distributed the allocations to the three tiers of government. Again, her claim was swiftly debunked by the Forum of Finance Commissioners (of the 36 states) and FAAC. Her rigmarole came to an end with her admission that the President (Jonathan) approved the withdrawals for fuel subsidy payments. Something definitely is not right here.
We welcome the setting up of a four-man governors’ panel to “look at what accrued, what it was spent for, when and by whom and who authorised the spending” by the NEC as an important step in unravelling the truth. Since all the parties have agreed that there is indeed a shortfall, it behoves the panel to establish whether the withdrawals were made in accordance with the law.
The ECA was established as “a stabilisation fund to meet annual budget deficits and contribute to the development of infrastructure and serve as a buffer against external shocks to the economy,” and the move to save for the rainy day in a time of oil boom is a noble idea. Revenues arising from prices higher than the pre-set budget benchmark were to be paid into it. The plan was that the fund would be used if oil prices fell consistently for three months below the budget benchmark. Now that prices have been falling for a year and many state and local governments owe staff salaries, it cannot play the role it was established for. This is depressing.
Jointly owned by the Federal Government, the 36 states and 774 local governments, there is nowhere in the 1999 Constitution that authorises the President, minister or any other person to unilaterally approve or spend money that belongs to the three layers of government. We charge the Muhammadu Buhari administration to take a strong action on these allegations and prosecute any person that might have drawn money from the account illegally.
The bleeding of the ECA raises another key issue: the meagre accruals to the account from 2007 (when it was $23 billion according to Obasanjo) to 2014 at a period when oil prices averaged $100 per barrel, much higher than when the fund was first built up. Nigeria, the 13th largest oil producing country in the world, consistently sold its oil at prices higher than the annual budget benchmarks until August last year, and critics wonder why the ECA did not grow correspondingly.
A former Central Bank of Nigeria governor, Lamido Sanusi, had warned of the parlous state of the ECA shortly before Jonathan relieved him of his job early in 2014. He had lamented the plundering of the ECA at a time of high and stable oil prices, stressing that it sign-posted grave danger to the economy. “This absence of fiscal buffers increased our reliance on portfolio flows, thus constituting the principal risk to exchange rate stability, especially with uncertainties around capital flows and oil price,” he said. Events have proved him right.
Now, the reality is that Nigeria has little to fall back on after the collapse of crude oil prices by 50 per cent in the international market over the past year. Gross external reserves, which were $43.83 billion in December 2012, plunged a few months ago to about $29 billion before recovering to $31.89 billion in July.
With the ECA standing at about $2.1 billion and another $1.4 billion in the Sovereign Wealth Fund, Nigeria, with a production of 2.3 million barrels per day, has pitiably meagre savings. In comparison, Norway, which produces an average of 1.8mbpd, has the world’s richest SWF estimated at $882 billion. In the first quarter of 2015, Norway’s fund raked in a profit of over $50 billion. Algeria has $50 billion, troubled Libya $66 billion, Angola, which started its fund in 2006 has $5 billion and Iran $62 billion in spite of being under decade-long sanctions from the West over its nuclear ambitions.
To survive the hard economic times, especially as crude oil prices continue to plummet, Nigeria needs a firm curb on the impunity in the management of our resources. An early resolution of the ECA imbroglio and punishment of all those found liable will send a strong message to those who might want to corruptly enrich themselves at public expense in future.
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