OpeOluwani Akintayo
06 September 2017, Sweetcrude, Lagos – Over N3.9 trillion was “unusually” withdrawn from Nigeria’s Excess Crude Account, ECA, from 2005 to 2015, SweetcrudeReports findings have shown.
According to figures at our disposal, an estimated, N3.93 trillion was withdrawn in violation of the operating principles of the ECA.
The ECA account was established in 2004 as part of the economic reforms of former President Olusegun Obasanjo’s administration.
The government had adopted an Oil Price-based Fiscal Rule, OPFR, as part of the National Economic Empowerment and Development Strategy, NEEDS, approved by the Federal Government following nationwide consultations and debates among stakeholders.
The objective was to “create a predictable macroeconomic environment” and to encourage government savings.
The government was expected to ensure that the budget benchmark price is consistently below projected international oil prices, therefore, an attempt was made to legalise and institutionalise the ECA in the Fiscal Responsibility Act 2007.
The law stipulates that revenue in excess of a predetermined commodity price should be saved in a Consolidated Revenue Fund at the Central Bank, and to be invested by the bank in consultation with the minister of finance, state commissioners of finance and local government treasurers.
Specifically, the law states that government cannot spend the money “unless the reference commodity price falls below the predetermined level for a period of three consecutive months.”
However, a document obtained from the Nigerian Extractive Industries Transparency Initiative, NEITI, showed that within the years reviewed, a loan of N6.68 billion was given to the Association of Local Governments of Nigeria, ALGON, from the fund.
Another loan of N28.7 billion was also given to 32 states to pay London Club Debt refund. Likewise, N12.68 billion was withdrawn for the funding of Niger Delta Power Plants.
Another N24.16 billion was given to the Petroleum Equalisation Management Board from the ECA within the said period.
Again, N46.87 million was taken out of the account for the National Integrated Power Project, NIPP.
Subsidy for Petroleum Products Pricing Regulatory Agency, PPPRA, and oil marketers got the largest withdrawal of N3.45 trillion while SURE-P payment got a total of N400.39 billion.
Total “unusual” withdrawals within the periods were, therefore, N3.93 trillion (N 3,926,636,560,020.56).
The total credit balance in the ECA as at May 2017 was $2.3 billion.39.
“Collectively, the items in this category constitute about 67% of total outflow (N5.85 trillion), indicating that the unusual withdrawals were significantly more than double the withdrawals that were properly made”, NEITI said.
While N5.82 trillion was transferred into the account as excess revenue, N5.85 trillion was withdrawn.
This meant that in 11 years, 2005-2015, there was almost no net addition to the domestic ECA, as a credit balance in the ECA was less than 0.5% of total inflows.
In seven out of the eleven years – 2005, 2006, 2007, 2009, 2010, 2013 and 2015 – these “unusual” withdrawals represented the entire outflow, 100%, from the domestic ECA, according to NEITI.
Another review of the ECA (domestic) showed that disbursements by the Federation Account Allocation Committee, FAAC, which can be classified as the only ‘proper’ disbursements since FAAC is the body statutorily empowered to distribute Federation revenue, accounted for less than 25% of total disbursements, and about half of the expenditure on a single item (subsidy payments) on the ‘unusual withdrawals’ list”, it said.
In June this year, the government released details of the first part payment of the Paris Club refunds paid to states.
The payments, totaling N516,384,636,883.81 (N516.38 billion), were made to the 36 states and the Federal Capital Territory upon the approval of President Muhammadu Buhari on November 21, 2016.
According to Salisu Danbatta, director of information in the Ministry of Finance, the payments were in partial settlement of longstanding claims by state governments relating to over-deductions from their FAAC allocation for external debt service arising between 1995 and 2002.
Again in July, the government released another list for the second portion of the refund to the states.
According to government’s list, 37 states and LGAs benefitted from the N243,795,465,195.2 loan. Total amount released for both months to the states was N295,480,102,079. 01.