The news broke in the Q4 of 2018 particularly the 19th of December that about $1.68 billion was drawn from the Excess Crude Account (ECA) in the last one month, leaving a balance of $631 million as at the date of the report.
Barely three weeks before then, the Minister of Finance, Zainab Ahmed, disclosed at the end of the Federation Accounts Allocation Committee (FAAC) meeting in Kaduna on November 25, 2018, that the balance in the account stood at about $2.319 billion.
At the end of the FAAC meeting for December in Abuja on Wednesday, Permanent Secretary, Federal Ministry of Finance, Mahmoud Isah-Dutse, said the money was withdrawn to settle the last tranche of the Paris Club loan refund to states.
The handling of the ECA has continued to receive criticism from various angles. The final tranche was vigorously criticized by the Peoples Democratic Party (PDP). In a statement disclosed to newsmen by the National Publicity Secretary, Kola Ologbondiyan, the party accuses President Buhari of “superintending over the surreptitious withdrawals from the ECA without recourse to the statutory appropriation of the National Assembly…”
The Permanent Secretary, Ministry of Finance, Mahmoud Dutse and the Accountant-General of the Federation, Alhaji Ahmed Idris, however also noted that due process was followed and the necessary approvals were gotten
It is a clear fact that the country’s oil reserves are depleting. This national asset belongs not just to the current generation but also to the future ones.
The rapidly changing dynamics and volatility of the global oil market thereby underscored the need for building material fiscal savings. Hence, the wisdom behind the establishment of ECA in 2004 to serve as buffer to sustain present and future developmental strides in Nigeria.
At times of crisis like when the price of oil nosedive, savings like those in the ECA could be used as a fiscal buffer to mitigate loss in income from either low price of oil or low oil production output.
During the global financial and economic crisis of 2008 to 2009, some of the savings were used to administer a fiscal stimulus to the Nigerian economy thus giving it a boost and warding off a recession.
In her book, “Fighting Corruption is Dangerous – The Story Behind the Headlines”, Ngozi Okonjo Iweala, the Former Minister of Finance gives a glance on the creation of the ECA and the many criticisms and events that followed.
She writes that despite the success of the oil-price based fiscal rule and the Excess Crude Account, governors opposed these mechanisms noting that the ECA was unconstitutional and that all monies therein should be shared with federating units and not saved, relying on Section 162 (1) and (3) of the 1999 Constitution. She continued, that the counter argument from the Finance Ministry and the Economic Management Team sprung from Section 16 (1) (a)(b)(c) of the Constitution which enjoins the State to amongst others (a) harness the resources of the nation and promote national prosperity and an efficient, a dynamic and self-reliant economy;
This and other challenges led to the creation of the Sovereign Wealth Fund (SWF) and the enactment into law of the Nigeria Sovereign Investment Authority act of 2011. $1bn out of the ECA was used as seed fund to kick start our SWF. As at 30th May 2018, Nigeria’s Sovereign Wealth Fund Savings stood at $2.15 billion.
The Nigeria SWF is comparably tiny being the eighth-largest exporter of oil in the world as opposed to the funds set aside in Saudi Arabia, Norway and Abu Dhabi, which have more than $600bn in assets as part of their funds.
Sadly, it can be said that Nigeria has frittered its oil revenues with large infrastructure deficit, white elephants projects and has also not saved enough for the future generations. The importance of savings cannot be over emphasized especially when optimally invested.
The withdrawal from the excess crude account to make payment for the tranche calls for some questions;
- Was the money originally collected from States to service the Paris Club Debt deposited into the ECA?
2.Why can’t a special account be created in the Central Bank of Nigeria for such deposit to service debts?
Continuously dipping hands into savings before the forming of rainy clouds is likely to cause complications for the future generations.
While the debate on the constitutionality of the ECA rages on, more focus should be placed on improving the SWF. The savings in the SWF should be maintained or rather spent on creating a springboard for stable long run growth that will benefit future generations. Today’s satisfaction should not be at the expense of the future.
Amuda Toheeb
Toheeb wrote via [email protected] and can be contacted on 09092434762
