The ministry of finance has dismissed as untrue with detailed information the allegations by different people that various sums of money are missing from the Excess Crude Account and that the foreign reserve is being mismanaged
| By Maureen Chigbo | Jan. 19, 2015 @ 01:00 GMT |
THE controversy over the management of the Excess Crude Account, ECA, is lingering. But what is obvious since the debate which has been on over the years is that many people do not understand much about it. This explains why there is a lot of misconception, mischief and outright ignorance on the part of some commentators on the issue. It also explains why different figures have been bandied about as missing from the ECA by some governors, a former president and some interest group.
It also appears that despite the obvious falling price of oil which shows the need for saving for the rainy day, some Nigerians are calling for the abrogation of the ECA amidst allegations of mismanagement although some people still think it is necessary.
The intensity of the debate on ECA resonated again in this season of politics with the allegation by Governor Adams Oshiomhole of Edo State in December that $30 billion was missing from the ECA. Oshiomhole’s allegation got support from former President Olusegun Obasanjo who told some women who visited him on Monday last week that President Goodluck Jonathan squandered $23bn Excess Crude Fund he left behind in 2007, urging them to use the next general election to effect desirable change in the political landscape of the country.
“Our economy should not have been this bad. When I was leaving office about eight years ago, I left a very huge reserve after we had paid all our debts. Almost $25 billion we kept in what they called excess crude. The excess from the budget we were saving as reserve for the rainy days. When we left in May 2007, the reserve was said to have been raised to $35 billion,” he said.
“But today, that reserve has been depleted. The reserve we left when we finished paying all our debts of about $40 billion, that is including debt forgiveness, the remaining debt was not more than $3 billion. Our reserve after we had paid off this debt was about $45 billion. As I said, they continued till the end of 2007, I heard that the reserve increased to almost $67 billion before the end of the year. Our reserve now, I learnt is left with around only $30 billion. That is why the Naira has been falling against the dollar. What would now happen, I learnt if you want to buy a dollar now, it’s about N192 or N195. What it means is this, what you have been buying at N150 to a dollar, now you need N192 or N195 to buy it. That is the real situation. Is there any remedy? There is, but it does not come overnight because it means we have to give up all the bad things we have been doing,” Obasanjo said.
Obasanjo’s cant gained traction with the Afenifere Renewal Group, ARG, which asked Jonathan to abolish the ECA and other special accounts/funds in order to ensure transparency and stop government officials from stealing the federation’s resources. Olawale Oshun, national chairman of the ARG, while presenting its Nigeria Democratic Governance Report in Lagos, with the theme: “Curbing Political Instability and Extravagance,” in Lagos, said if the ECA and other accounts were not abolished, corruption would continue to thrive at the top level of government as these accounts were being used to embezzle money by government officials.
Oshun said that since 2012, daily crude production had consistently fallen short of projection which was attributed to oil theft, saying it is claimed that as much as 400,000 barrels of crude oil is stolen daily as illegal bunkering is festering in the oil industry, despite contracts worth billions of naira awarded purportedly to protect oil installations.
“We only hope that the data portending that only about half of accruable amount was remitted into the ECA is not really true. If it is, we wonder what happens to the unremitted balance. We also ask why all revenues cannot be treated as total inputs into the Federation Account? The nebulous act of creating all these accounts will not work in Nigeria’s corruption-prone platforms. The opaque management of special accounts in Nigeria always create potentials for fraud, whether in the retired PTF, ECA, SWF, or SURE-P.
“Imagine what benefit could have accrued directly in electricity, health and education sector if all revenues kept in spurious special accounts and budget heads had gone into the Federation Account and used to fund developmental projects. For instance, the N6.2tn ($41.7bn) spent is far above the “conservative estimate” of $36bn needed to improve power generation capacity to 40,000MW,” he said.
According to Oshun, in Budget Implementation Reports, BIR, N1.055 trillion was recorded as subsidy payments for 2011, but that the finance minister told the Senate that N2.2trillion was paid in 2011. “Clearly, other than the foreign reserves, which may be built up to cover six months of importation index from the present three-month cover, Nigeria needs no other purported savings, be it SWF, ECA or any other opaque fund/account from which unmitigated looting of the country’s patrimony is presently taking place.
“If 70 percent of expenses from the ECA still end up in the Federation Account, why could it not be abinitio when fund is full and yet to be stolen from? On December 17, 2014, $1billion was reportedly missing from the ECA, only for the finance minister to explain the next day that the amount was used to pay petroleum products marketers. 21 percent of ECA was used for this subsidy payment and another 9.5 percent for a nebulous special intervention fund,” he said.
However, the federal ministry of finance on December 26, 2014, issued a press release dismissing Oshiomhole’s allegation as untrue. According to the finance ministry “the widely published comment by Governor Adams Oshiomhole alleging that $30 billion is missing from the Excess Crude Account is shocking and totally untrue.
“The comments reflect, once again, the unfortunate tendency of some political players to politicise the management of the economy on the basis of half-truths and sundry distortions. This is not good for the country. There should be a limit to negative politics even during an election season such as this. Governor Oshiomhole’s sweeping comments give the impression that the federal government sits alone in secret and doles out whatever it wishes to the states from the federation account. But anyone who is familiar with the Federation Accounts Allocation Committee, FAAC, process knows that this is simply not true. The meetings are held every month and commissioners of finance and other officials represent their states and agreements are reached on issues including the sharing of proceeds from the account, it said.
The release signed by Paul Nwabiukwu, special adviser to the Ngozi Okonjo-Iweala, minister of finance and coordinating minister of the economy said, “There is no $30 billion missing from the Excess Crude Account as alleged by Governor Oshiomhole. How can such a huge amount be missing from the ECA and the Edo State governor will be the only one privy to this? It is instructive that the Edo State government did not table this allegation before FAAC for investigation or clarification before going public with a sweeping, political allegation based on casual, back of the envelope calculations.”
It should be recalled that Governor Amaechi of Rivers State made a similar allegation in November last year when he raised a loud alarm that $5 billion was missing from the same Excess Crude Account. But the ministry subsequently showed, with facts, that not only was the money not missing, the Rivers State government got N257.6 billion from the Account between January and October 2013. Governor Oshiomhole’s allegation seems to be cut from a similar political fabric.
Governor Oshiomhole correctly observed that the economy would be in better shape today if we had saved more for the rainy day. But he failed to recall that the federal government’s strong advocacy for a low budget benchmark and greater savings in the ECA articulated by the Okonjo Iweala was repulsed by some governors. There is no doubt that oil theft is a challenge but this too would have helped.
“We do not share Governor Oshiomhole’s overly bleak view of the country’s economic prospects. Yes, the challenges are great and cannot be wished away but as Moody’s, the international ratings agency and the IMF confirmed recently, the economy is resilient despite the oil price crash and we retain some advantages as we confront these challenges,” Nwabuikwu said
Also the ministry issued another statement again last week to clarify the facts of the recent history and status of Nigeria’s Excess Crude Account and foreign reserves, an issue that is, in this election season, gaining more headline attention. “Because of the importance of this key economic indicator, we believe it is important to restate the true position in the interest of the Nigerian public as well as local and international investors,” it said. .
“First, it is absolutely not true that the administration of President Goodluck Jonathan has squandered the nation’s reserves. The facts are clear and indisputable. At the end of May 2007, Nigeria’s gross reserves stood at $43.13 billion – comprising the CBN’s external reserves of $31.5 billion, $9.43 billion in the Excess Crude Account, and $2.18 billion in federal government’s savings. These figures can be independently verified from the CBN’s records. The figure of $67 billion cited in some recent commentary is therefore factually incorrect,” the ministry said.
Second, it states that it is a misconception to think that reserves are immutable or cast in stone. The reality is that since May 2007, the reserves have fluctuated in line with developments in the international oil market, rising from $43.13 billion at that time, peaking at $62 billion in September 2008 during the Yar’adua/Jonathan Administration when oil prices reached a peak of $147 per barrel, and falling subsequently to a low of $31.7 billion in September 2011. This fall in reserves was largely a result of the vicissitudes of the global economy and oil market which caused the CBN to intervene, using some of the reserves, to defend the value of the naira.
Thirdly, the ministry explained that the excess crude savings, which it should be noted as component of the reserves, was largely used to cushion the economy at the height of the global financial crisis in 2008-2009. As a result, Nigeria was one of the few countries in the world that did not seek assistance from international financial institutions at that time. The fiscal stimulus used to shore up the economy during that period was shared by all 3-tiers of government. Similarly, savings in the ECA were also used to pay for fuel subsidies for the entire nation and that sharing continued after the crisis ended. Starting in 2012, such payments have been published each time they are made.
Fourth, The ministry states it is true the savings in the ECA would now have been higher but for the fact that a number of governors, against strong professional advice, actively kicked against continuous building up of the ECA and, indeed, pushed for its sharing. It is on record that States even took the federal government to court on this matter, and the case is still pending at the Supreme Court.
Fifth, it is also worth noting that the Jonathan administration built the first ever Sovereign Wealth Fund for the nation in which savings are being made for future generations of Nigerians and important infrastructure investments are being supported. It is also a matter of public knowledge that the Fund would have generated more savings and investments if the same sort of opposition that blocked savings in the ECA had also not been at work.
The ministry averred that by common agreement between the federal government and state governors, in 2009, an amount of about $5.5 billion was drawn from the ECA and used for investment in Independent power projects. Today, various State governments are shareholders in the projects and hold share certificates confirming their stake in the projects.
On the use of reserves, the ministry said: “It is not correct to say that the nation’s external reserves were dipped into or misapplied by the Administration. Anyone familiar with foreign reserves management will be aware that the federal government cannot dip its hands into the external reserves. Like in other countries, the management of external reserves is one of the statutory mandates of the Central Bank of Nigeria, CBN.”
Section 2 sub-section (c) of the CBN Act (2007) states that the CBN shall “maintain external reserves to safeguard the international value of the legal tender” – in other words, to defend the value of the Naira. No President since the democratic dispensation has contravened this Act, it noted..
The reserves are also used to settle both public and private sector foreign currency obligations, including the importation of goods such as equipment for power sector. Whenever an agency of government or a private individual/company needs to make a payment in foreign currency (e.g. payment of goods and services, settlement of external debt, etc) it must provide the naira equivalent to the CBN in exchange for the required foreign currency.
From the above, it is clear that Nigeria’s reserves during the period were not squandered but used appropriately in the course of normal transactions required for the development of the Nigerian economy, the ministry said.