Excess Crude Account…and the controversy lingers

It was created to save funds for the rainy day. But, the Excess Crude Account (ECA) has been a conduit pipe to siphon cash by ECA’s managers, writes Assistant Editor Nduka Chiejina [The Nation]

Those who created the Excess Crude Account (ECA) in 2004 meant well. It was opened during the Chief Olusegun Obasanjo presidency to save oil revenues above the established benchmark at the beginning of every fiscal year.

The primary objective is to shield budget estimates against shortfalls that may arise from volatility in crude oil prices at the international market.

By separating government expenditures from oil revenues, the ECA was designed “to insulate the economy from external shocks”, a modern threat known to many countries in the 30s and 40s.

In four years after its creation, savings in the ECA had risen almost four-fold. It rose from $5.1 billion in 2005 to more than $20 billion in November 2008. The surging crude oil prices accounted for the rise. The savings at the ECA as at 2008, accounted for one-third of the country’s external reserves.

But, by June 2010, the account had been depleted to below $4 billion due to budget deficits at all levels of government and the steep drop in oil prices.

Before the turn of 2010, the National Economic Council (NEC), comprising of state governors, Central Bank of Nigeria (CBN) Governor, and headed by the vice president, had approved the creation of the Sovereign Wealth Fund (SWF) Account.

The long-term plan was to erase the ECA and strengthen the SWF Account, which was established principally to create wealth for the common good.

At the expiration of the Chief Obasanjo administration on May 29, 2007, the country’s gross reserves stood at $43.13 billion, comprising the CBN’s external reserves of $31.5 billion, $9.43 billion of which was in the ECA and $2.18 billion in the Federal Government’s savings. These figures were contained in the CBN records.

Not a few Nigerians believe that the country’s reserves should remain unchanged, or maintain a steady increase. But, since May 2007, the reality is that the reserves have fluctuated in reaction to developments in the international oil market, rising from $43.13 billion at that time and peaking at $62 billion in September 2008, during the Yar’Adua/Jonathan administration when a barrel of oil  peaked at $147 before it subsequently fell to an all time low of $31.7 billion in September 2011.

The fall in reserves was due to the volatilities of the global economy and oil market which caused the CBN to intervene, using some of the reserves to defend the naira value.

The ECA savings, a component of the reserves, was used to cushion the economy at the height of the global financial crisis of 2008-2009.

It is on record that Nigeria was one of the few countries that did not seek assistance from international financial institutions for the period the global financial meltdown lasted. The NEC approved the withdrawal of funds from the ECA as fiscal stimulus to shore up the economy by the three-tiers of government.

Besides, the savings in the ECA were also used to pay for fuel subsidies for the nation and the sharing continued after the crisis.

Following allegations of mismanagement of funds in the account, any money drawn from the ECA has been published since 2012.

Some governors, who felt the ECA was unknown to the constitution kicked against the continuous building up of the ECA when Dr. Goodluck Jonathan was in the saddle.They were always pushing that monies be shared from the account to the three tiers of government.

It got to a point that the 36 states’ governors dragged the Federal Government to court on the matter. The case has not been decided by the Supreme Court till date.

The Federal Government and the state governors reached a consensus in 2009 to withdraw about $5.5 billion from the ECA. The withdrawal was invested in Independent Power Projects with the states as shareholders. They (state governments) have  share certificates as proofs of their stake in the projects.
The reserves are also used to settle both public and private sector foreign currency obligations, including the importation of goods and equipment for the power sector.

In January last year, the erstwhile Financial Minister and Coordinating Minister for the Economy Dr. Ngozi Okonjo-Iweala said the economy was under threat. She expressed concern over the continuous depletion of savings in the ECA.

The minister, who spoke on the sideline of the World Economic Forum in Davos, Switzerland, warned that the depletion of the ECA to about $2.5 billion had made the country more vulnerable than it was in the past, thereby putting the economy at great risk.

As a cushion against the depletion, she said: “We have tried to set the country’s main parameters in a very modest way. We have made our budget at a very reasonable benchmark price for oil. This is to shield us and to ensure we are not subjected to any volatility that may be in the oil markets.”
The ECA was depleted from $8.65 billion at the end of 2012 to $2.5 billion, while external reserves dropped 11 per cent from the previous year’s peak of $48.85 billion.

The Monetary Policy Committee (MPC) of the CBN, had after its bi-monthly meeting, expressed concerns over the depletion of the ECA, saying that “the absence of such fiscal buffers increases our reliance on portfolio flows thus, constituting the principal risk to exchange rate stability, especially with uncertainties around capital flows and oil prices.”

Also, the former CBN Governor, Mallam Sanusi Lamido Sanusi, decried the continuous fall in oil revenue despite stable price and production in 2013. He added that although the MPC acknowledged output losses due to theft and vandalism, that could not wholly explain the magnitude of the shortfall in revenue.

Sanusi said: “As a consequence, accretion to external reserves remained low while much of the previous savings have been depleted, thereby undermining the ability of the apex bank to sustain exchange rate stability.”

The CBN, therefore, urged the fiscal authorities to block revenue leakages and rebuild fiscal savings needed to sustain confidence and preserve the value of the naira.

In December 2014, the Federal Government withdrew $1 billion from the ECA to cushion the effect of the cash crunch occasioned by the acute shortage of funds due to declining global oil prices.
The ECA, which previously had $4.1 billion, was drawn down to $3.1 billion.

Most politicised account

Prof Tam David-West, a former petroleum minister, told a Lagos-based national newspaper in a May 2013 that “they (stakeholders) have been talking about ECA, but there is nothing like ECA. What we have is extra crude account.

“There is a difference between excess and extra. When you talk about excess crude account, that means you have done everything and there is still more money. If you based your budget on $40 for example, and if later on, oil price went up to $50 per barrel, the $10 difference is not excess. It is extra. There is nothing called excess crude account.

“It’s a lie. It is intellectually fraudulent. And they would say our foreign reserves have gone to several billions, I’m not impressed. What do we want to do with that? Have you taken care of the country? It’s like somebody saying he has N10 million in his bank account and that person is not able to feed himself and his children.”

$5 billion missing

In November 2013, former Rivers State Governor Rotimi Amaechi alleged that $5 billion had disappeared from the ECA. He demanded for explanations from relevant government agencies.

He spoke in his capacity as the chairman of the Nigerian Governors’ Forum (NGF) at a retreat organised by the governors’ umbrella body in Sokoto.  Amaechi urged Nigerians to rise up and ask questions on how the nation’s resources were being managed by the Nigerian National Petroleum Corporation (NNPC).

 According to him, such explanation would prevent the Federal Government from shortchanging the other tiers in the sharing of national resources.

Amaechi said it was shocking to discover that the ECA, which had a balance of $9 billion in January of that year, had inexplicably dwindled to $4 billion without explanation by the Federal Government.
Hec said: “The ECA in January was N9 billion. That account belongs to the federal, states and local governments. Today, it is N4 billion. We don’t know who took the N5 billion. Nigerians need to ask where the money has gone and why their money is being used as private funds.”

Amaechi also condemned the finance minister’s refusal to sign a loan agreement with the African Development Bank (AfDB) to free $200 million for the provision of water in Rivers State because of the alleged disagreement between him and the the former president.

Also at the same event, the breakaway faction of the Peoples Democratic Party (PDP), led by Alhaji Abubakar Baraje, challenged the Federal Government to account for the $5 billion, which allegedly disappeared from the ECA.

The National Publicity Secretary of the Baraje faction, Eze Chukwuemeka Eze, said in a statement that they “consider the development too weighty to be swept under the carpet in view of the stature of the person making the allegation and the realities on ground. For all intents and purposes, Governor Amaechi is not a frivolous person and he is not known for making frivolous claims.”

Reacting to the controversial $5 billion purportedly missing from the ECA, Dr. Okonjo-Iweala said: “the $5 billion which Governor Amaechi referred to in his statement had been shared to the three tiers of government to make up for the revenue shortfalls during the Federation Accounts Allocation Committee (FAAC) meeting.

“Part of this fund also went for the Subsidy Reinvestment Programme (SURE-P) payments and the balance for subsidy payments to oil marketers.”

$1 billion missing

At the budget breakdown on December 18, 2014, Dr. Okonjo-Iweala, said no money was missing from the ECA as reported in some national dailies.

According to her, “$1 billion from the ECA has been used to pay oil marketers and we published this on December 2, showing that we put N154.6 billion to pay oil marketers.

“This is why you now have about $3.1 billion in the ECA and I will implore that if people need information on what is happening, we are available to answer their questions.”

$30 billion disappears

A few days later, Edo State Governor Adams Oshiomhole alleged that the inability of the Federal Government to share money from the ECA in the last 18 months has distorted the developmental plans of state governments. He raised the alarm over massive stealing of public funds.

Speaking when the Association of Enigies from Edo South visited him at the Government House, Benin, Oshiomhole said: “Over the past 18 months, we have not shared money from the ECA and yet, the account is empty. Sometimes, we are told they have taken money from it to fund subsidies, including subsidy on kerosene. But, your royal highnesses, there is nowhere in your various domains where kerosene is sold for N50. So, in the name of subsidy, large sums of money are being stolen.”
He explained that the country ought to be saving $36 per barrel and 2.3 million barrel a day over the past three years, which would have amounted to over $30 billion, yet, the country could barely save $3 billion in the ECA.

In her response, Dr. Okonjo-Iweala dismissed Oshiomhole’s claim on the missing $30 billion. Her defence: “The widely published comment by Governor Adams Oshiomhole alleging that $30 billion is missing from the ECA 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.

“ Oshiomhole’s comments made it look as if the Federal Government gives out whatever it wished to the states from the Federation Account. Anyone  who is familiar with the FAAC process would know that it does not work that way.

“The meetings are held every month and commissioners of finance and other officials represent their states and agreements are reached on issues including the distribution of proceeds from the account.
“There is no $30 billion missing from the ECA as alleged by Governor Oshiomhole,’’ she said.

$20 billion grows wings

Dr. Okonjo-Iweala was once again put to task when another allegation  that $20 billion was missing from the ECA was made. An exasperated Okonjo-Iweala said it was strange for the NGF to allege that $20 billion was missing from the ECA. She said there was no basis for the forum to demand that she should account for such money from June 2013 to April 2015.

Her words: “The statement by the governors is totally strange because FAAC meets every month and the ECA is discussed at every session with all the state commissioners of finance present.

“So, governors who want any information about the ECA should ask for details from their commissioners, who should have the records of what was discussed and agreed upon.”

According to her, details of the ECA were also published every month along with the allocations to the three tiers of government. It added that the reference to June 2013 was immaterial as FAAC meetings during which the ECA and similar issues were discussed held every month.

She said Amaechi, who was reported to have read the communique on behalf of the governors, made a similar unsubstantiated allegation in November 2013.

“He alleged in November 2013 that $5 billion was missing from the ECA. We subsequently showed with facts that not only was the amount not missing, Rivers received N257.6 billion from the Federation Account between January and October 2013,”Mrs. Okonjo-Iweala said.

She assured that the Finance ministry, would, in a couple of days and in the interest of transparency and accountability, publish the details of the ECA for the last four years.

The finance ministry later released details of how it shared N6.21 trillion from the ECA to the three tiers of  government between 2011 and 2014.

She gave the breakdown in response to a demand by the NGF that she should explain how the over $20 billion in the ECA between June 2013 and April 2015 was managed.

The minister said she needed to make public the details in order to “clarify issues thrown up by recent claims made by Governor Rotimi Amaechi of Rivers State on behalf of some governors”.

According to the details as published by the former minister, the Federal Government got N3.29 trillion and the 36 states shared  N2.92 trillion from the ECA between 2011 and last year.
It  showed that the 36 states received N966.6 billion in 2011; N816.3 billion in 2012; N859.4 billion in 2013 and N282.8 billion in 2014.

The low figure shared in 2014 was attributed to a sharp drop in revenues due to the impact of the crash in global oil prices, which began by mid last year.

A further breakdown indicated that Akwa Ibom State received the highest allocation of N265 billion from the ECA. Rivers and Delta states trailed with N230.4 billion and N216.7 billion respectively.
Allocations to other states were Bayelsa (N176.3 billion); Kano (N106.5 billion); Lagos (N82.9 billion) and Kwara (N52.8 billion).

The six states that got the least allocations were: Enugu (N51.6 billion); Gombe (N47.7 billion); Nasarawa (N46.9 billion); Ekiti (N46.8 billion) and Ebonyi (N44.3 billion). $2.1 billion spent without
authorisation

The former minister denied the latest allegation that she unilaterally withdrew and spent $2.1 billion from the ECA “without authorisation”.

The allegation was made last Monday after the reconstitution of the NEC by President Muhammadu Buhari in Abuja.

Dr. Okonjo-Iweala’s spokesman, Paul Nwabuikwu, stated that “the allegation by some governors that her former principal, spent $2.1 billion from the ECA without authorisation is false, malicious and totally without foundation.”

In a statement,  Nwabuikwu said there was “no time  unauthorised expenditure was made from the ECA under Mrs. Okonjo-Iweala’s watch in the finance ministry. Decisions on such expenditure were discussed at FAAC meetings and such meetings are attended by finance commissioners from the 36 states.

Against this background, Mrs. Okonjo-Iweala maintained that the idea that she “spent $2.1 billion ‘without authorisation’ is simply not credible given that details of government receipts and expenditure are public knowledge.”

The former minister wondered how “some governors, who fought the Federal Government’s efforts to leave robust savings in the ECA and even took the Federal Government to court over the matter, could turn around to make such unfounded allegations?”

The statement described as “curious that in their desperation to use the esteemed NEC for political and personal vendetta, the persons behind these allegations acted as if the constitutionally recognised FAAC, a potent expression of the country’s fiscal federalism, does not exist.

“Nigerians know that collective revenues, allocations and expenditures of the three tiers of government are the concern of the monthly FAAC meetings.”

In the statement, Nwabuikwu said Mrs. Okonjo-Iweala acknowledged “the efforts of governors who are working hard to overcome the current revenue challenges facing their states without resorting to character assassination and blame games.

“The former minister is ready and willing to respond to legitimate enquiries about issues under her purview as finance minister. But it is clear that this is the latest chapter of a political witch-hunt by elements who are attempting to use the respected NEC for ignoble purposes, having failed abysmally in their previous attempts to tar  Okonjo-Iweala’s name.”

Mrs. Okonjo-Iweala also lamented in the statement that “one of such attempts took place in May, when some of these governors, hiding under the auspices of the NGF asked the former minister to explain $20 billion alleged to be missing from the same ECA.”

The finance ministry, she said, subsequently issued a statement and published an advertorial in national newspapers on May 25, 2015, in which it gave details of what the Federal Government and states received from the ECA in the last four years.

It also provided details of the use of the funds for payment of petrol subsidies and SURE-P allocations to all   tiers of government for development purposes.

Mrs. Okonjo-Iweala recounted how she “pioneered the practice of publishing monthly updates of all allocations to different tiers of government in order to empower Nigerians with information and knowledge of government revenues and expenditure.

“This enabled the public to ask questions about the utilisation of these resources. Of course, many elected and appointed public officials were not happy with this development.”

She claimed to have continued the practice when she returned in 2011 and even added periodic updates on the ECA, subsidy payments for verified claims by oil marketers for fuel imports as well as SURE-P payments.

Buck passing

In the heat of electioneering campaigns in November last year, the former minister spoke of a plan to draw about $2  billion from the balance of $4 billion in the ECA.

She, however, did not say what the money would be used for and none of the governors raised an eyebrow on the missing $2 billion until President Buhari cried out that he met a virtually empty treasury.

The state governments in November 2014 also proposed to the former President that $2 billion be shared from the foreign Excess Crude Account (ECA) to complete on-going projects and to the March 28 and April 11 general elections.

Erstwhile chairman of the Commissioners of Finance Forum, Timothy Odaah, from Ebonyi State, noted that security matters and the approaching  elections required enormous resources to execute and that the state governments were optimistic that Dr Jonathan, being an understanding president, would favourably consider the proposal.

Since 2011, both warring parties over the ECA have failed to convince the ordinary Nigerian evne as they engaged in trading blames. Both camps have been giving watered-down excuses. The governor’s who are the most vociferous on the claim of missing funds from the ECA have never come out with documents to substantiate their claims. Mrs. Okonjo-Iweala had always stuck to her gun by insisting that the decision to draw from the ECA was done with the knowledge of the governors through their finance commissioners.

The fact that cannot be denied is that it would have been better if there was enough savings  in the ECA  as conceived by those who established it, especially at a time like this, when   the country’s earnings from crude oil export have declined by 50 per cent and against the backdrop of President Muhammadu’s claim that his administration inherited a treasury that is virtually empty.

Three options are open to the incumbent administration. It can go after those who squandered the fortunes of the ECA and recover misappropriated funds, or devise creative ways of boosting the ECA. The third is a combination of the first two options. [The Nation]