Wasteful culture, poor management, corruption, lack of trust between state and federal governments, and worsening fiscal outlook may have played key roles in the depletion of the over $22 billion left in the Excess Crude Account (ECA) some 12 years ago.
In less than 12 years, after the death of former President Umaru Musa Yar’Adua, Nigeria has depleted the ECA from a whooping $22 billion to only half a million dollar, no thanks to the administrations of former President Goodluck Jonathan and incumbent Muhammadu Buhari.
The Natural Resource Governance Institute (NRGI) had ranked the nation’s ECA as the worst among other 33 sovereign wealth fund of oil countries. The International Monetary Fund (IMF) also rated the account as the world’s second worst after Qatar.
Established in 2004, the ECA was meant to stabilise the economy by buffering the impact of price volatility in oil exports. The difference between the market price of crude oil and the budget benchmark price of crude oil is usually credited in the ECA.
Introduced and built to $9.43 billion before the end of the reign of President Olusegun Obasanjo in 2007, it improved significantly to $22 billion under President Yar’Adua’s. By the end of Jonathan’s administration, it stood at $2.1 billion.
Reacting to the alarming rate at which the ECA got depleted, stakeholders in the finance, energy and legal sectors as well as civil society organisations have said that Nigeria’s ECA remained one of the most mismanaged external accounts in the world with a high level of corruption and lack of transparency.
Amid high level poverty, local and foreign debts, fiscal challenges and rising cost of living, the stakeholders insisted that the series of withdrawals made from the account have had no effect on the welfare of Nigerians in terms of living standard and infrastructural development of the country.
While admitting that current economic realities in the country does not provide room for saving, some of the stakeholders called for the immediate amendment of the Petroleum Industry Act (PIA) to allow the scrapping of the account, stressing that the excess crude fund is better in the Nigerian Sovereign Investment Authority (NSIA).
Nigeria is Africa’s largest oil producer. But years of oil boom has not translated into meaningful benefits for the masses except for the less than two per cent of the population, who are either politically exposed or owners of oil blocks.
Inequality has also remained alarming while the country now relies on borrowing to finance basic operations, including payment of salaries.
In early 2021, the balance in the ECA was $72.4 million. Despite higher oil price compare to budget benchmark, the ECA fell by almost half to $35million in a space of one year.
After falling to less than a million dollar last month, Nigeria’s Minister of Finance, Budget and National Planning, Zainab Ahmed, said the Federal Government withdrew $1 billion from the account to fund security.
Just few years into the Buhari administration, a Senator representing Cross River North Senatorial District, Dr. Rose Oko and some 41 senators had called for the scrapping of the ECA, insisting that it had been a drainpipe.
Oko had said: “It was reported that the ECA increased from $5.16 billion in 2005 to over $20billion in 2008, and decreased to less than $4billion by 2010 with no known tracking of its operations.
“At various times and from several quarters in 2013, it was purported that $5 billion was missing from the ECA, and that $2 billion was withdrawn without authorisation. These accusations between tiers of government portrays a financial system that is flawed and without probity.”
Former Chairman, Society of Petroleum Engineers (SPE), Nigeria Council, Joe Nwakwue, said while Nigeria has been in the red for sometime and is not surprising that the fund in ECA is being depleted, there remained an urgent need for the ECA to be liquidated.
According to him, the country cannot be saving the ECA balance while surviving on borrowing. “I believe the ECA should be liquidated and shutdown and the PIA provisions in the seventh schedule 11(3) implemented. This will ensure that such funds are managed according to the rules of the NSIA,” he said.
An associate professor of Law and Director of Abuja School of Social and Political Thought, Sam Amadi noted that dwindling of the Excess Crude Account is an indication of poor leadership, fiscal control and inability of the government to generate more revenue.
Amadi also said the development shows that the government is frequently bankrupt or lacked the required revenue.
According to him, government earnings have dropped significantly to the point that its debts servicing is more than its revenue as such the ECA will not be buoyant.
“Ultimately, it is a statement to the weakness in the management of the economy, the poor fiscal control and inability to generate more revenue profiles. Again, government has not improved earning from the oil and gas sector partly because of excess subsidy payment and poor management of the sector,” he said.
Co-founder of Sustainability School, Dr Olufemi Olanrewaju insisted that the management of the ECA is nothing different from the prevailing realities across every sector of the country, which is now in limbo.
Olanrewaju noted that the security, which has recently been the reason for withdrawal from the ECA, is going from bad to worse. Stressing that the masses on the street can’t feel any impact, he noted that the country is wasteful and spending so much in doing little.
Olanrewaju said: “It is not an oil issue but leadership crisis. Until we get the leadership problem right, the issue we remain.”
Managing Partner, The Chancery Associates, Emeka Okwuosa, said the inability of government to address oil theft, contributed to the low ECA, noting that it has been difficult to meet crude oil production benchmark in the budget.
He equally noted that the frequent fall back to ECA showed the level at which the country had become dependent on oil earnings to survive instead of diversifying the revenue base.
Okwuosa said: “We should diversify to other sources of income including agriculture. We should not leave all our eggs in one basket. Finally, the New NNPC is commercially driven, that should improve things going forward. We need to stop sharing our resources amongst states. States should find innovative ways to improve their Internally Generated Revenue,” he said.
Okwuosa also urged the Federal Government to deepen its institutions predicated on the twin pillars of accountability and transparency.
Former Director General of the Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf said the absence of conviction on the part of the governors in the culture of savings was part of the reasons the ECA had been shrouded in controversies.
He noted that contention by the governors over the constitutionality of the ECA, saying that the ECA depletion reflected the quality of fiscal management at all levels of government over the years.
“Most of all, given the current fiscal vulnerabilities, it is difficult to be talking of savings. Fiscal deficit is growing rapidly, the debt situation is getting worse and the fiscal space is extremely weak,” he noted.
Former President, Movement for the Survival of the Ogoni People (MOSOP), Ledum Mitee accused the federal government of treating the ECA as its Automated Teller Machine even when the account belong to both the federal and sub national governments.
He said: “The states have been content with paying lip service to what is going on with the account as they are content with expenditures by the federal government from the account in so far as they get some pittance from the sharing. The National Assembly, which should exert oversight functions have been complicit, to say the least, in the mismanagement of the account.”
He urged the Nigerian Extractive Industry Transparency Initiative (NEITI) to follow up on the account, while calling on the citizens to use NEITI reports to hold the government to account with respect to the account.
Meanwhile, the minority caucus in the House of Representatives has decried the level of oil theft in the country, which it noted has become an organised racket under the All Progressives Congress (APC)-led administration.
The caucus is disturbed by reports of alleged complicity by certain corrupt government officials as evident in the clandestine entrance and berthing of a 3-million-barrel capacity super tanker, MV Heroic Idun in Nigerian waters to criminally load millions of barrels of stolen crude oil.
“Such reported complicity is also evidenced in the failure of the Nigerian authorities to effectively intercept and arrest the criminal tanker and its crew, which successfully left the Nigerian waters only to be apprehended by the Equatorial Guinea Navy,” the caucus said.
“This shocking development underscores the massive sleaze in our nation’s oil and gas sector under the APC administration, with consequential crippling effect on our overall national economy and social wellbeing.
“It is indeed disturbing that under the APC administration, according to official reports, oil thieves are having a field day stealing up to 400,000 barrels of crude oil every day. This amounts to a daily siphoning of about $40m (given the current average global oil price of around $100 a barrel) accrued revenue meant for the wellbeing of Nigerians.
“Our caucus is saddened because such enabled sleaze is responsible for the crippling of our production and services sectors, massive unemployment; collapse of our critical sectors, including education, health and power; unbearable infrastructural stagnation and escalated insecurity with attendant excruciating hardship on our citizens.
The caucus, in a statement by its leader, Ndudi Elumelu in Abuja said it stands with Nigerians in demanding for an immediate, independent and open investigation into the issue of oil theft in the country with particular reference to the circumstances that facilitated the reported illegal operation by MV Heroic Idun as well as its escape from the nation’s waters.
The lawmakers urged President Muhammadu Buhari to, in the interest of suffering Nigerians, rise to the occasion and take urgent steps to halt the hemorrhaging of the national economy through crude oil theft.
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