States governors are pushing for the sharing of the $2.25 billion in the Excess Crude Account (ECA), as a way of cushioning the cash crunch, which has hit the nation several months ago following the crash of crude oil at the international markets, New Telegraph has learnt. Crude oil, Nigeria’s major source of revenue and foreign exchange earnings has crashed from about $100 per barrel in 2014 to over $40 lately, compelling the Federal Government to seek other ways of generating additional revenue to cushion the effects of crude price rout.
The governors are said to be canvassing the sharing of the ECA through their finance commissioners who are their states’ representatives at the Federation Account Allocation Commission (FAAC), a source privy to last week’s deliberation at FAAC meeting hinted our correspondent.
The ECA, which was created as a buffer to save oil revenues above a base amount derived from a defined benchmark price, has been depleted over the years following incessant withdrawal and sharing amongst the three beneficiaries – the Federal Government, states and local governments.
The ECA had risen to $22 billion in 2008, but dropped to $4 billion in 2011 and currently holds about $2.25 billion. A group, consisting states’ Commissioner of Finance, said to be acting on directive of their governors whose identities the source refused to disclose, have been fingered as arrowheads behind the agitation for sharing this fund.
Speaking in confidence because of the sensitive nature of the issue, the source, who was privy to last week’s FAAC deliberations, said: “A member of FAAC stood up and reviewed the precarious financial position across most states, including the local governments such as pile ups of staff salary obligations and debt owed contractors.
He said there was urgent need to take a proposal to Mr. President to share the money in ECA in view of the unhealthy economic conditions of all the states. “The FAAC member also suggested that the amount in the Treasury Single Account (TSA) be reconciled with a view to paying in what was meant for the federation account.”
Fresh push for the ECA sharing by states came up on the day the federal government adopted loan service deferral for states that accessed financial bailout fund. In response to their huge financial burden as a result of loan service obligatory repayment, the National Executive Council (NEC), last week, approved deferment of loan service for March. The deferral, amounting to a total of N10.9 billion, is to ensure indebted states are in a better position to meet their salary obligations.
Efforts by New Telegraph to get official confirmation on renewed bid for ECA sharing by states were unsuccessful. Deputy Director (Press) in Office of Accountant General, Mrs. Kene Offie, did not respond to phone calls and Short Messaging Systems (sms) sent to her phone.
Last Thursday, the three tiers of government shared what turned out as lowest allocation in last four years. The grand total allocation approved for sharing among federal, states and the 774 local government as April allocation by FAAC fell by N39.018 billion.
A paltry N299.747 billion, as against N338.765 billion shared in previous month, was approved for three tiers as April allocation last week. New Telegraph learnt that members of FAAC are sharply divided as to whether to treat the monthly N6.330 billion refund of the Nigerian National Petroleum Corporation (NNPC) to the federation account as revenue or debt owed by the corporation.
According to the source, NNPC refund, as item was extensively debated last week at FAAC session with no resolution reached. “A member had raised an observation that treating NNPC debt refund to FAAC as revenue was wrong because the piece meal refund was debt owed FAAC by the corporation, which ought not to be treated as revenue. At the end of the day, no resolution was adopted on the issue, but I’m sure it’s one item that will be re-visited again,” he said.
Meanwhile, members of FAAC have expressed concerns over nine per cent interest rate charged on loans received by states as bailout, including interest charged on ECA account.They argued that the high interest charges on the two accounts are a departure from interest charges on foreign loans, which in their claim attracts less than nine per cent.
Subsequently, FAAC members, the source hinted, urged Central Bank of Nigeria (CBN) to consider reduction from nine per cent to three per cent in view of dwindling fortunes in the economy. He said the finance commissioners also urged the government to take drastic measures to turnaround the economy as failure to do so, might make some states become bankrupt.
The creation of ECA in 2004 by former President Olusegun Obasanjo and Nigeria Sovereign Investment Authority (NSIA) by Dr. Goodluck Jonathan were resisted by states’ governors and the National Assembly. For ECA, the controversy culminated into litigation instituted collectively by 36 states challenging the constitutionality of the ECA. In 2008, the 36 states went to court to compel the Federal Government to stop operating the ECA and to transfer the funds in it to the Federation Account for sharing among the three tiers of government. While the case was still pending in court, President Jonathan compounded the problem by replacing the ECA with the NSIA, otherwise known as the Nigeria Sovereign Wealth Fund (NSWF) in May 2011. This also faced similar opposition by the gover-nors, lawyers, political parties and members of the National Assembly.
In October 2011, the 36 states went back to the court to stop the Federal Government from withdrawing $1 billion from the ECA to the NSIA as “seed” money to start the operation of the NSIA. After failing to force the states from withdrawing the case from the court, the Federal Government decided to pursue it in the court.
However, when the case came up for hearing at the Supreme Court in March 2012, the Federal Government pleaded with the court to allow it seek an out-of-court settlement with the states. The Federal Government continued to operate the ECA by paying “excess oil revenue” into it while depleting it at the same time.
The dying days of the Jonathan administration witnessed attacks and counter-attacks between former Minister of Finance, Dr. Ngozi Okonjo- Iweala and the Edo State Governor, Adams Oshiomhole, over depletion of balance in the ECA.
