The balance in the Excess Crude Account (ECA) as at the end of January, 2020 was scandalously low that Nigerians had wondered how the fund was being managed. Nigerians were unaware that the supposedly Piggy Bank was almost empty until the Federation Account Allocation Committee (FAAC) issued a statement last week, saying the strategic reserve account had a balance of $71.814 million, down from $324.968 million on January 15. There was no explanation given as to how and why the account was depleted.
The spending was in disregard to the Central Bank of Nigeria (CBN) warning in January that the situation in Nigeria had become critical and that the fiscal authorities must build up buffers against “revenue shocks” by saving for the rainy day. As at May 2015 when Buhari took over as president, there was the sum of $2.29 billion in the ECA, which, compared to the savings in other oil-producing countries accounts, was still a disappointment.
Though it has no supporting legislation, ECA was initiated by former President Olusegun Obasanjo in 2003. Crude oil sales in excess of annual budgets benchmark was expected to be deposited in that account as savings. For instance, the benchmark set by the Buhari administration for crude oil revenue was $60 per barrel. As at this week, crude oil sold for $65 per barrel, therefore, the excess of $5 per on each of the 2.2 million barrels of crude oil sold daily should have been deposited in the ECA. All things being equal, an average of sum of $12 million should accrue to ECA from daily crude oil sale. But, from all indications, this does not happen.
Several oil producing countries have huge balances in their equivalent of ECA. In Kuwait, it is called the General Reserve Fund; in Norway, it is referred to as State Petroleum Fund; in Chile, the name given to it is Copper Stabilization Fund; while in Oman, it is State General Reserve Fund. For instance, Oman had $20.8 billion in its SGRF account as at 2018. Chile had $14.3 billion in its account as at December 2019; and Algeria had $56.7 billion as at 2012.
Stabilization Funds are maintained in order to cushion the effects of volatile revenues from sale of natural resources, like oil and gas. An effective management of such fund would keep oil producing countries afloat when oil prices drop dangerously due to gluts in the market, any natural disaster or other negative economic factors. However, in Nigeria, governments have, over the years, shared balances in this supposed savings account among federal and state governments, even when the country was not faced with any serious emergency. This is totally unacceptable.
We advocate the enactment of a law which should give legal backing to ECA. We challenge the National Assembly to activate the process of passing a Bill in this regard. Over the years, political officer holders, especially state governors, had argued that ECA could not stand because it had no foundation in law. To this end, they argued that any money that accrued from the sale of oil revenue must be distributed among the 36 states, and not held by the Federal Government under any guise. The argument is logical, but it does not obliterate the fact that Nigeria, as a nation, must develop a savings culture so that the huge population is not caught napping during unforeseen circumstances.
Even if there is no legal backing for the operation of ECA, we challenge the Ministry of Finance, FAAC and other stakeholders in the management of the Fund to ensure transparency and accountability. There should be no extra-budgetary spending from ECA, and when withdrawals are being made from the account, they should be declared; they should not be shrouded in secrecy. Government encourages Nigerians to maintain savings account. Government should also walk the talk – government should give no excuses for depleting the Excess Crude Account.