{"id":2845,"date":"2022-08-16T13:23:03","date_gmt":"2022-08-16T13:23:03","guid":{"rendered":"https:\/\/placng.org\/Legist\/?p=2845"},"modified":"2022-08-16T13:23:05","modified_gmt":"2022-08-16T13:23:05","slug":"depletion-of-excess-crude-account-resurrects-questions-on-its-legality-exposes-weak-oversight","status":"publish","type":"post","link":"https:\/\/placng.org\/Legist\/depletion-of-excess-crude-account-resurrects-questions-on-its-legality-exposes-weak-oversight\/","title":{"rendered":"Depletion of Excess Crude Account Resurrects Questions on its Legality & Exposes Weak Oversight"},"content":{"rendered":"\n

Recently, Nigerians received with shock, the news of the depletion of the Excess Crude Account (ECA) from a massive $2.1 billion in 2015 to $376,655 in July 2022. On July 26th<\/sup>, 2022, the Office of the Accountant General of the Federation disclosed that the account dropped sharply from $35.7 million in June 2022 to the current $376,655, which translates to about 10,000% drop in one month.<\/p>\n\n\n\n

The Excess Crude Account (ECA) was created in 2004 by\nthe Obasanjo administration to serve as an account into which the excess amount\nof the budgetary benchmark from the sale of crude oil is to be paid. The\nessence of the account is to protect planned budgets against shortfalls due to\nfluctuations in crude oil prices. For instance, in the 2022 budget, the price\nof crude oil is pegged at a benchmark of $62 per barrel, while oil is currently\nsold at $100 in the international market; the $38 profit per barrel is\ndesignated to be paid into the Excess Crude Account. The account was created to\nbe jointly operated by the Federal, State and Local government and withdrawals\ncould only be made with the approval of all three tiers of government. The\naccount reportedly had a balance of $20 billion in January 2009.<\/p>\n\n\n\n

The Special Assistant to President Muhammadu Buhari on\nDigital\/New Media, Tolu Ogunlesi explained that the Excess Crude Oil Account\ndeclined as a result of $1 billion spent on purchasing security equipment,\nwhile a substantial amount went into the Sovereign Wealth Fund (SWF)\/ Nigeria\nSovereign Investment Authority (NSIA).<\/p>\n\n\n\n

A further breakdown showed that in 2019, $1 billion\nwas withdrawn for the procurement of critical equipment for the Nigerian army,\nNavy and Airforce; $496 million was paid for 12 Super Tucano fighter aircraft\nfor the Airforce, while $380.5 million was disbursed for the procurement of\nvarious critical military equipment in a direct government to government\ncontract. The major depletion of July 2022 has been attributed to the advanced\npayment for the purchase of brand-new offshore patrol Vessels for the Nigerian\nNavy, as part of the effort to strengthen maritime security.<\/p>\n\n\n\n

Controversy over spending from the ECA is not new. The Federal and State governments have been accused of appropriating\nmoney arbitrarily from the ECA to execute various\ninfrastructural projects not considered fit-for-purpose.\nIn 2018, the President came under heavy criticism by the\nNational Assembly when he gave an anticipatory approval to purchase the Tucano aircrafts from the US government without National\nAssembly approval. Legislators were outraged calling it an impeachable offence.\n<\/p>\n\n\n\n

It has been said that for Reserve Funds to have the\nintended impact, there must be binding rules stating the purpose of the fund,\ndefining conditions for deposits and withdrawals, and possibly indicating caps\non withdrawals. This is particularly key as news reports have shown that\nwithdrawals were made from the country\u2019s \u201crainy\nday funds\u201d at times when the sun of revenue surpluses was shining\nbrightly. <\/p>\n\n\n\n

Unfortunately, legislative response\non this matter while attempted, has been inadequate. In the 8th<\/sup>\nAssembly, a motion titled \u201cThe Excess Crude Account: <\/em>A<\/em>n <\/em>I<\/em>llegality\nand a <\/em>D<\/em>rainpipe\u201d<\/em> was debated in the Senate. At the time, it was reported that the ECA\nhad \u201cincreased from $5.16 billion in\n2005 to over $20 billion in 2008, and decreased to less than $4 billion by\n2010, with no known tracking of its operations.\u201d They\nreferred to it as the \u201cbiggest slush fund\u201d in the country for State Governors, adding that one-third of the spending were\ndone with illegality. They called for the account\nto be abolished but failed to agree on a resolution to investigate\nthe revenue that accrued to the accountsince its\ncreation in 2004, as well as\nits utilisation.<\/p>\n\n\n\n

Perhaps the bigger issue which has never been fully\naddressed is concern over the legality of the Excess Crude Account which many\nhave said contradicts the provisions of the Constitution. Under the 1999  Nigerian Constitution, the only accounts\ncreated to be maintained by the Federal government for the purpose of\ncollecting revenue is the Federation Account (in section 162 (1) and meant for\nthe three tiers of government) and the Consolidated Revenue Fund (in section 80)\ninto which revenues or other moneys raised or received by the Federation is to\nbe paid into (excluding revenues or other moneys payable into any other\npublic fund of the Federation established for a specific purpose)<\/em>.\nTherefore, there is really no law that provides for the establishment and\nmaintenance of the Excess Crude Account. It has been recommended that the\nExcess Crude Account either be abolished to avoid duplicity as the Federation\nAccount is still in existence or legalised through an Act of the National\nAssembly, so as to ensure properly regulation and accountability.<\/p>\n\n\n\n

The government tried to address this through the\nestablishment of the Sovereign Wealth Fund (SWF) in\n2012 backed by the Sovereign Wealth Investment Authority Act 2011.\nThe fund aims to encourage savings from crude oil earnings and promote investments. It followed from negotiations with State\nGovernors who had initiallyquestioned its constitutionality and threatened to\nscuttle it. The fund was intended to replace the Excess Crude Account (ECA) but\nthis did not materialise as the Governors wanted the ECA to remain. Like\nthe ECA, the Sovereign Wealth Fund is owned by\nthe three tiers of government (federal, state and local). However, unlike the\nECA, it is expected to function independently of political pressures for\nwithdrawals and transparency regarding its use.<\/p>\n\n\n\n

Questions over the constitutionality\nof the Sovereign Wealth Fund however also remains as it is the product of an\nAct not the Constitution. In recent times, the body has had tensions with the\nNational Assembly who has accused it of consistently refusing to present their\nbudget for approval. The House of Representatives\nCommittee on Finance had threatened them with a zero-budget vote for 2022,\nwhile the Chairman of the House Committee on Public Accounts, Hon. Oluwole Oke,\nwent as far as proposing a bill to repeal the Nigeria Sovereign Investment\nAuthority Act, although it was rejected by the House.<\/p>\n\n\n\n

The National Assembly (NASS) no doubt has an important\nrole to play in terms of tightening existing legal framework for reserve funds\nor savings mechanisms such as the ECA and SWF. Its bigger role, however, is\nprobing the use of these funds and ensuring that it works for the public good.\nMany would say it has performed this role poorly. <\/p>\n\n\n\n

Unfortunately, apart from weak oversight, the National\nAssembly has also been criticised for contributing to the challenges with poor\nsavings in the ECA. Because the National Assembly has a habit of increasing the\noil benchmark price proposed by the executive to allow for an expanded annual\nbudget to accommodate their constituency projects, there has reportedly been reduced contributions or lost savings to the ECA. In addition to indiscriminate withdrawals and\nunchecked spending by the executive, alteration of savings in the ECA has been\nidentified as a source of mismanagement of the account.<\/p>\n\n\n\n

Ultimately, the victims in this story are Nigerian citizens who remain plagued by rising poverty\nand insecurity in spite of the alleged used of rainy-day funds to fight insecurity.\nFor many citizens, the depletion of national savings in the name of tackling\ninsecurity is one that has little evidence of tangible gains. <\/p>\n","protected":false},"excerpt":{"rendered":"

Recently, Nigerians received with shock, the news of the depletion of the Excess Crude Account (ECA) from a massive $2.1 billion in 2015 to $376,655 in July 2022. On July 26th, 2022, the Office of the Accountant General of the Federation disclosed that the account dropped sharply from $35.7 million in June 2022 to the […]<\/p>\n","protected":false},"author":2,"featured_media":2851,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[],"class_list":["post-2845","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/placng.org\/Legist\/wp-json\/wp\/v2\/posts\/2845","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/placng.org\/Legist\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/placng.org\/Legist\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/placng.org\/Legist\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/placng.org\/Legist\/wp-json\/wp\/v2\/comments?post=2845"}],"version-history":[{"count":1,"href":"https:\/\/placng.org\/Legist\/wp-json\/wp\/v2\/posts\/2845\/revisions"}],"predecessor-version":[{"id":2852,"href":"https:\/\/placng.org\/Legist\/wp-json\/wp\/v2\/posts\/2845\/revisions\/2852"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/placng.org\/Legist\/wp-json\/wp\/v2\/media\/2851"}],"wp:attachment":[{"href":"https:\/\/placng.org\/Legist\/wp-json\/wp\/v2\/media?parent=2845"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/placng.org\/Legist\/wp-json\/wp\/v2\/categories?post=2845"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/placng.org\/Legist\/wp-json\/wp\/v2\/tags?post=2845"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}