By Adedapo Adesanya
About four weeks ago, Business Post raised an alarm over the declining rate of the amount in Nigeria’s Excess Crude Account (ECA), which stood at $321.4 million as at January 20, 2020.
However, a month after, what is left on the account will leave many asking several government they hope the government of the day will provide answers to. As you read this piece, what is left in the ECA is just $71.814 million, yes, $71.814 million.
At the end of a Federation Account Allocation Committee (FAAC) retreat held in Lagos on Wednesday, the Permanent Secretary in the Federal Ministry of Finance, Budget and National Planning, Mr Mahmoud Isa-Dutse, confirmed this development, but did not disclose the reasons why the ECA has shed over 78 percent in just about 20 working days.
While briefing newsmen on outcome of the event, he said the three tiers of government, comprising federal, states and 774 local government councils, shared a total of N647.353 billion as their allocation from the federation purse for the month of January. The amount shared from FAAC this month was lower than what was disbursed last month from the revenue generated in December 2019. This is totally different from the ECA.
The ECA is meant to keep the excess amount made from the sale of crude oil above the budget benchmark for the year. This year, the cap was put at $57 per barrel, but weak performance of oil at the global market caused by the coronavirus has kept prices below the benchmark, but there have been few times this year prices have gone above $58 per barrel at the market.
When Business Post published its report last month on the ECA, it was stated that amount in the account once rose above $20 billion, but the hunger for the money by state governors resulted in the money being shared. They went to court to force the federal government to allow them have access to the funds meant to be saved for the rainy days.
The ECA created by former President Olusegun Obasanjo in 2004 for saving revenue realised from crude oil sales above the budgeted benchmark price and had once peaked at $22 billion during the administration of the late President Umaru Musa Yar’Adua in 2008.
There are serious concerns over the constant drop in the ECA, with observers warning that if not properly checked by government, the devaluation of Naira will ultimately happen. But the Central Bank of Nigeria (CBN) has maintained that the Naira will not be devalued and to allay fears, it has constantly released forex into the market almost on a weekly basis to defend the local currency, which is stable around N360/$1.
Last month, the Monetary Policy Committee (MPC) of the CBN urged the fiscal authorities to strongly consider building buffers by not sharing all proceeds from the federation account at the monthly FAAC meetings to avert the macroeconomic downturn in the event of an oil price shock.
In the eventuality of a price shock, coupled with shortage in foreign reserves, and decline in the excess crude account, Nigeria could be heading towards another recession in four year.
