Business

How Nigeria Govt frittered $22b from ECA in 12 years

Published

2 years ago

August 21, 2022

How Nigeria Govt frittered $22b from ECA in 12 years

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.

Related Topics:Accessmagazine Accessnews AccessNewsMagazine business news NewsUpdate

Up Next

Kishida, Japan PM tests positive for Covid-19, symptoms mild

Don't Miss

Joshua tearful over Usyk lost – ‘I should have won’

Derrick Bangura

Click to comment

Business

Businesses count losses amid power outage in Bauchi, Gombe, and Jigawa

Published

4 weeks ago

October 28, 2024

Matthew Eloyi

Business owners in Bauchi, Gombe and Jigawa are recording losses due to week-long blackout ocassioned by vandalism of the power transmission line in parts of northern Nigeria.

The sudden disruption in electricity supply in the past days, also affected essential services such as water, sanitation, street lighting and healthcare delivery as most hospitals have been operating without light.

Some of the affected businesses including shop keepers, millers and artisans, who spoke while reacting to a survey by the News Agency of Nigeria (NAN), described the situation as “pathetic”.

The survey examined the perennial collapse of national grid and the need for alternative power supply in the country.

Rice millers in Gombe had decried the impact of the erratic power supply on their businesses.

A Miller, Musa Arab, at Nassarawo Industrial Layout in Gombe, said the trend was crippling their operations as they relied on electricity supply from the grid to process paddy.

He said the mills were not operational power outage as they could not afford exorbitant pump prices of petrol or diesel to run their machines.

This, he said, reduced the volume of rice supply to the market and posed serious challenge to food security.

“We must invest in power because it is the biggest determining factor for industries to thrive.

“I have over 20 workers in my mill, and we have 100 mini rice mills here, so you can imagine those who have no jobs for the past 10 days.

“Government must go tough on those responsible for the perennial grid collapse because some persons may be benefitting from it,” he said.

Also, Yusuf Ibrahim said the situation might trigger the already fragile inflation, as prices of local varieties would shot up ocassioned by the diminish supply.

He said that some had jerked up their charges to cover the expenses on diesel thereby affecting rice prices.

A check by NAN at the Gombe Main market showed that a 100 kilogramme of rice was sold for between N120,000 and N160,000, as against N110,000 and N150,000, before the blackout.

Mr Usman Sani, a rice dealer, attributed the hike in price to low supply of the produce to the market in spite of the number harvest recorded this cropping season.

He said the prices had decreased slightly at the onset of the harvest, however, it showed sprawling increase due to power outage.

“The price of rice is already dropping as a result of harvest but the trend reverse since the blackout in the past days “ he said.

Ugochukwu Daniel, a bartender in Bauchi, decried the epileptic power supply in the country, adding that lack of durable energy supply would retard Nigeria’s quest to attain social and economic greatness.

Daniel said that she spent much on fuel to run power generator for refrigrator and lightening the beer parlour, to enable her to keep the business running.

He said that businesses could only thrive in an enabling environment with stable electricity supply, to enhance wealth creation and reduce poverty among Nigerians.

“My trade is about chill drinks and it survives on electricity to operate otherwise you will out of bussiness.

“Without electricity there is nothing you can do, and not only business but about everything. We depend on it,” he said.

Similarly, Samuel Adamu, said the persistent power outage had forced him to patronised charcoal for ironing clothes in spite of its high cost and cumbersome processes.

He said that most cleaners in the area had resorted to fabricated iron charcoal in spite of hike in its prices which suddenly jumped from N5,000 to N15,000.

Adamu said the situation also encouraged division of labour in laundry to cut cost and make some gains.

“Presently, I do wash the cloth, and engage someone for ironing. The charge is N300 per set as against N150”.

While advocated development of renewable energies to enhance power supply in the country, Adamu urged security agencies to entensify efforts towards electrical installations in the country.

In the same vein; Mr Muhammad Adamu, Chairman, Jigawa State House Assembly Commitee on Power and Energy, said the Jigawa Electricity Law 2024, made sound provisions to improve power generation and distribution in the state.

This, he said, was an offshoot of the devaluation brought about by the 5th alteration of the constitution, where removed power from the executive legislative list and to the concurrent list.

“It empowered the state houses of assembly to enact laws on power.

“The committee has also carefully pursued the bill and reviewed its structure and the promise it holds for the state power sector, infrastructure and the overall economy of the state.

“The new law will pave way for the establishment of Jigawa Electricity Commission, to regulate the state’s electricity market,” he said.

According to Adamu, the law will protect residents and investors in the energy sector through ensuring prepaid meter installation and possibility of recouping investor’s funds as well as address vandalism.

“The law will lead to provision of reliable, affordable and sustainable power, essential for development of all sectors of the economy, particularly in rural areas,” Adamu said.

“Vandalism will be over because we pay Kano Electricity Distribution Company (KEDCO) money for powered supplies, but whenever there is problem of damages or broken down transformers, it is either the communities or individuals that pay for the repairs”.

Business

Mercedes urges delay of EU tariffs on Chinese electric vehicles

Published

1 month ago

October 21, 2024

Matthew Eloyi

Mercedes urges delay of EU tariffs on Chinese electric vehicles

The head of German luxury carmaker Mercedes-Benz, has called for the European Union to de-escalate the dispute with China over tariffs on electric cars.

“We need more free trade instead of new trade barriers.

“That is why it is important to find a solution that suits both the EU and China,” chief executive Ola Källenius told the Monday edition of Bild newspaper.

“The negotiations for this take time. In order not to jeopardise them, the EU should postpone the enforcement of the planned tariffs,’’ he said.

At the start of the month, a majority of EU countries paved the way for additional tariffs of up to 35.3 per cent on battery-powered electric vehicles imported from China.

Germany, however, voted against the measure amid concerns over retaliatory actions which could hurt the country’s giant car industry.

The European Commission had pressed for extra tariffs after an investigation accused Beijing of subsidising domestic electric car manufacturers, and thus distorting the market in the EU.

But whether the import tariffs would actually come into force at the beginning of November is still up to the commission.

The plans can still be dismissed if Brussels reaches a solution with China at the negotiating table.

Business

ACCI moves to promote business connections, balance work-life

Published

1 month ago

October 16, 2024

Matthew Eloyi

ACCI moves to promote business connections, balance work-life

The Abuja Chamber of Commerce and Industry (ACCI), is taking innovative steps to enhance professional relationships and promote a healthy work-life balance.

The President of ACCI, Dr Emeka Obegolu, said this in a statement on Tuesday in Abuja.

Obegolu said ACCI was committed to creating environments where professionals could connect beyond the confines of traditional boardrooms.

He said the upcoming “Business Meets Golf’’ Tournament epitomises this vision.

“Scheduled for Oct. 18 to Oct 19 at the IBB Golf Club, the tournament will gather industry leaders, top executives, and key decision-makers for a unique networking experience.

“This two-day event aims not only to strengthen business ties but also to foster partnerships that can drive economic growth.

“The ACCI’s initiative reistates the importance of maintaining a balance between professional achievement and personal well-being.

“By encouraging corporate cultures that prioritise relaxation and self-care, the Chamber acknowledges that such balance is vital for productivity and overall success,” he said.

According to Obegolu, the event will feature a range of activities designed to facilitate both business engagement and relaxation.

“Highlights include a Business-to-Business (B2B) cocktail on the first day, followed by the golf tournament and additional networking opportunities on the second day.

“The tournament will culminate in an awards ceremony recognising outstanding golfers among the participants.

“‘Business Meets Golf’ exemplifies our dedication to fostering innovative networking opportunities.

“We aim to create spaces for meaningful discussions that can lead to impactful collaborations,” Obegolu said.

The ACCI boss said in addition to promoting business connectivity, the council aimed to restate the importance of relaxation and a balanced lifestyle.

Obegolu said through events like this, the Chamber continued to play a pivotal role in supporting trade and industry in Nigeria while driving sustainable growth within the private sector.

He said to raise awareness about this landmark event, ACCI was partnering with the News Agency of Nigeria (NAN) and Media Trust Limited, to ensure broad visibility and engagement from leading brands.