Nigeria’s excess crude account now rated among world’s worst governed funds

The Natural Resources Governance Institute (NRGI), an extractive sector transparency watchdog, rated Nigeria’s excess crude account as one of the world’s worst-governed fund in a report released last week.

In the organisation’s assessment of sovereign wealth funds in 33 countries as part of its 2017 Resource Governance Index, Nigeria’s Excess Crude Account was found to be one of the worst-governed funds. The NRGI governance index includes new assessments of oil, gas and mining governance in 81 countries.

The excess crude account is the Federal Government account used to save oil revenues above a base amount derived from a defined benchmark price. It is also part of the eleven sovereign wealth funds worth about $1.5 trillion NRGI researchers rated as failing.

“Good governance of extractive industries is a fundamental step out of poverty for the 1.8 billion poor citizens living in the 81 countries we assessed in the Resource Governance Index,” said Daniel Kaufmann, NRGI president and CEO said in a release.

“It is encouraging that dozens of countries are adopting extractives laws and regulations, but often these are not matched by meaningful action in practice,” Kaufmann.

Meanwhile, Colombia’s Savings and Stabilization Fund was found to be the best-governed of the assessed funds, followed by the Ghana Stabilization Fund.

Nigeria’s excess crude account was established in 2004 in response to surging oil prices. The fund grew from $5.1 billion in 2005 to over $20 billion by 2008, accounting for more than one-third of Nigeria’s external reserves at the time.

The fund suffered massive decline during the administration of former president Goodluck Jonathan from nearly $20billion when he took office in 2009 to a paltry $2billion when he left office in 2015.

“At any time the earnings (from oil) drop, the governors would insist that there is no place in our laws that actually say that the federal government should keep the reserve,” Jonathan told Bloomberg in an interview last year. “They always insisted that a part of it (excess crude revenue account) should be brought.”

Jonathan said there had always been misconception about the excess crude account, as  some felt it was a reserve fund for the rainy day, others said it was fund that could be drawn from in times of economic difficulty.

Management of the excess crude account was always going to be controversial. Crude oil accounts for over 80 percent of oil revenues and states with bloated budgets and insignificant internally generated revenue, worsen the situations through profligate spending.

Peter Obi, former governor of Anambra state in a speech at The Platform, a public discourse forum organised by the Convent Christian Centre, in Lagos, on May 1, said that Nigeria is the only country where governors and local government chairman, order anything without any responsibility for paying for it.

This underscores how Nigeria’s weak corporate governance systems is largely responsible for corruption in the public sector. Obi has at several fora condemned past administrations in the country of unwillingness to save, saying that it was a key reason the economy slipped into recession.

Since April, Nigeria has commenced payment into the excess crude account to rebuild the nation’s fiscal buffers. The sum of $87 million was paid into the ECA in April.

At the end of the last National Economic Council (NEC) meeting on 25 May, the governors decided to audit the excess crude account, because they claimed to have detected some discrepancies in the balance in the account as presented by the Accountant General of the Federation (AGF), Ahmed Idris.

Idris put the balance in the excess crude account at US$2.3 billion at the end of April as against the US$2.4 billion as at the end of March. This means that the account had gone down by US$100 million.

The governors dispute the balance in the account because they have not received any disbursements from the account since their last meeting. Experts say a lack of legal framework for the funds impedes its management.

Nigerians have not benefited from the operation of the ECA due to mismanagement of the funds by different state governments. Some have called that the funds should be moved into Nigeria Sovereign Wealth investments fund which could be used to deliver the country’s infrastructure.

ISAAC ANYAOGU