The controversy that has trailed the panel set up to probe Nigerian National Petroleum Corporation (NNPC) on apparent discrepancies in its accounts, as well as alleged plundering of the Excess Crude Account (ECA) by the immediate past government is understandable. The fact that recommendations from such probes are always never implemented has made Nigerians skeptical and pessimistic. More fundamental, however, is that the ECA is an illegal contraption that has been abused by the ruling elite. As Nigerians bemoan the high level corruption in government, it is pertinent to admit that the country does not need an ECA. This cesspit of corruption is an impediment to progress and President Buhari should abrogate it immediately, in the national interest.
The four-man panel comprising governors from Edo, Gombe, Kaduna and Lagos States allege that the NNPC earned 8.1 trillion naira ($40 billion), from the sale of Nigerian crude but paid only 4.3 trillion naira into the Federation Account (FA). What this means is that NNPC withheld and spent 3.8 trillion naira, without appropriation by the national assembly. A member of the panel; Edo governor, Adams Oshiomhole also claimed the ECA into which the difference between government-set oil prices and the actual international prices is deposited has plunged to $2 billion from $4.1 billion since November 2014.
Sensing that the panel’s allegations targeted her, former Finance Minister, Ngozi Okonjo-Iweala came out strongly to discount the allegations as false, malicious and baseless; dismissing them as a political witch-hunt. She said all decisions on ECA expenditure were taken at Federation Accounts Allocation Committee (FAAC) meetings attended by finance commissioners from the 36 states. But Oshiomhole countered that the power to withdraw money from the ECA was vested in the National Economic Council (NEC), an institution created by the constitution, and not State Finance Commissioners.
As Oshiomhole and Okonjo-Iweala continue their shouting match, many Nigerians have raised eyebrows on the composition of the audit panel, stressing that the governors have been made judges in their own case. Some are also of the opinion that what is at stake is evidence of total accruals, not what has been shared and how it was shared among the three tiers of government. The controversy and familiar disagreements over the ECA is needless, if not contrived. President Buhari has promised that henceforth all revenues accruing to the federal government will be remitted into the Consolidated Revenue Fund. The President should rather save the country further embarrassment by simply scraping the ECA. The so-called “rainy day” account has institutionalized corruption and freeloaded money to distort the economy, while undermining the budget process.
Beyond this, however, the issue of revenue allocation has remained arguably the most consistently contentious in Nigerian history. Between 1946 when the Phillipson Commission on revenue allocation was set up, and 1988 when Gen. Danjuma headed the National Revenue Mobilization, Allocation, and Fiscal Commission, there have been over nine such bodies set up by just about every government to advise how the Nigerian “national cake” should be shared among the tiers of government on one hand, and among the federating states on the other. Indeed, between 1977–1979, two commissions were instituted namely the Prof. Ojetunji Aboyade Commission and the Dr. Pius Okigbo Commission by the Gen. Obasanjo and Shehu Shagari administrations respectively. Curiously, not a single commission has been created to advise on how “the cake” can be enlarged and baked better.
Quite clearly, the under-funding of the budget below prevailing oil prices; the surplus of which is put into the ECA has been crowned with superficial decelerating inflation. This obnoxious fiscal policy has continued despite the perennial high unemployment and poverty rate of over 70%. The ECA creates a cesspit of corruption, at the same time the domestic debt soars and multilateral loans are contracted to legitimize these self-destructive fiscal and monetary policies. All these insult a nation’s intelligence. If the ECA is scraped, FA accruals will be shared in full to enable States make the needed investments in health, education and infrastructural projects that will alleviate the poverty of their citizens. Besides, it will end the excess liquidity-induced borrowings from the banking system that form the bulk of national domestic debt and which is not invested despite its high service cost (it is actually a subsidy to banks). Resources from the ECA will then be tapped to actualize national development goals which are glowingly promised in annual budgets.
With sound management, available ECA resources could boost State budget expenditure levels that would energize the economy. Instead, the FAAC in conjunction with the Accountant-General of the Federation have foisted unlegislated excessive fiscal deficits on the economy across the three tiers of government making national economy failure inevitable. To wit, FAAC directs the CBN to substitute and distribute naira equivalents of FA oil earnings to States, which is tantamount to CBN proportionate deficit financing of their budget spending.
When Nigeria’s external reserves peaked at $62.08 billion in September 2008, the exchange rate was artificially fixed at N117.73/$1. By September 2013, the external reserves had dropped by $16.81 billion to $45.27 billion while the exchange rate, again artificial, was N157.32/$1. In effect, in five years, the CBN squandered $16.81 billion plus all FA oil earnings on defending the naira (which still lost 25.17% of its value) and funding imports to the advantage of foreign economies while Nigeria’s infrastructure, manufacturing, productive and other social sectors continued to decay. Following the inability of the FG and States to amicably resolve the dispute arising from the ECA and the creation of the Sovereign Wealth Fund (SWF), the states went to court seeking interpretation of Section 162 of the constitution on the diversion of funds, which ought to accrue to the FA for sharing among the three tiers of government.
Fiscal matters have both political and social implications; reason why it is as much economics as it is politics. An equitable mobilization and allocation of national revenue is fundamental to national unity. If an organ of state is given a direct constitutional responsibility, it should receive directly too, the necessary resources to discharge it. There are many functions better left by the central government to the lower tiers of government and for which they should be well funded. Therefore, the revenue allocation formula should be skewed in their favor. At present (after deducting the 13% derivation allocation), the formula grants the FG 52.68%. The 36 states and the 774 local governments that are closest to the people share a combined total of 47.32%. Besides, the FG also keeps 35% of the Value Added Tax (VAT) generated from the other tiers; in addition to the billions that accrue to the excess crude account. This is neither justifiable nor sustainable; and certainly not in the national interest.
For a country like Nigeria, genuine federalism preserves its “unity in diversity”, and allows a reasonable level of autonomy to the federating units. Central to federalism, is the fiscal component because, States and local governments saddled with more responsibilities but denied commensurate funding cannot meet their political and social commitments to their citizens. A situation whereby the FG arrogates a substantial part of the country’s resources to itself, leaving little more than crumbs for the states and local governments, is unacceptable.
Few would argue that the ECA was an idea designed to save Nigeria for the rainy day. But as with all things, however, good or bad, it can only be for a time and season. To date, the leitmotif of the ECA violates the letter and spirit of federalism as it is known and practiced in other parts of the world. Worse even, and typical of Nigeria, the ECA is now riddled with corruption. The anomaly has become endemic and points to a democracy that is not working. In the circumstance, Mr. President should immediately direct that funds in the ECA be shared to the states, to enable them pay the outstanding salary arrears owed public servants. The ECA itself should be scrapped for the take-off of a new system of true federalism which is the best way forward for the country.
