ECA: NEITI calls for resolution of S-Court tussle between FG, 36 States

By Chris Ochayi

THE Nigeria Extractive Industries Transparency Initiatives, NEITI, has called for urgent resolution of the legal battle between the 36 States and the Federal Government over maintenance of the Excess Crude Account, ECA, before the Supreme Court to enable the country save money for future generations.

The Executive Secretary of NEITI, Waziri Adio, said in paper entitled, “The case for a robust oil savings funds for Nigeria”, that Nigeria must inculcate saving habit, warning that any county that fails to save is a dead nation.

Adio, who recommended amendment to the Section 162(1) of the 1999 Constitution, which deals with revenue sharing and allocation formula, argued that cogent alteration to the section would be required in order to encourage savings to accommodate the welfare of future generations.

Adio, who recalled that, from 1980 to 2015, the country exported crude oil worth about $1.09 trillion, regretted that Nigeria has a current balance of $3.9 billion as at June 2017 in the three funds, which according to him can fund only 16% of the 2017 federal budget of N7.44 trillion.

According to him, “The time is now for Nigeria to embrace fully a robust policy to save portion of oil and gas revenue for the rainy day and for the next generation.

“The urgent measures that need to be taken include the immediate transfer of all revenue savings in the stabilization fund and the Excess Crude Account into the Nigeria Sovereign Wealth Fund.

The NEITI boss alerted the nation that a national consensus on saving for tomorrow has become urgent to prepare the country to overcome frequent commodity price volatility and depletion of non-renewable resources.

He lamented that in spite of these benefits and the huge revenues that have accrued from oil and gas over the years, Nigeria has one of the lowest natural resource revenue savings in the world.

“Nigeria currently has three oil savings funds. They are the Sovereign Wealth Fund with $1.5bn, the Excess Crude Account with $2.3bn and the stabilization fund with N29.02bn ($95M). In the last forty years of oil production, Nigeria has extracted about 31 billion barrels of its oil reserves.
“However, from 1980 to 2015, the country exported crude oil worth about $1.09 trillion, but has a current balance of $3.9 billion dollars as at June 2017 in the three funds.

He remarked that these “different oil revenue saving funds should be consolidated and the legal framework harmonised. Specifically, the 0.5% Stabilisation Funds and the Excess Crude Account (ECA) should be merged with the Sovereign Wealth Fund, as this multiplicity of savings funds with different rules has led to uncoordinated and widespread extra-budgetary spending.

Apart from depleting the savings in each fund, such unrestricted spending defeats the purpose for which the funds were set up in the first place which is to shield the economy from revenue volatility”.

According to the Paper, Nigeria did not save enough oil revenues to sustain economic activities when oil prices began to “tank” in June 2014. “Also problematic is the level of consumption relative to non-oil exports.

“Nigeria typically responds to high oil prices with equally high, but manifestly unsustainable, level of consumption. The absence of sufficient savings left Nigeria severely exposed when the price of oil, Nigeria’s main source of government revenues and foreign exchange, started to plunge in 2014” the NEITI Occasional paper explained.

“NEITI expressed regret that the $1.5 billion currently in the Sovereign Wealth Fund is one of the World’s worst ratio to annual budget (10%), and one of the lowest Sovereign Wealth Fund per capital ($8) globally.

“From the Occasional Paper, NEITI provided some global comparisons among other resource rich countries. “Norway, a country of 5.2 million people has a sovereign wealth fund worth $922 billion, Chile $24.1 billion, Angola $4.6 billion and Botswana $5.7 billion. Others are Russia $89.9 billion and Kuwait $592 billion.

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