Senate Calls for scrap of the Excess Crude Oil Account

On Tuesday at the upper chamber of the National Assembly, Senator Rose Oko representing a constituency in Cross River State initiated a motion calling for the abolishment of the Excess Crude Account and pay the excess of the Oil receipts benchmark to the Federation Account as is stipulated in the constitution. The Senator who spoke with the backing of 18 other Senators says the ECA that was set up in 2004 to provide savings for the country and stabilisation for the economy during periods of shortfalls in Oil revenue, is been operated without checks and balances, providing loopholes for imprudence and financial recklessness.

She says the Act is not in compliance with Section 80, subsection 1-4 of the amended 1999 constitution, and sections 162, subsection 1-3 that states:

80 (1) All revenues or other moneys raised or received by the Federation (not being revenues or other moneys payable under this Constitution or any Act of the National Assembly into any other public fund of the Federation established for a specific purpose) shall be paid into and form one Consolidated Revenue Fund of the Federation.

(2) No moneys shall be withdrawn from the Consolidated Revenue Fund of the Federation except to meet expenditure that is charged upon the fund by this Constitution or where the issue of those moneys has been authorised by an Appropriation Act, Supplementary Appropriation Act or an Act passed in pursuance of section 81 of this Constitution.

(3) No moneys shall be withdrawn from any public fund of the Federation, other than the Consolidated Revenue Fund of the Federation, unless the issue of those moneys has been authorised by an Act of the National Assembly.

(4) No moneys shall be withdrawn from the Consolidated Revenue Fund or any other public fund of the Federation, except in the manner prescribed by the National Assembly.

162 (1) The Federation shall maintain a special account to be called “the Federation Account” into which shall be paid all revenues collected by the Government of the Federation, except the proceeds from the personal income tax of the personnel of the armed forces of the Federation, the Nigeria Police Force, the Ministry or department of government charged with responsibility for Foreign Affairs and the residents of the Federal Capital Territory, Abuja.

(2) The President, upon the receipt of advice from the Revenue Mobilisation Allocation and Fiscal Commission, shall table before the National Assembly proposals for revenue allocation from the Federation Account, and in determining the formula, the National Assembly shall take into account, the allocation principles especially those of population, equality of States, internal revenue generation, land mass, terrain as well as population density;

Provided that the principle of derivation shall be constantly reflected in any approved formula as being not less than thirteen per cent of the revenue accruing to the Federation Account directly from any natural resources.

(3) Any amount standing to the credit of the Federation Account shall be distributed among the Federal and State Governments and the Local Government Councils in each State on such terms and in such manner as may be prescribed by the National Assembly.

Mrs. Oko says the accruals to the ECA was expected to be the amount above the benchmark of crude oil sales, “These breaches of the constitution in setting up and operating the ECA have created room for the pool of funds from revenue accruing to the federation being operated without legal backing”

“The ECA increased from 5.16 billion dollars in 2015 to over 20 billion dollars in 2008 and decreased to less than four billion dollars by 2010 with no known tracking of its operations.

“Also, at various times and from several quarters in 2013, it was reported that five billion dollars was missing from the ECA and that two billion dollars was withdrawn without authorisation.

“By May 2017, government announced a resumption of payment into the ECA of 87 million dollars ostensibly since May, 2015, arbitrarily.

“Furthermore, between May, 2015 and August, 2017, about 122.2 million dollars had accrued and ought to have been paid to the ECA,’’

Its worth noting that the Sovereign Wealth Fund was set up in 2011 as a consolidated revenue fund to focus on three (3) major areas:

  1. Stability Fund
  2. Future Generation Fund
  3. Infrastructure Fund

Nigeria has one of the lowest sovereign wealth fund’s in the world amongst Oil producing or resource rich nations. The 2018 Appropriation Bill as Presented by the President to the National Assembly today in Abuja places the Oil Benchmark at $45 per barrel multiplied by 305 naira to one dollar benchmark for Oil revenue receipts, which means that if the Senate succeeds in amending the constitution that compels the executive to pass on the difference in revenues above the benchmark, the SWF will rise significantly in a short time and provide buffer for the economy.

As at trading in New York today, Brent Oil Price is at $63.97 per barrel on support of sustained production cuts of OPEC Quota by Saudi Arabia and signs of impending fiscal and political reforms in the Kingdom.

Kelvin Emmanuel

About Kelvin Emmanuel

The Oil producing Angola in the Southern part of Africa faces what Nigeria faced 12months ago; a distortion in its exchange rate with a difference between the official markets and the parallel black markets. One dollar through the official window buys you 166 kwanza, while one dollar through the black market buys you 400 kwanza. Nigeria faced the same challenge 12months ago, when the distortion between the official and black markets was as much as the official markets trading at 306 with the parallel market ranging from 450 through to 510. The Central Bank Governor of Angola, Jose de Massano Junior announced in Luanda “We will stop having a fixed foreign exchange, we will adopt a floating regime of foreign exchange”. Angola faces exactly the same challenges and has been applying the exact same responses to an exchange rate crisis like using its foreign reserves that was sitting at $26bn to defend the currency kwanza, with no success so far, even though the external reserves has dropped to $14bn. Angola relies on Oil receipts for 80% of its government revenue, 90% of its inflow and 50% of its GDP. Angola is a $194bn economy that has been growing at an average of 10% on the back of rising oil prices since 2002 when its 27 year old civil war that started in 1975 ended. The state national oil company Sonangol reports that it produces up to 1.8m barrels of crude oil daily, however the government that until now has being led by the family dynasty Jose Eduardo dos Santos until recently when succession saw power transferred to Joao Lourenco, reports that the oil price rout in 2015/2016 that saw prices drop to as low as $28 per barrel caused ripples across the economic structures of the government, upsetting government revenues, its ability to fund its budget, capital project funding, foreign direct investments into the economy as a result of a currency crisis that was driven by the widening of gap between the official and street window of the kwanza, that until now has been pegged in a fixed exchange rate regime to the US Dollar.