Federal Government Share $5.5Billion From Excess Crude Account With 36 State Government

The Federal Govern­ment yesterday said that sharing of $5.5 billion from the Excess Crude Account (ECA) be­tween it and the 36 states governments in 2009 was aimed at financing some In­dependent Power Projects (IPPs) across the country.

Apparently reacting to former President Olusegun Obasanjo’s allegation that Jonathan’s administration squandered the ECA, the Min­istry of Finance admitted that the ECA ought to have been higher by now but for the fact that a number of governors, against strong professional advice, actively kicked against its continued build up and, in­deed, pushed for its sharing.

“It is on record that states even took the Federal Govern­ment to court on this matter, and the case is still pending at the Supreme Court,” a state­ment from the ministry said.

According to the statement, the Excess Crude Savings, which is a component of the reserves, was largely used to cushion the economy at the height of the global financial crisis between 2008 to 2009.

“As a result, Nigeria was one of the few countries in the world that did not seek assistance from international financial institutions at that time. The fiscal stimulus used to shore up the economy dur­ing that period was shared by all three-tiers of government. Similarly, savings in the ECA were also used to pay for fuel subsidies for the entire nation and that sharing continued after the crisis ended. Starting in 2012, such payments have been published each time they are made,” it noted.

On the use of reserves, the ministry denied that the Federal Government can dip its hands into the external re­serves, saying that like in other countries, the management of external reserves is one of the statutory mandates of the Cen­tral Bank of Nigeria (CBN).

It cited Section 2, Sub-sec­tion (c) of the CBN Act (2007) which states that the bank shall “maintain external reserves to safeguard the international value of the legal tender” – in other words, to defend the val­ue of the naira. No President since the democratic dispensa­tion has contravened this Act.

“The reserves are also used to settle both public and pri­vate sector foreign currency obligations, including the importation of goods such as equipment for power sector. Whenever an agency of gov­ernment or a private individ­ual/company needs to make a payment in foreign currency (including payment for goods and services, settlement of ex­ternal debt, among others) it must provide the naira equiva­lent to the CBN in exchange for the required foreign cur­rency.

“From the above, it is clear that Nigeria’s reserves during the period were not squan­dered but used appropriately in the course of normal trans­actions required for the devel­opment of the Nigerian econo­my,” it said, noting that at the end of May 2007, Nigeria’s gross reserves stood at $43.13 billion – comprising the CBN’s external reserves of $31.5 bil­lion, $9.43 billion in the ECA and $2.18 billion in Federal Government’s savings.

“These figures can be in­dependently verified from CBN’s records. The figure of $67 billion cited in some re­cent commentaries is therefore factually incorrect.

“Second, it is a misconcep­tion to think that reserves are immutable or cast in stone. The reality is that since May 2007, the reserves have fluctu­ated in line with developments causing the CBN to intervene, using some of the reserves, to defend the value of the naira,” the statement said.

Culled from Sun news