Nigeria’s finance minister said on Thursday that a significant portion of the billions of dollars drained from the oil savings account over the past two years was distributed to powerful governors instead of being saved for a rainy day.
Nigeria,
Africa’s biggest oil producer, is grappling with financial difficulties
owing to a 30 percent fall in the price of oil since June, which has
added pressure on the government’s already depleted fiscal buffers.
The
central bank devalued the naira by 8 percent on Tuesday because it was
running out of forex reserves with which to defend the currency.
The
Excess Crude Account (ECA) had around $9 billion in December 2012, but
it has since fallen to around $4 billion, Finance Minister Ngozi
Okonjo-Iweala noted in a speech to capital market authorities. Most of
the falls occurred during a period of record high oil prices, when oil
savings are supposed to accrue.
Okonjo-Iweala
said some of the money had been needed to cover revenue lost due to
outages caused by oil theft and pipeline vandalism, thought to drain
hundreds of thousands of barrels a day.
“Some of it (the ECA) was then legitimately
used to offset revenue shortfalls arising from quantity shocks and to
narrow the fiscal deficit,” she said. “But against our advice,
significant portions were also used to augment monthly allocations,” to
local and state authorities.
“States
argued that rainy days were already at hand and in fact (the rain) was
already pouring, so the money needed to be used right away,”
Okonjo-Iweala said.
Nigeria’s
oil revenues are the source of around 80 percent of government spending
and are distributed each month to the three tiers of government:
federal, state and local.
Money
from oil sold over and above the finance ministry’s benchmark price is
in theory deposited into the ECA, which can later be used to protect
against oil price shocks or to plug the deficit.
However,
there are disputes about who should control this money, and state
governors often argue the central government is hoarding the money and
should distribute more to them.
The
president, being the country’s most powerful person, can usually have
the de facto last say on how ECA funds will be distributed.
President Goodluck Jonathan, approved two dispersals of $1 billion last year to state governments.
State
governors are some of the country’s most powerful people and their
support is crucial for winning presidential elections — President
Goodluck Jonathan faces re-election in February 2015.
State
governors requested $2 billion from the ECA this month to complete
projects and provide security ahead of the February elections.
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