Nigeria’s excess crude account has declined by 89 per cent in the last eight years, moving from $4.1bn in November 2014 to $472,513 in the same period of 2022.
According to a statement by the Ministry of Finance, Budget and National Planning, the ECA’s balance as of November 23, 2022, stood at $472,513.64.
The ECA is the Federal Government’s fiscal account that was created to save revenues—in excess of the budgetary benchmark price—that were generated from oil sales, according to Investopedia, an investment and business dictionary.
The account, however, has depleted in the last eight years owing to lack of inflows, oil market vagaries and the country’s revenue crunch, according to economists.
“It is a simple fact that when you spend money from an account and you are not adding to it, it will deplete,” said Professor of Economics at Covenant University, Ogun State, Jonathan Aremu.
“For you to increase the ECA, the oil price must rise above the budgeted price. If it does not, nothing goes in. Also, if what you are spending is higher than what goes in, it depletes. This is the situation,” he further said.
Brent crude sold at $88.45 per barrel at 4pm on Wednesday. WTI crude, on the other hand, was $81.13 per barrel at the same time. Oil benchmark in the 2022 budget was $57, but the current oil prices are still about $30 above the benchmark. However, the ECA has been on the decline in spite of higher oil prices since early 2022 driven by Russia-Ukraine war.
“The reality is that the government has been struggling with revenues, particularly at Buhari’s second tenure,” said the Director of Research and Strategy, Chapel Hill Denham, Tajudeen Ibrahim.
“They always dip their hands into ECA to support federal, state and local governments,” he said.
He explained that governors had earlier called for the distribution of ECA, which was not in line with the reason for its creation in 2011.
“This is pointing to the fact that it is not backed by the law and that the government is broke,” Ibrahim further said, stressing that the only way out was to pay less attention to oil and more attention to non-oil revenues.
Meanwhile, the Federation Account Allocation Committee, FAAC, at its meeting, shared a total of N736.782bn to the three tiers of government as the allocation for the month of October, 2022.
According to the Ministry of Finance, Budget and National Planning’s statement, from this stated amount, inclusive of gross statutory revenue, value added tax, exchange gain and augmentation from non-oil revenue, the Federal Government received N293.955bn, while the 36 states got N239.512 bn.
Local government councils got N177.086bn, while the oil-producing states received N26.228bn for 13 per cent derivation.
The communiqué issued by the FAAC at the end of the meeting indicated that the gross revenue available from VAT for October 2022 was N213.283bn, which was an increase distributed in the preceding month.
While the Federal Government got N31.992bn from it, states received N106.642bn, while local government councils were given N74.649bn.
But the gross statutory revenue of N417.724bn distributed was lower than the sum received in the previous month, from which the Federal Government was allocated the sum of N206.576bn; states, N104.778bn; local councils, N80.779 billion; and oil-producing states, N25.591bn.
Also, N70 billion augmentation was distributed to the three tiers of government. The Federal Government received N36.876 billion; states got N18.704 billion; while local government councils were given N14.420 billion.
An extra N30bn augmentation from non- oil revenue was also distributed. The Federal Government received N15.804bn; states got N8.016bn; while local government councils were given N6.180bn.
The communiqué further disclosed N5.775bn from exchange gain was shared by the three tiers of government. While the Federal Government received N2.707bn, states got N1.373bn, whereas local government councils were given N1.058bn. On the other hand, oil-producing states got N637m.
Moreover, oil and gas royalties, petroleum profit tax and import duty recorded considerable decreases, while VAT and companies income tax increased significantly. However, the excise duty increased marginally.
According to the communiqué, the total revenue distributable for the current month of October was drawn from statutory revenue of N417.724bn; VAT, N213.283bn; exchange gain, N5.775bn; and N100bn for augmentation from non-oil revenue, bringing the total distributable for the month to N736.782bn.
Source: Punch Newspapers