<\/p>\n
ABUJA (Reuters) – Nigeria’s finance minister said on Thursday that a
\nsignificant portion of the billions of dollars drained from the oil
\nsavings account over the past two years was distributed to powerful
\ngovernors instead of being saved for a rainy day.<\/p>\n
Nigeria, Africa’s biggest oil producer, is grappling with financial
\ndifficulties owing to a 30 percent fall in the price of oil since June,
\nwhich has added pressure on the government’s already depleted fiscal
\nbuffers.<\/p>\n
The central bank devalued the naira by 8 percent on Tuesday because it was
\nrunning out of forex reserves with which to defend the currency.<\/p>\n
The Excess Crude Account (ECA) had around $9 billion in December 2012, but
\nit has since fallen to around $4 billion, Finance Minister Ngozi
\nOkonjo-Iweala noted in a speech to capital market authorities. Most of the
\nfalls occurred during a period of record high oil prices, when oil savings
\nare supposed to accrue.<\/p>\n
Okonjo-Iweala said some of the money had been needed to cover revenue lost
\ndue to outages caused by oil theft and pipeline vandalism, thought to
\ndrain hundreds of thousands of barrels a day.<\/p>\n
“Some of it (the ECA) was then legitimately used to offset revenue
\nshortfalls arising from quantity shocks and to narrow the fiscal deficit,”
\nshe said. “But against our advice, significant portions were also used to
\naugment monthly allocations,” to local and state authorities.<\/p>\n
“States argued that rainy days were already at hand and in fact (the rain)
\nwas already pouring, so the money needed to be used right away,”
\nOkonjo-Iweala said.<\/p>\n
Nigeria’s oil revenues are the source of around 80 percent of government
\nspending and are distributed each month to the three tiers of government:
\nfederal, state and local.<\/p>\n
Money from oil sold over and above the finance ministry’s benchmark price
\nis in theory deposited into the ECA, which can later be used to protect
\nagainst oil price shocks or to plug the deficit.<\/p>\n
However, there are disputes about who should control this money, and state
\ngovernors often argue the central government is hoarding the money and
\nshould distribute more to them.<\/p>\n
The president, being the country’s most powerful person, can usually have
\nthe de facto last say on how ECA funds will be distributed.<\/p>\n
President Goodluck Jonathan, approved two dispersals of $1 billion last
\nyear to state governments.<\/p>\n
State governors are some of the country’s most powerful people and their
\nsupport is crucial for winning presidential elections — President
\nGoodluck Jonathan faces re-election in February 2015.<\/p>\n
State governors requested $2 billion from the ECA this month to complete
\nprojects and provide security ahead of the February elections.
\n[ID:nL6N0T91BH]<\/p>\n
The request has not yet been approved.<\/p>\n
OPEC DECISION ADDS PRESSURE<\/p>\n
Demands from local governments for more funds are likely to intensify in
\nthe run-up to the election, but the falling oil price means government
\nfinances are likely to be squeezed further.<\/p>\n
The government has already revised down its assumed oil price for next
\nyear’s budget to $73 a barrel, from $78 a barrel. But OPEC’s decision on
\nThursday not to cut output has put further pressure on the oil price,
\npotentially worsening Nigeria’s problems.<\/p>\n
Okonjo-Iweala said on Thursday that government plans to review tax
\nincentives and waivers and plug customs loopholes while also increasing
\nsurcharges on luxury goods, should raise 480 billion naira ($2.7 billion)
\nover the next three years.<\/p>\n
She also said the government planned to save 160 billion naira by weeding
\nout 60,000 “ghost workers” from the payroll, although she did not give a
\ntime frame.<\/p>\n
<\/p>\n
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