Editorial: Institutionalising Savings
Last week, the Nigeria Governors Forum (NGF) urged President Muhammadu Buhari to approve the sharing of the $2.259bn in the Excess Crude Account (ECA) among the three tiers of government in order to improve the liquidity position of the states. The governors, during a meeting with the president at the Presidential Villa, hinged their call on the current economic crisis facing the states, which had culminated in the inability of majority of them to pay workers’ salaries.
Chairman of the Forum, Governor Abdulaziz Yari, said: “We are looking at loan restructuring, bailout and the ECA. We are asking for an 18-month moratorium before we can start paying, so that we will able to strategise.”
Yari cleverly avoided saying that his call was hinged on the slight rise in the price of oil from the benchmarked $38 to $44 which enabled payment into the ECA by the current Federal Government only once since it got into power.
The governors’ call came against the backdrop of the allegation made by President Muhammadu Buhari and several senior officials of his administration in countless local and international fora that the failure of the immediate past administration to save for the rainy day was responsible for the country’s current economic woes, and the counter claim by the immediate past Minister of Finance, Dr Ngozi Okonjo-Iweala, that it was the state governors who lacked the discipline and political will to save. To all intents and purposes, however, the current call derives from a callous indifference to the raison d’etre of the ECA, and a desire to continue with the unchecked profligacy that has made a mess of the country’s liquidity profile.
The ECA, a national account meant to save oil revenues above a base amount derived from a defined benchmark price, is a visionary economic instrument established by the Olusegun Obasanjo administration in 2004 with the primary objective of protecting approved budgets against shortfalls due to volatile crude oil prices, thereby insulating the Nigerian economy from perennial external shocks.
Crude oil price being well above $100 per barrel at the time, the then President Obasanjo laudably spared a thought for the future, although the constitutionality of the ECA was called into question. In 2011, the Goodluck Jonathan administration enacted the Nigeria Sovereign Investment Authority Act as a complement to the ECA. Under it, the Sovereign Wealth Fund was founded, with an initial $1 billion in seed capital, for the purpose of investing part of the savings gained on the difference between the budgeted and actual market prices of oil, with its returns meant to benefit present and future generations of Nigerians.
For far too long, the ECA has been subject to the whims and caprices of the governors. In 2008, the NGF instituted a suit against the Umaru Yar’Adua administration calling for the sharing of the $15billion then in the ECA. By 2009, the administration opted for an out of court settlement, consequently sharing a whopping $8.5billion, leaving only $6.5billion as outstanding from the initial $15 billion accumulated in the account. The same pressure, coupled with litigation, was mounted on the Jonathan administration and in January 2010, Jonathan acceded to the governors’ request and shared $2 billion from the ECA. In August 2010, another $3 billion was withdrawn from the Excess Crude Account, leaving behind a meagre $460 million. The tug of war between the then Finance Minister, Dr Ngozi Okonjo-Iweala and the governors, then led by Mr Rotimi Amaechi, currently the Minister of Transport, considerably heated up the polity.
Indeed, in 2013, the position of the (NGF) was clearly articulated by the National Leader of the then Action Congress of Nigeria (ACN), Chief Bola Ahmed Tinubu. Tinubu noted that “the accumulation of money by the Federal Government is a misplaced objective for these times. Our driving purpose must be to channel idle human and material capacity into productive streams that furnish jobs and manufacture tangible goods bettering the living conditions of every citizen. To say we are saving money for a rainy day while everyone is already drenched and wading through flood waters makes little sense to me.”
In our view, such a reductionist view of national savings anchored on momentary felt needs is mortally fractured by the nature of human existence. Saving for the rainy day is, we believe, the product of a disciplined consciousness. Has there ever been any point in history when there were no pressing needs?
We believe that it is time the National Assembly enacted a bill institutionalising compulsory savings as part of the national culture. Since the governors have proven time and again that they are not interested in saving for the rainy day, it is time to compel them to do so.
It is a proven fact of history that successful nations do not joke with savings, and that they do not do so because of a surfeit of funds or the absence of critical needs. Rather, they do so in the full realisation of the indispensability of savings to wealth generation, national stability and national security. Besides, the current economic situation is in a large measure the product of the scandalous spending profile and unceasing profligacy of Nigerian governments at all times and at all levels. In any case, the current sorry state of infrastructure in the country coupled with the astounding debt profile of both the federal and state governments put a lie to the claim by the governors who ceaselessly harassed the Yar’Adua and Jonathan governments because they claimed to be in need of funds to prosecute core developmental programmes whose results fall far short of the resources claimed to have been poured on them. And this visible failure applies to successive federal governments too.
Those who cannot manage scarcity and difficult situations have no business being in the Government House in the first place. Given the foregoing, we categorically reject the NGF’s call for the sharing of ECA funds. We consequently call on the National Assembly to come up with an Act that would institutionalise national savings.
It is our suggestion that the proposed law should allow withdrawal in a fiscal year from the ECA to the maximum of twenty five percent (25%) of what has been accumulated in a preceding year to augment budgetary shortfall in that year. Where on the balance crude oil sold above the budgetary benchmark for the year, no withdrawal will take place. Another 25 per cent of the ECA account balance of the preceding year will statutorily be sent to the Sovereign Wealth Fund (SWF) to boost its capital base. Returns on investment of the SWF should be made available as part of the distributable funds in the Federation Account.
The balance of 50 per cent must be kept for a time of extreme national emergency such as war. And that statutory balance in the ECA, in the face of an extreme national emergency, can only be drawn down by a resolution supported by two-thirds of all members in each of the two chambers of the National Assembly. This is what the unfortunate economic situation of the country and the reality of the unrepentant profligacy of Nigeria’s political elite demand.
CREDIT: http://tribuneonlineng.com/institutionalising-savings
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