Breaking News
Translate

Excess Crude Account: depleted to $ 4.393 billion

By Omoh Gabriel, Business Editor
The Nation Excess crude account has been depleted from  about $20 billion in 2007 to  only  $4.393 billion as at the end  of  April, 2010. This  was disclosed at the week end by the Minister of  State for Finance, Mr. Remi  Babalola who is the chairman of  the  federation account allocation committee.

According to him, the total distributable  revenue  to all the tiers of government amounted to N 1.495 trillion  for  the  period ,January  to  March 2010. He, however, noted that N 758.06  billion was distributed due to the use of the parameters of  2009  appropriation since the 2010 budget was yet to be passed by the National Assembly and assented to.

The shortfall in the revenue distributed to the three tiers of government necessitated the augmentation of  N 736.985 billion from the Excess Crude Account.

He said “With augmentation for the months of January to March 2010 amounting to N 736.985 billion, the Domestic Excess Crude Account of N 212.559 billion will not be able to accommodate such figure hence a recourse to sourcing from the Foreign Excess Crude Account.

“The implication of  the foregoing is that with subsidy to Oil Marketers averaging N 34.73 billion monthly and monthly receipts of  N 431.747 billion, the projected monthly distribution  may  not be realizable.

“We may thus be constrained to amongst others consider amending the  revenue profile of  the 2010 budget or re-negotiate with all relevant stakeholders the monthly distributable amount pending improvements in the budgeted revenue profile,” he stated.

The minister was upbeat about the nation’s economic outlook for 2010. He revealed that the real Gross Domestic Product ( GDP ) grew  to 6.68 per cent in the first quarter of 2010 despite the challenge of illiquidity facing the domestic economy. He also noted that consumer  prices trended downwards during same period  while the country’s external reserves stood at US$ 40.68 at the end  of  March, 2010.

Much of the savings in the Excess crude account has been disbursed and what is left based on what the three tiers of government in the country agreed on will not be enough to make any significant impact on the budget if the prices of oil falls below the budget bench- mark.

It will be recalled that the federation account committee agreed in 2007 that N 1 trillion be set as the base for the savings and what ever is earned as excess revenue in any particular month that is above the one trillion mark, 80 per cent  should be  shared  among the three tiers of  government  why 20 per cent is saved.

In 2007 the three tiers of government agreed that the sum of $ 5.6 billion is to be spent on power.
Babalola further disclosed that “the balance in the Foreign Excess Crude Account at the end of April 2010 FAAC meeting was US$ 4.393 billion after setting aside the commitment to the Nigeria Integrated Power Projects whilst Domestic Excess Crude Account was N 212.559 billion”.

The Honourable Minister of State for Finance, Mr. Remi Babalola, on Friday advised Nigeria against any form of profligacy by all tiers of government to enable them address the various fiscal challenges likely to be faced in the near future.

He gave this advice in a speech titled “Between Profligacy and Performance” presented at the Federation Account Allocation Committee (FAAC) meeting in Abuja . The meeting presided over by the minister was attended by the Accountant General of the Federation, Alhaji Ibrahim Dankwambo; Director of Home Finance in the Federal Ministry of Finance, Alhaji Gidado Mohammed; commissioners for finance and accountants_general from the 36 States, and the representatives of the Central Bank of Nigeria, Revenue Mobilisation, Allocation and Fiscal Commission, Debt Management Office, National Planning Commission, and revenue collection agencies, among others.
Babalola asserted that the growth of discretionary spending by all tiers of government has outpaced the annual growth rate of the overall economy over the past 10 years, with deficits being the expected consequence.
He said, “The production and price assumptions in the 2010 budget leave minimal headroom for adjustment and expose the economy to higher risks of exogenous shocks. It reduces the accretion to our honey pot of Excess Crude account which is already below comfortable cushion. “If we embark on any form of fiscal profligacy today it will certainly hinder our ability to address the various fiscal challenges we are likely to face in the near future.”

He explained that current developments from nations like Portugal , Italy , Spain and Greece had shown that while it appears urgent to use massive public spending to stimulate an economy under stress, an economy wouldn’t be able to sustain long_term growth under the weight of significant fiscal burdens.

“At some point, what is considered a temporary economic prosthesis becomes a hindrance to the workings of the larger economy,” he added.

The minister, also at the FAAC meeting, presented details and breakdown of the revenue distributions from the Federation Account and the Excess Crude Account ( ECA ) in the first four months of Fiscal 2010.


Disclaimer

Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.