President Muhammadu Buhari of Nigeria has taken a cue from the immediate past president of the west African country, Goodluck Jonathan, by taking money from the Excess Crude Account (ECA) to share to states in a bid to help ease the financial burden on them.
The bailout by Buhari is timely for the financially-burdened states but negates the reason why the ECA was created in 2004 by former president, Chief Olusegun Obasanjo.
It would be recalled that on Monday that the Federal Government agreed to share about N391bn ($1.7bn) from the Excess Crude Account with state governments following their inability to pay salaries.
“The position is very clear, what we met on ground is what we are going to distribute. What we met on ground is hovering between $1.6bn to $1.7bn, and that is what we are going to distribute among all the three tiers of governments based on the approved formula,” Ahmed Idris, the Accountant General of the Federation said, adding that, FAAC would soon meet to distribute the amount agreed by the states and approved by the NEC meeting last week.
Raymond Omachi, the acting chairman of Fiscal Responsibility Commission (FRC) had frowned at the practice of the federal government to pay subsidy from the ECA or to share to states from the ECA when available funds are not adequate to meet revenue projections.
He said that the ECA was established in 2004 to protect planned budget against shortfalls due to volatile crude oil prices, but that was not how the funds from the account were spent today.
“If the ECA had been properly managed, in accordance with the FRC act, the country will not have been embroiled in the liquidity crisis being presently experienced,” he said.
Omachi said that the FRC Act stated that savings from the ECA should not be accessed until oil price falls below the predetermined level for a period of three consecutive months.
He said that the sum accessed should be limited to the amount that would bring the revenue of government to the level contained in its budget estimates.
Omachi also said that the other acceptable withdrawal from the ECA was to fund capital projects.
He said that over the years, the commission had noticed withdrawal that was contrary to this and had raised alarm severally at the way the ECA was being brazenly depleted.
“In essence, the non-compliance with the relevant sections of the Fiscal Responsibility Act, 2007, is the cause of the financial management problem being experienced by the country in the light of the sliding oil price.
“If the account had been intact, the effect of declining oil price will have been accommodated with the ECA buffer to finance the budget,” he said.