In February, PREMIUM TIMES published a detailed breakdown of how, in the last fifteen years, the Nigerian government spent at least $107.4 billion (the equivalent of N15.46 trillion) from the Excess Crude Account (ECA) under the administrations of Olusegun Obasanjo, Umaru Yar Adua, Goodluck Jonathan and incumbent President Muhammadu Buhari.
The report noted, however, that despite the huge arbitrary spending, the nation has failed to transform its potential into growth.
The Nigeria Excess Crude Account (ECA) has been ranked and rated as the most mismanaged funds in the Sub-Saharan African among similar resource rich countries, this was report by the Natural Resource Governance Institute (NRGI) has shown.
The new report, titled “Resource Governance Index: From Legal Reform to Implementation in Sub-Saharan Africa” look into the gap between cost of governance, the revenue generated from oil gas and funds distributed among 28 countries in Africa.
The reports revealed that the Sub-Sahara is on the average the lowest-scoring region in relation to sovereign wealth funds.
“The government discloses almost none of the rules or practices governing deposits, withdrawals or investments of the ECA,” the report said of Nigeria.
The ECA is an account used to save oil revenues above a base amount adopted as benchmark price in the budget.
The report said Nigeria has other sovereign wealth funds, some of which are more transparent. But as the largest fund by asset balance, the report revealed,
“the potential revenue loss through ECA constitutes a critical challenge in the country where over 90 per cent of government revenues come from the oil sector.”
“Ghana’s high ranking is a result of clear rules and advanced oversight mechanisms, including by the parliament,” the report said.
“Botswana’s Pula Fund achieves a satisfactory score of 65, even though it does not have binding rules on how much is deposited into and withdrawn from the fund each year.”
For years, there have been controversies over the “illegality” of Nigerian government’s continued operation of the ECA without the requisite legal backing.
The Auditor-General of the Federation, Anthony Ayine, in his last report released in 2018, advised the Nigerian government to legalise its continued maintenance of the ECA. In the report, Mr Ayine recommended that relevant government agencies and the
Federation Accounts and Allocation Committee (FAAC) initiate the process to legalise the creation of the Excess Crude Oil/Petroleum Profit Tax/Royalty Account, through the National Assembly.
Earlier in November 2017, the Nigerian Senate had declared the ECA illegal, with some senators describing it as the “biggest slush fund” for governors.
In its report, the NRGI advised that ministries should ensure sovereign wealth funds are subject to oversight independent of the fund’s management and the executive.
“Parliamentary approvals for withdrawals, and a rules-based deposit, withdrawal and investment framework audited by a supreme audit institution or external auditor can help,” it added.
Similarly, it said the funds should publish annual reports containing information on assets, investments and returns, which help assess their feasibility of a fund as a revenue management tool.
In the area of licensing, the report also identified that there is opacity in Nigeria’s key decisions including qualification of companies, process rules and disclosure of terms of extraction.
“In Nigeria’s oil and gas value realisation component, licensing is the weakest link with a score of 17 of 100,” the report said.
As the first step in developing mineral resources, it explained that the award of exploration and production licenses presents a critical opportunity to set the course of governance for the entire life cycle of a project.
Sub-Saharan African countries that performed best in licensing are Mozambique, Burkina Faso, DRC (for mining), Guinea and Ghana.
Ten countries achieved failing scores in this area, it said, including significant resource economies like South Africa, Nigeria, Botswana, Sudan and Madagascar.
The report noted that it is particularly important for government officials to disclose ownership in extractive companies to avoid conflicts of interest.
While seventeen out of 28 countries require public officials to declare their financial assets, including investments in extractive companies,
to a government entity, five (Burkina Faso, Ethiopia, Guinea, Niger and Uganda) require these disclosures to be made publicly, and two, Burkina Faso and Uganda, actually disclose this information.
The report recommended, among other things, that licensing authorities should run transparent license allocation processes to ensure qualified, legitimate companies are selected to develop resources.
“They should publish prequalification requirements and rules of allocation, and negotiable terms when licenses are awarded through competitive tender or auction,” it said.
The NRGI report explores resource challenges and governance in Sub-Saharan Africa, with judicious use of data set and evidence documents comprising over 10,000 legal texts, reports and other data sources.
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