Okonjo-Iweala Says “Powerful Governors” Emptied Oil Boom Savings

Source: pointblanknews.com

 
ABUJA (Reuters) – Nigeria's finance minister said on Thursday that a

significant portion of the billions of dollars drained from the oil

savings account over the past two years was distributed to powerful

governors instead of being saved for a rainy day.
Nigeria, Africa's biggest oil producer, is grappling with financial

difficulties owing to a 30 percent fall in the price of oil since June,

which has added pressure on the government's already depleted fiscal

buffers.
The central bank devalued the naira by 8 percent on Tuesday because it was

running out of forex reserves with which to defend the currency.

The Excess Crude Account (ECA) had around $9 billion in December 2012, but

it has since fallen to around $4 billion, Finance Minister Ngozi

Okonjo-Iweala noted in a speech to capital market authorities. Most of the

falls occurred during a period of record high oil prices, when oil savings

are supposed to accrue.
Okonjo-Iweala said some of the money had been needed to cover revenue lost

due to outages caused by oil theft and pipeline vandalism, thought to

drain hundreds of thousands of barrels a day.
“Some of it (the ECA) was then legitimately used to offset revenue

shortfalls arising from quantity shocks and to narrow the fiscal deficit,”

she said. “But against our advice, significant portions were also used to

augment monthly allocations,” to local and state authorities.

“States argued that rainy days were already at hand and in fact (the rain)

was already pouring, so the money needed to be used right away,”

Okonjo-Iweala said.
Nigeria's oil revenues are the source of around 80 percent of government

spending and are distributed each month to the three tiers of government:

federal, state and local.
Money from oil sold over and above the finance ministry's benchmark price

is in theory deposited into the ECA, which can later be used to protect

against oil price shocks or to plug the deficit.
However, there are disputes about who should control this money, and state

governors often argue the central government is hoarding the money and

should distribute more to them.
The president, being the country's most powerful person, can usually have

the de facto last say on how ECA funds will be distributed.

President Goodluck Jonathan, approved two dispersals of $1 billion last

year to state governments.
State governors are some of the country's most powerful people and their

support is crucial for winning presidential elections — President

Goodluck Jonathan faces re-election in February 2015.

State governors requested $2 billion from the ECA this month to complete

projects and provide security ahead of the February elections.

[ID:nL6N0T91BH]
The request has not yet been approved.
OPEC DECISION ADDS PRESSURE
Demands from local governments for more funds are likely to intensify in

the run-up to the election, but the falling oil price means government

finances are likely to be squeezed further.
The government has already revised down its assumed oil price for next

year's budget to $73 a barrel, from $78 a barrel. But OPEC's decision on

Thursday not to cut output has put further pressure on the oil price,

potentially worsening Nigeria's problems.
Okonjo-Iweala said on Thursday that government plans to review tax

incentives and waivers and plug customs loopholes while also increasing

surcharges on luxury goods, should raise 480 billion naira ($2.7 billion)

over the next three years.
She also said the government planned to save 160 billion naira by weeding

out 60,000 “ghost workers” from the payroll, although she did not give a

time frame.
 
 
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