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By NBF News
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After over seven years of illegally operating the Excess Crude Account (ECA), the Presidency has finally bowed to the National Assembly's pressure to scrap the account.

The ECA, which was created in 2004, during the administration of President Olusegun Obasanjo, with a whopping $9.4billion, was said to contravene section 80 of the 1999 constitution. The section of the constitution recognizes only the Consolidated Revenue Fund (CRF).

In its stead, the Presidency is going ahead with the proposed Sovereign Wealth Fund (SWF), which the governors are kicking against. In 2008, the Federal Government proposed the National Sovereign Wealth Fund (NSWF) to replace ECA.

In the 2012-2015 Medium Term Fiscal Framework (Medium-term revenue framework and medium-term expenditure framework) and Fiscal Strategy paper submitted to the National Assembly on September 22, President Goodluck Jonathan admitted the illegality of the ECA and intent to channel all extra budgetary revenue to the SWF.

'The NSWF will manage Nigeria's excess earnings from crude oil. The current administration stated the current Excess Crude Account has no real legal backing since it was formed under a political arrangement from the previous administration.

'In continuation of the adoption of an oil-based fiscal rule, oil benchmark prices significantly below the current market prices will be adopted for the 2012-2015 period. Revenue in excess of the benchmark price will continue to be set aside in the Sovereign Wealth Fund (SWF).

'The SWF, which formalizes the ECA, was designed to guarantee savings for future generations, to promote the development of critical infrastructure thus promoting growth and diversifying the economy and to protect the budget against negative oil price shocks.'

President Jonathan noted in the MTEF that government will adopt a gradual slash in recurrent expenditure and concentrate on completing ongoing capital projects.

For 2012, N2.581 trillion is budgeted as recurrent expenditure while N1.319 trillion will be spent on capital projects.

The President noted that recurrent expenditure was pushed up by the new minimum wage including increment in wages of medical personnel across the country and that of the Academic Staff Union of Universities (ASUU).

'Government will also continue its strategy of fiscal consolidation by which expenditure, particularly on recurrent spending will be reined in and directed to its most productive and growth-enhancing use while efforts will be intensified to increase revenue.

'To correct this bias, government is implementing a four-year capital project plan commencing in 2012, which will ensure that we exit from the current portfolio of on-going projects.

'The reduced size of the 2011 Amended Appropriation Act relative to the 2010 budget signals government's intent to scale down its spending from the highs reached in recent times, largely due to the fiscal stimulus extended during the peak of the global economic crisis and the recent increase in the wage bill. 'In recent times, the outlay on recurrent spending has outstripped the growth of spending on capital projects. This increase can be attributed largely to the rising wage bill, an outcome of the increase awarded to civil servants, medical personnel, ASUU staff, etc. 'The 2012-2015 period will focus on correcting this structural imbalance in our expenditure profile thus ensuring that more funds are allocated to critical infrastructure.

'The report of the Expenditure Review Committee, which concluded its work in April 2011, will provide a starting point for this key initiative. PPP funding for infrastructure projects will also be pursued aggressively. 'The share of recurrent spending in aggregate expenditure is set to decline from 74.4 percent in 2011 to 72.5 percent in 2012 while capital expenditure as a share of aggregate spending is set to increase from 25.6 percent to 27.5 percent in 2012.'

Furthermore, the Presidency is projecting N794.44 as new domestic borrowing for next year while N120 billion is projected as unspent funds in the 2011 fiscal year.