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Economic Confidential, February
2008
FEATURES
WINDFALL: Sharing of Excess Crude and Dollarised Allocations
By Yushau A. Shuaib
This is a season of windfall and a period of extra vigilance by
electorate to closely monitor how huge and unprecedented revenue
allocation would be managed from the Federation Account. Imagine
this reality: apart from the monthly statutory releases, VAT
disbursements and internally generated revenue, $4.017billion of
excess crude revenue would be shared from February 2008 and paid in
dollars to tiers of government.
The agreement over this jumbo package came from the National
Economic Council (NEC), an advisory body which is chaired by the
Vice President Goodluck Jonathan. Other statutory members are the
governors of the 37 states of the federation representing their
states while from federal government’s side are the ministers of
finance, Dr Shamsudeen Usman, his counterpart in the National
Planning, Senator Sunusi Daggash and Governor of the Central Bank of
Nigeria, Prof. Charles Soludo.
According to Finance Minister, Dr. Shamsudeen Usman, the payment is
going to be paid like the $1.8 billion refunds from excess
deductions from the Paris Club exit settlement to states in December
2007 which was done in dollars by the apex bank to the domiciliary
account of the states.
It could be recalled that a monthly magazine, Economic
Confidential exclusively reported a meeting in December on
how the stakeholders decided to manage funds from the excess crude
account in 2008. The magazine also disclosed that in 2007 least
recipient states from the federation account received an average of
N3billion monthly each excluding occasional releases from excess
crude accounts, while some oil producing states received as high as
N10billion each monthly due to the derivation principles.
The Rivers State Governor, Rotimi Amaechi, after the NEC’s meeting
said the money would be shared at the ratio of 80:20 to states and
FG respectively. He stated that in a bid not to allow it affect the
macro-economy, governors agreed that it will be essentially used for
the purpose of construction. To further prove that it is a generous
windfall, Amaechi added that the first installment coming before the
end of February would enable those who have already passed their
budgets and those who are still going on with their budgets to
factor in properly and commence implementation. He even sent a
strong signal that that they would “set up a peer review mechanism
where states will peer review each other not Federal Government or
any other agencies but the states will try and compare notes of what
you are doing with the other and see where we can borrow from the
other and manage together the economy.” Probably he is sending a
signal to anti-corruption agencies and other regulators not to
poke-nose in their management of the funds.
Definitely, to have arrived at this critical decision, personal
opinion or constitutional perspective may have given ways to
professional cum political solutions considering the caliber of
personalities whose professional views in the past could have been
in variance to the latest policy matter. Dr, Shamsudeen Usman,
Senator Sunusi Daggash and Prof. Charles Soludo are highly respected
and knowledgeable intellectuals (all first class graduates) with
pedigree on economic matters. They might have consented to the
agreement in the interest of the economy and sovereignty of Nigeria
even though the conditions and details of releasing the chunk of the
fund and in dollars still remain cloudy.
Another interesting
dimension is the extreme generosity of the federal government by
conceding to the ratio of 80:20 to states’ advantage against the
existing revenue formula that provides for FG 52.68%, States 26.72%
and LGC 20.60%. The present proposed formula too pending before the
National Assembly for approval favours the federal government which
recommends for FG 53.69%, States 31.10% and LGCs 15.21%. It is hoped
that the President and his vice who were governors before their
elections were not stampeded and pressurized by all-powerful
Governors’ Forum to concede to this excessive charity which
seemingly promotes fiscal federalism with the hope propelling fiscal
decentralization.
The new policy will excite different reactions from watchers of the
economy especially the multilateral institutions and the acclaimed
economists but definitely not the politicians because of the way and
manner politics is played in our clime. Though an average Nigerian
may be novice on economic terminologies and theory, but like the
typical market woman he/she knows the reality on ground especially
on how some immediate past political leaders have squandered the
revenue for frivolities and dented the nation’s image with their
kleptomaniac tendencies.
The dollarized allocation for lodgments in domiciliary accounts
could have been surreptitiously influenced by emerging economic
dominants i.e. the consolidated banks that have been in supremacy
struggle to manage the foreign reserve. However the policy is said
to be aimed at managing the flow and strengthening of naira, besides
providing an additional instrument for effective liquidity
management by the CBN. In fact it is claimed that if the apex bank
disburses such funds to states in naira, it would have to print
additional Naira – thus pushing additional funds into the economy
with a potential to trigger inflation. But with the new policy,
Nigeria doesn’t need to print Naira again given the fact that the
country earns dollar from its crude oil export, which constitutes
mores than 90 per cent of her earnings.
As hazy as the conditions are presently, there is necessity for
convincing clarity on the dollarized allocation considering the
constitutional impediment against promoting foreign currency to our
local legal tenders. The governments must also evolve, not through
rhetoric, practical mechanisms to avoid triggering off inflation and
turning our Naira notes to worthless tissues. Banks as major
beneficiaries of lodgements of billions of dollars in their
accounts, must be humane and flexible in their operation by
providing financial assistance, soft loans for productive projects
and enterprises to individual and corporate bodies as mark of
respect for using public funds to run their banking businesses. They
should also engage in extensive social responsibility programmes for
the benefit of the poor.
What the citizenry need is not the amount of cash in monetary terms
but provision of infrastructure and enabling environment for
diversification of the economy. Diversification that would encourage
mechanized farming for mass food production; develop capacity
building to churn out highly educative workforce in ICT; tackle the
power generation to reduce the cost of doing business; and invest in
industrialization to revive the productive sector.
The beneficiaries should undertake worthy projects that are
specific, measurable, actionable and time bound for
poverty-elimination and for easy tracking by the citizenry. These
will also ensure reductions of unemployment rates and by extension
curb the menace of restless youth militants, aggressive area-boys
and illiterate Almajiris. It may also be necessary to
encourage the states to emulate the federal government in passing
into law their fiscal responsibility and procurement bills too to
check and promote transparency and accountability at that level.
The argument that the states do not require monitoring from any
agency is a whimsical thinking considering the fact that their
respective arms have oversight roles on receipts and disbursements.
This is the period where not only anti-corruption agencies, like
EFCC, ICPC but also civil society groups and media to come out in
full force in ensuring that nobody is engaged in money laundering
and other corrupt practices. Everybody must be a whistleblower.
The excess crude windfall, like a sudden jackpot, if not adequately
managed, since most of the beneficiaries did not envisage the
development in their budgets, it may have adverse consequences on
the economy. Extreme caution is required before spending a dime of
super-manna, not from heaven but, from fluctuating
global oil prices.
Though the responsibilities of respective tiers of government are
clear in the Second and Fourth Schedules of the 1999
Constitution—especially on the exclusive and concurrent legislative
lists, the federal government should henceforth cede its financial
intervention to the states in the areas of education,
industrialization, health, agriculture and concentrate more on its
major statutory power on national security, foreign affairs,
regulatory reforms, dispute resolutions, extractive industries,
monetary and general economic policy.
Most painful irony is that while FG generously concedes to state
demands, many states continue to abuse the local government councils
by appointing administrators to run their affairs and
misappropriating their allocations in the name of joint projects.
Since the states are no more extension of the Federal Government,
local governments too should cease to be annexes of the states. In
fact that ratio of 80:20 without the mention of LGCs sounds illegal
and unconstitutional for delisting a constitutional tier.
It is hope that the excessive generosity of President Yar’Adua will
be reciprocated by governors too by allowing the local government
councils to operate as democratic entities and fully entitled to
their monthly allocations without deduction and interferences in the
spirit of the due process and fiscal decentralization. Above all the
public officers and custodians of our collective wealth should not
only think about being accountable to the electorate, they should
also remember they would account to almighty God too.
Yushau A. Shuaib
www.yashuaib.com
yashuaib@yahoo.com
Abuja-Nigeria
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