The Nigerian Extractive Industries Transparency Initiative, NEITI, on Tuesday asked the federal government to transfer the management of the Excess Crude Revenue Account, ECA, and the Stabilization Funds to the Nigerian Sovereign Wealth Fund for effective coordination.
NEITI said such an arrangement would enable the country develop a coordinated policy to save a portion of the country’s oil and gas revenue for the rainy day and manage for the benefit of future generations of Nigerians.
The Executive Secretary of the transparency & accountability agency, Waziri Adio, spoke in Abuja at the presentation of a policy paper titled, “The case for a robust oil savings fund for Nigeria.”
The Stabilization Fund covers the equivalent of 0.5 per cent of revenue in the federation account designated for augmentation of the shortfall in the federal budget to ensure stability in the economy.
On the other hand, excess crude oil revenue account holds revenues realised from the sale of crude oil above the approved benchmark price contained in the Appropriation Act for the year.
Again, the Sovereign Wealth Fund is a special fund set aside by government for Nigeria Infrastructure Fund (40 per cent), the Future Generations Fund (40 per cent) and the Stabilization Fund (20 per cent).
As at June 2017, the balance in the three funds was $3.9 billion, including Stabilization Fund (N29.02 billion), Sovereign Wealth Fund ($1.5billion) and Excess Crude Account ($2.3billion).
In his presentation, Mr. Adio noted that despite the huge revenues realized from oil and gas operations over the years, Nigeria had one of the lowest natural resource revenue savings in the world, apparently as a result of poor coordination and management.
“The multiplicity of savings funds with different rules led to uncoordinated and widespread extra-budgetary spending,” Mr. Adio said.
He noted that apart from depleting the savings in each fund, such unrestricted spending defeats the purpose for which the funds were set up in the first place, which was to shield the economy from revenue volatility.
Consequently, he said the three funds should be consolidated and the legal framework harmonised into one and transferred to the sovereign wealth fund administered by the Nigerian Sovereign Investment Authority, NSIA.
“NSIA is a very good model the country can entrust with the coordination and management of these funds. Unlike the other two Funds, NSWF is not only better governed and structured, the NSIA has more clarity of purpose and flexibility in its management of investments they have,” the NEITI scribe said.
Besides, he said the Sovereign Wealth Institute’s transparency index rates the NSIA as one of the best in the world, with a score of 9/10, the best in Africa and the second joint best in the world.
In addition, Mr. Adio said NSIA was the only fund that has generated some returns from its investments, about N192 billion last year.
“Putting everything under one roof will make the NSIA more robust, transparent and more inclusive of other interest groups in the country. Under NSIA, withdrawals from the saving would have limits and the criteria would be clear on what to use the funds for and what not,” he stated.
Mr. Adio said NEITI would recommend that Nigeria copy the Norwegian sovereign wealth investment model, which allows government to transfer every revenue realized from mineral resources into its sovereign wealth fund.
Only a maximum of four per cent of the Fund could be withdrawn to fund budget deficits according to the model. He said Norway, in 2016, earned from its investments three times more than what it realized from oil.
Besides, he said, Nigeria could also adopt the Angolan model, that promotes the setting aside of the revenue realised from the sale of 100,000 barrels of crude oil, irrespective of whether the price is high or low.
Support PREMIUM TIMES' journalism of integrity and credibility
Good journalism costs a lot of money. Yet only good journalism can ensure the possibility of a good society, an accountable democracy, and a transparent government.
For continued free access to the best investigative journalism in the country we ask you to consider making a modest support to this noble endeavour.
By contributing to PREMIUM TIMES, you are helping to sustain a journalism of relevance and ensuring it remains free and available to all.
TEXT AD: To advertise here . Call Willie +2347088095401...