Excess Crude Savings: Why Nigerian govt. must ‘aggressively’ fund NSIA – Official

With the Nigeria Sovereign Investment Authority (NSIA) posting six consistent yields of profits in four of its five years of existence, the Supervising Minister of Finance, Zainab Ahmed, said the government needs to be more aggressive in its excess crude oil revenue savings to sustain the funding of the agency.

The minister said on Thursday at the quarterly briefing of her ministry in Abuja that government was working towards an understanding with the National Economic Council (NEC) to ensure it saved on a regular and routine basis in the excess crude revenue account (ECA) for the NSIA.

“The NSIA is doing a good job with the small savings available to it in the Stabilisation Account,” the minister said.

“But, the finance ministry is hoping to get the understanding of the NEC, chaired by the Vice President, and composed of all the 36 states of the federation and the Federal Capital Territory. The government wants the savings into the ECA to be more aggressive.

“There is a provision in the NSIA Act that requires that savings in the ECA on a routine basis be able to fund the NSIA. Government has not been able to attain that yet.

“It is not something the federal government alone can decide. The ECA belongs to the three tiers of government. Their understanding is required to start that routine savings and funding to the NSIA,” she said.

IMF Indicts Nigeria over ECA

Early last month, the International Monetary Fund (IMF) criticised Nigeria for her poor utilisation of the Sovereign Wealth Fund.

The IMF, in its Fiscal Monitor Report, released as part of the World Bank/IMF Spring Meetings, ranked Nigeria second lowest among 33 countries using the sovereign wealth fund from their natural resources.

The IMF ranked Nigeria only better than Qatar. The IMF’s Senior Resident Representative and Mission Chief for Nigeria, Amine Mati, said Nigeria’s use of the ECA savings lacked transparency, particularly on the rules governing deposits, withdrawals, and investments.

The ECA is a special account kept by the Nigerian government where revenues realised from the sale of crude oil, above set oil benchmark price in the budget, are saved.

As is the practice in most resource-rich countries with Sovereign Wealth Fund, accruals in the ECA domiciled at the Central Bank of Nigeria (CBN) are usually transferred to the agency mandated to manage such funds for the benefit of the citizenry.

Serial abuses

However, successive Nigerian governments have been accused of serially misusing huge accruals in the ECA with scant transparency and accountability.

The Natural Resource Governance Institute (NRGI) in its recent report, titled “Resource Governance Index: From Legal Reform to Implementation in Sub-Saharan Africa”, ranked Nigeria’s ECA lowest among other sovereign wealth funds covered.

“The (Nigerian) government discloses almost none of the rules or practices governing deposits, withdrawals or investments of the ECA,” the report stated.

Another report by the Premium Times Centre for Investigative Journalism (PTCIJ) revealed Nigeria realised over $109.37 billion (about N15.274 trillion) as total accruals in the ECA between 2004 and 2018.

Of the amount, the report said successive Nigerian governments spent about $107.4 billion (about N15.46 trillion) without any tangible evidence of accountability to the people.

Between 2011 and 2015, the report said the country earned about $42.3 billion in the ECA. Between 2009 and 2014, about $12.95 billion was drawn from the account for fuel subsidy payments to petroleum products marketers.

Of all the withdrawals, only $1.25 billion was transferred to the Stabilisation Fund, which later became the seed funding for the current Sovereign Wealth Fund managed by the NSIA.

According to the report, the Obasanjo administration realised about $33.74 billion in the ECA between 2004 and 2006. About Out of the total accrual of $33.74 billion, his administration expended a total of $25.65 billion.

Similarly, between 2007 and 2009, the Yar’Adua administration received $27.36 billion and spent $28.73 billion.

Also, between 2010 and 2014, the Jonathan administration realised about $45.56 billion and spent about $50.44 billion.

The Buhari administration has so far earned $2.49 billion despite the recent low oil prices.

Out of the amount, $500 million was paid as additional capital to the Sovereign Wealth Fund and $1 billion for payment to states as part of the Paris Fund refund.

As of May 1, the Federation Account Allocation Committee (FAAC) Secretariat reported that about $183 million was the latest balance in the ECA.

NSIA’s achievements

The NSIA commenced operations in 2013 with a core seed equity investment capital of $1.5 billion in three ring-fenced funds for Stabilisation, Future Generation and Nigeria Infrastructure.

NSIA Managing Director, Uche Orji, told PREMIUM TIMES the agency had recorded six consistent yields of positive profits on all three of its signature funds in four of the five years of its existence.

Apart from the additional $500 million by the present administration, the NSIA said, in its 2018 annual financial report over $550 million was earned as “value addition” from investments with its funds in five years of operation.

Also, about $75 million was realised from third-party assets managed on behalf of other government agencies, like the Debt Management Office (DMO) and presidential initiatives on infrastructure development fund, bringing the total balance sheet to about $2.63 billion.

With 100 per cent funds deployed, Mr Orji said the Stabilisation Fund yielded over 7.2 per cent in profits, while about 81 per cent of the Future Generations Fund deployed fetched about 8.3 per cent profit during the year.

Similarly, he said the Nigeria Infrastructure Fund yielded over 7.7 per cent from only 17 per cent of the fund deployed.

The NSIA MD said his agency was able to record those achievements through the deployment of the funds into strategic investments in roads, healthcare, power and agricultural services impacting directly on the lives of Nigerians.

In 2016, he said the agency realised about N149.8 billion as income, apart from N130.4 billion in profit. The figures, however, dropped to N27.9 billion and N22.5 billion respectively in 2017.

In 2018, total comprehensive income, including $18.05 million as foreign exchange gains, rose to about N44.3 billion, from N27.9 billion in the previous year.

Also, total income grew by 88.5 per cent, from N30.6 billion in 2017 to N57.7 billion, while interest income of about N23.82 billion, represents a 9 per cent year-on-year, an increase from the N21.77 billion in 2017.

Besides, the total assets of the agency grew by about 16 per cent, from about N533.8 billion in 2017 to about N617.7 billion.

The officials also said the agency had achieved a lot in health, agriculture, and infrastructure development.