Nigeria’s Excess Crude Account, ECA, has been ranked the most poorly governed sovereign wealth fund among 33 resource-rich countries around the world, a new report by the Natural Resource Governance Institute has shown.
Nigeria was placed in the joint last position alongside the Qatari Investment Authority as a country whose government discloses almost none of the rules or practices governing deposits, withdrawals or investment of the ECA.
The index, released on Wednesday, assessed 33 sovereign wealth funds that collectively manage at least $3.3 trillion dollars in assets.
Sarah Muyonga, Nigeria Manager at NRGI, said Nigeria’s low index score should serve as an incentive to fix some of the challenges highlighted in the report.
“In the past, the ECA played a useful role in cushioning the 2008 global financial crisis when oil prices dropped considerably but has since been unable to play the same stabilization role in this recent crisis,” said Ms. Muyonga.
“The low index score for Nigeria reflects the lack of rules on disclosures related to deposits and withdrawals alongside practice which are all necessary to improve governance of the fund.
“The current state should definitely act as an incentive to fix some of the challenges.”
The 2017 NRGI report, while noting that the funds of countries like Ghana, Colombia, and Chile performed better than those of Canada and Norway, raised concerns over the “failings” of the funds in the United Arab Emirates’ Abu Dhabi Investment Authority which manages $590 billion.
The funds with the weakest scores suffered the most from excessive risk-taking, high management fees and politically motivated investments, according to the report.
However, the funds in countries such as Algeria, Angola, Gabon, Saudi Arabia, Qatar, and Nigeria are so opaque that there is no way of knowing how much may be lost to mismanagement or who benefits from the Fund’s investments, the report added.
“The current state of recession Nigeria finds itself in today can be partly blamed to lack of savings in the ECA which was established in 2011 ideally to curb wastage and introduce some level of fiscal prudence,” said Ms. Muyonga.
“The ECA has since then been subject to ad-hoc withdrawals and in recent times has nearly been depleted and the government was only able to start making deposit to the fund recently.”
Last month, the Nigerian government announced it had resumed payment into its ECA with the sum of $87 million, the first payment since the Muhammadu Buhari administration came into office in May 2015.
As at May this year, the ECA balance stood at $.2.29 billion, down from $2.49 billion the previous month.
Between 2011 and 2015, Nigeria earned $61.7 billion (about N12.3 trillion) as excess crude money, with the fund reaching its peak in 2012.
The NRGI report stated that the Nigerian government had failed to regularly disclose, publicly, the government officials’ financial interests in the extractive sector or the identities of beneficial owners of extractive companies, despite making commitments to do so with the Extractive Industries Transparency Initiative (EITI) and the Open Government Partnership (OGP).
According to Nigeria’s 2014 EITI data, the report noted, just over half of public revenues from oil and gas were distributed to the federal government and the rest were shared between the state and local governments. In terms of revenue sharing, Nigeria ranks 11th, alongside the United States (Gulf of Mexico) and Ecuador.
“The government has committed to disclosing all oil, gas and mining contracts in its “seven big wins” policy strategy and as part of its OGP action plan, but thus far, it has not disclosed contracts,” stated the report.
“Despite some progress in transparency of revenue collection over the past five years, tracking payments from oil and gas companies remains challenging.
“The public lacks access to audited information on revenue flows to lower levels of government, and this contributes to the gap between the quality of the legal framework and actual implementation.”