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.
This article was originally published in Economic Confidential February, Daily Trust February 12, Leadership February 12, Daily Independent February 13, New Nigerian February 15, Vanguard February 18, Daily Triumph February 19 and Sunday Leadership March 9, 2008