---

---

Nigeria: FG Stops Sharing of Excess Crude Proceeds

Kunle Aderinokun

14 January 2009

---

Abuja — The global economic crisis appears to have started taking its toll on the country as the Federal Government has started the promised belt-tightening measures to adjust to the current realities.

Yesterday, the government said henceforth it would no longer withdraw from the Excess Crude Account (ECA) for sharing by the three tiers of government.

The government also announced that, effective next month, the amount for sharing amongst the Federal, state and local governments would be pruned down because of low income from oil sales.

Minister of State for Finance Remi Babalola at the monthly Federation Account Allocation Committee (FAAC) meeting yesterday in Abuja said: "This is the last monthly distribution of not-less-than N407 billion as downward adjustments will be made from next meeting hinging on slightly lower than production volume and significantly lower benchmark. We have all agreed these are great times calling for the best in all of us and not the period for sharing excess crude earnings.

"There was an augmentation of $92 billion, which is almost similar to the $106 billion that was augmented for the prior month. What came out clearly now is the fact that the dwindling impact of the crude price is affecting us. After this month, going forward, since the volume and the benchmark price are lower than what it was in the last fiscal year, there may be greater need for augmentation as the month goes by. But the augmentation for this period is not because of vandalisation, it's just because of the price deterioration of crude oil," he said while fielding questions from journalists shortly after the meeting.

He added: "Every time we share, we augment the distribution, what you are actually doing is you are still distributing the excess crude because what you are doing substantially is that you are saying that what you budgeted in terms of the production capability as well as the price you have not met up to that during that month. And you are taking some part of your savings to augment it, that one would continue. In fact that's the greatest challenge that we have now for 2009. That one will continue. We would still continue with augmentation.

"And we are saying that because that augmentation becomes much more imperative now we do not think that in 2009 we would have opportunities for sharing additional excess crude. The way excess crude was shared, apart from augmentation, we would need that money for augmentation for 2009 and maybe 2010 before probably the economy would rebound," he added.

The National Economic Council (NEC) had in December 2007 approved the sharing among the three tiers of government, the sum of $4.017 billion taken from the ECA, which was shared in two equal installments of $2.008 billion each in March and June, 2008 respectively.

For sharing in January, the Federation Account Allocation Committee (FAAC) put on the table December allocation of a total of N435.40 billion, after an augmentation with about N91.65 billion taken from the ECA.

The total amount shared was N3.12 billion lower than the previous month's allocation of N438.52 billion.

Babalola, however, assured Nigerians that the Federal Govern-ment has enough money in the Excess Crude Account to support the economy through "lean period."

The minister added: "We have sufficient funds in excess crude account to tidy us through the lean period and don't forget that it's from excess crude we are going to debit the power intervention, which we have approval of the Federal Government and the various states. So we are taking $5.3 billion out of that excess crude and we still have sufficient amount there to cushion us during the hard times."

Meanwhile, the allocation for December totaling N435.40 billion, which represented N313.33 billion statutory allocation and N30.42 billion Value Added Tax (VAT) as well as N91.65 billion augmentation from ECA was shared by the three tiers of government.

The three tiers shared the statutory allocation in the proportion of N146.58 billion to the Federal Government; N74.35 billion to state governments and N57.32 billion to the local governments.

For VAT, the Federal Government got N4.56 billion while the state and the local governments received N15.21 billion and N10.65 billion respectively.

Read comments. Write your own.

---