Kunle Aderinokun
15 September 2008
Abuja — The much-touted emergency in the power sector may have witnessed a setback as only seven of the 36 states of the Federation have secured approvals from their respective assemblies to contribute a portion of their excess crude proceeds into the special intervention fund for projects in the sector.
About $5.37 billion (N639.625 billion) of such deductions was approved by the Federation Account Allocation Committee (FAAC) for the rehabilitation and expansion of Nigeria's power generation, transmission and distribution through the Independent Power Projects (IPP).
The Federal Government also explained that its reason for sourcing for $500million from the international capital market, that is, the $500 million Sovereign Bond, was to create a benchmark rate for other Nigerian borrowers that may wish to seek funding from the international market.
Minister of State for Finance Remi Babalola made these disclosures while fielding questions from Finance Correspondents at the end of the monthly FAAC meeting at the weekend in Abuja.
He, however, pointed out that most state had passed the resolutions at their respective states house of assemblies to the extent that they could use their share of the excess crude to fund the emergency.
FAAC, a major part of which are the 36 states, had in June approved the withdrawal of $5.37 billion from the excess crude account to support the financing of power projects across the country in the yet-to-be-declared emergency on power.
The FAAC is presided over by the Minister of State for Finance and has as members, the Accountant-General of the Federation, state commissioners for finance, and state accountants-general.
Other members include representatives of Federal Ministry of Finance, Revenue Mobili-sation Allocation and Fiscal Commission (RMAFC), Central Bank of Nigeria (CBN), Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS), Debt Management Office (DMO) and Nigerian National Petroleum Corporation (NNPC).
About $8.442 billion had already been taken from the Excess Crude Account by the administration of former president Olusegun Obas-anjo, to finance power projects, which the Yar'Adua administration is struggling to complete.
If this is added to the proposed funding of $5.375 billion, it will bring the total amount deducted from the Excess Crude Account for the power projects to $13.817 billion (N1.644 trillion).
Given this scenario, the stakes of the three tiers of government in the power project would be 48.83 per cent, 36.25 per cent and 17.92 per cent respectively.
But as soon as the Federal Government releases $1.5 billion for the Mambilla and Zungeru power projects, the stakes of both the states and local government will be reduced.
Federal Government's stake would increase to 53.9 per cent, while those of the states and local governments would be 30.7 per cent and 15.3 per cent respectively.
Membership of the board of the power projects is expected to be shared along these proportions of holdings.
The Minister of State for Finance said: "Following the approval of this committee that the power sector be specially funded by all tiers of government and in consideration of the provisions of Section 120 of the 1999 Constitution, states were to formally seek the approval of their respective Houses of Assembly to utilise the shares of their states and their local government councils on the Power project.
"We are aware that most states have passed the necessary resolution even though only seven htate houses of assembly have forwarded the resolutions of their parliaments to the Federal Ministry of Finance towards meeting this national emergency in the power sector."
Babalola stressed the need to bring the whole issue to a close "very urgently".
Shedding more light on the Federal Government's $500 million sovereign bond, Babalola explained that the decision to raise the sovereign bond should not be misconstrued to taking a fresh credit or loan.
Rather, he noted that the Federal Government was using the venture to test the international market.
Said he: "The decision for Nigeria to issue a $500 million naira-denominated sovereign bond is not a fresh open gate to taking credit. Based on the fiscal responsibility act we've told you that now we are only focusing on concessionary loans so there is no reason for us to go to the market and go and be taking expensive loans again. But based on that same act, there is a window for us that when we can make a very strong case. We can take some money from international capital market.
"What we are doing with this particular one is not to actually take a lot of money from the market, we are testing the international capital market for a benchmark rate so that it would give opportunity for other Nigerian borrowers when they want to go to the international capital market.
"I will tell you as an example when I was in First bank, we went to the international capital market to raise a bond, what we had was that we took that money at a rate that is not dependent on the risk of Nigeria. Now when we take this $500 million bond it will have what we call a bench mark rate.
"That money is just half a billion dollars, so that money is not going to be used extensively because we want to fund railway or we want to fund roads or something. It's for us to actually have a bench mark rate. So that we can determine the risk nature of the country and that would give opportunity especially for private borrowers when they want to go to international market to raise money that's the whole essence."
Earlier at the meeting, the three tiers of government shared a total of N441 billion for the month of August, part of which was N31.44 billion withdrawn from the excess crude account as augmentation. The total amount shared represented an increase of N10.86 billion over the previous month's figure of N430.14 billion.
The increase in total revenue was attributed to increase in value added tax (VAT).
According to a communiqué signed by the Accountant-General of the Federation (AGF), Mr. Ibrahim Dankwambo, and issued by the Technical sub-Committee of FAAC, a total of N676.09 billion revenue from mineral (N604 billion) and non-mineral (N71.45 billion) was available for distribution.
From this amount, N300.19 billion was transferred to the excess crude, petroleum profit tax (PPT) account while N1.75 billion and N1.94 billion were also deducted - being 4 per cent of cost of collection for the Federal Inland Revenue Service (FIRS) and seven per cent cost of collection for the Nigeria Customs Service (NCS) respectively. Thus, it leaves a net amount of N372. 21 billion for sharing amongst the three tiers of government.
The Federal Government received N175.23 billion (52.68 per cent), while the states got N88.88 billion (26.72 per cent) and the local government, N68.52 billion (20.60 per cent). N39.58 billion being 13 per cent derivation fund went to the nine littoral states.
For the VAT, which totalled N37.34 billion, it was shared in the proportion of N5.60 billion to the Federal government (15 per cent): State government N18.67 billion (50 percent): local government, N13.07 billion (35 per cent).
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Is this not the same approach used by OBJ’s administration to have each local govt areas contribute a portion of their federated account funds towards building health centers so that each local govt residents could have access to basic health care and treatment? Yar would have none of it and scrapped it to spite his predecessor as wasteful. If a dunce promised during his campaign for Presidency to declare emergency in the power sector but wasted precious time dismantling the most logical ideas put in place by his predecessor and now awoke from his slumber a year and half later, with almost half of his tenure wasted on unproductive partisanship to now attempt to implement the same idea of his predecessor of getting each state to contribute to their respective power sector development, who would take him seriously. This is a self inflicted wound that is all too common in our society – the Nigerian shuffle – one step forward, twenty steps backwards. O’ well, whatever, lets all just siddon, continue to look and suffer in silence and expect god to come down and help us. Guess what, god helps those who help themselves by getting rid of this inept, visionless leadership. Geez!