Daily Champion (Lagos)
Udo Onyeka
25 October 2009
Following the recent sharing of N300 billion from the excess crude account among the three tiers of government, tongues are wagging over the rational for the action even as situations in many states and local governments have shown that such allocation in the past may have been misused.
The decision to share the N300 billion was taken by the National Economic Council (NEC) to buoy the economy. It took this decision after a presentation by the Central Bank of Nigeria (CBN) at its meeting in Abuja three weeks ago. The CBN presentation Sunday Champion was told had indicated that liquidity problems in commercial banks had led to a credit crunch.
According to the minister of National Planning, Dr. Shamsudeen Usman, President Umaru Yar'Adua had requested that the $2 billion (N3000billion) be made available to the three tiers of government to mitigate the impact of the liquidity crisis.
Sunday Champion gathered that the money which had been shared following a formula made available by the Federation Account Allocation Committee, has been remitted to the various accounts of the governments.
The three tier of government had also in August 2009 shared $2.1 billion from the excess crude proceeds account while $5.3 billion was removed from the account for the power intervention projects.
Confirming the development last week in Abuja, the Minister of State for Finance, Mr. Remi Babalola disclosed that the sum of N350.721 billion has been paid by the CBN to the tiers of government, being their share of the statutory allocation, value added tax and budget augumentation for the month of September 2009.
Babalola explained that the urgency in sharing of the $2billion and revenue allocations from Federation Account was in accordance with the Federal Government's drive to bring liquidity to the economy.
"I received confirmation from CBN last Friday that the $2billion from the excess crude has been paid into the various accounts of the tiers of government. So no tier of government is being owed from the approved $ 2 billion from the excess crude and the N350.7 billion from Federation Account," the minister said.
"The distribution of the $2billion is part of the government's stimulus plan to reflate the economy. It will mitigate the inadvertent liquidity and credit crunch challenges being faced by the various tiers of government due to the recent banking reforms in the economy.
"By implication, the current challenges of illiquidity and credit crunch in the system are being addressed by this injection. It also means that funds are available for on-going capital projects at the federal, state, local government's levels."
According to the minister, the Federal Government received the largest share of $841.911 million, followed by states which got $799,648 million, while the 774 local government councils obtained the balance of $358, 440 million.
In addition to the $2 billion, the three tiers of government received N350.721 billion from the federation account. Statutory revenue accounted for N235.121 billion of the money shared from the Federation Account, while value added tax and budget augumentation amounted to $ 36.529 billion and $51.192 billion respectively.
Indicating the FG withdrawals from the excess crude account is becoming rampant, while there are no development and infrastructure to justify this, the chairman of Revenue Mobilization Allocation and Fiscal Commission (RMAFC), Mr. Hamman Tukur Thursday in Edo state said the account has drop from $27 billion to $7 billion.
The RMAFC chairman who said this during a visit to Governor Adams Oshiomhole said that in view of the way the nation's economy was being plundered, it will not be long before the nation will grind to a halt.
However, Tukur's concern is that Excess revenue account as a savings for the nation has been drawn from $27 to $7 under a short period of time.
Tukur noted that the only revenue accruing to the country was the collection from Federal Inland Revenue Service (FIRS) customs duties and petroleum profit tax (PPT). He said the joint venture cash call (JVC) has outlived its relevance and has become a drainpipe in the economy.
For instance he said from August till October, Nigeria has not got one dollar from the total crude sold. "Yet Nigerian National Petroleum Corporation (NNPC) has paid over N560 trillion to JVC.
Instructively he said rather than finding solution to this, the government reverted to the excess crude account.
Many have condemned the pace of infrastructural development in many states and local governments even as all these allocations are made available for development of infrastructure and provision of amenities.
On the part of the Federal Government it is surprising that in spite of several financial interventions in the power sector, generation of adequate power supply in the country has remained at its lowest level.
The Federal Government earlier in the year promised to achieve 6000 mega watts (MW) target of electricity supply by December this year, but indication on ground shows that the target may not be achieved.
According to a respondent, "Even though the federal government has said so, the determination and commitment of achieving the target is not there" the respondent said.
The inadequate power supply according to many analysts is perhaps the greatest challenge of facing business men and women in the country. This is because the inadequate electricity supply for the citizens and for industrial capacity has continued to hinder economic development and activities in the country.
According to a recent survey, rise in food and energy prices which hit other developing economies has also affected Nigerians. The poll which was conducted for the British Broadcasting Corporation's World Service by an international polling firm, Globes noted that many, in the developing world, are cutting back on what they eat because of higher cost of food including Nigerians.
For Nigeria, African's Continent largest oil producer, the economy is heavily dependent on oil, which according to World Bank, accounts for over 95 per cent of export earnings and about 85 per cent of government revenues.
The inability of Nigeria to develop infrastructure to manage its oil and gas resources whose gas is mostly flared has continued to slow down the rate of development of the sector.
In spite of huge budgetary allocation monthly revenue sharing and special revenue such as the excess crude, VAT, Nigerians are yet to have a feel of good governance. Corruption among the leaders has continued to increase.
According to a recent report by the Mo Ibrahim Foundation, Nigeria ranks 35th in Africa out of 53 African countries assessed interns of good governance and power of citizens to hold governments and public institutions accountable to the public.
The report which was released in October 2009, the foundation employed 84 criteria to assess performances of government institutions with the use of 2007/2008 cross country data in 53 African countries.
According to the report, countries that performed poorly included Somalia, Zimbabwe, Congo, Equatorial Guinea, Eritrea and Nigeria.
It identified four key pillars to includes good governance, the rule of law, participation and human rights, sustainable economic opportunity and human development.
The foundation measured delivery of public goods and services to citizens by governments and non-governmental organizations in 2007/2008. Nigeria scored 46.5 out of 100, and was ranked 35th out of 53.
Within the West African region, Nigeria was ranked 11th and her score was below the regional average, which was put at 51.7.
Nigeria also scored below the overall continental average, which was put at 51.2 at the category level. Her score was below the continental and regional averages, in four categories that constitute the Mo Ibrahim index.
The report stated the problem facing African leaders was how to lift millions of people from poverty and create a conducive environment for business to thrive.
Also recently, a Geneva-based World Economic Forum (WEF) released a study on 133 countries in the world, ranking them according to the performance of their governments in critical areas of development including human capital, institutions of governance, infrastructure and business competitiveness. Other areas of the study included corruption, insecurity, official spending method and macro economic environment.
While acknowledging the abundance of human and material capacity in the country including its oil and gas reserves, large population and extensive landmass, WEF noted that poor performance of almost all institutions of governance.
According to the WEF, the absence of good governance, which is a product of inefficient and ineffective political leadership has impeded the country's development. In the light of the above, the forum ranked the country poorly in almost all indices of development and good governance.
In the area of weak institutions, the forum ranked the country 102, while placing her 120th in wasteful spending, 117 in insecurity, 122 in corruption, 127 in infrastructure and global competitiveness in business and investment. The only area that gave to the economy was its ranking as the 20th in macro-economic environment, high rate of savings and low national debt profile. In any case this fair position would have been eroded by the ill-advised banking reforms by the Central Bank of Nigeria (CBN) in recent times.
Indeed, the rankings appear to be going in line with the global index of failed states which placed Nigeria among the worst 20 countries in the globe. (see box).
According to Mr. Linus Okoroji co-coordinator, Humanity Service Project (HSP), our leaders are wasteful.
"The crop of governors we have now, many of them are reckless in spending the people's money. I t is only in Lagos state and in some few other states that I will tell you that something is happening, in terms of infrastructural development. When you go to Lagos state and see what the Governor of the state Mr. Babatunde Fashola is doing, you know that others are actually wasting money," Okoroji said.
Sunday Champion was told that apart from all these funds being given to states and local government councils, some state governors have recently raised bonds in which large sums of money were also raised.
On bonds by state governments, a financial expert, Mr. Francis Chukwumerije said that the regulators should make sure that due process is followed to the letter before any state would be given approval to raise bond.
It was in this regard that the Ogun state House of Assembly took exception with the state governor, Otunba Gbenga Daniel in the governor's effort to raise bond.
But, the former President, Chartered Institute of Stock brokers (CIS), Mr. Dipo Aina, in an interview told Sunday Champion that before a state is given approval to raise bond on the capital market, the state must go through several processes.
"The regulatory agencies in the capital market must be convinced beyond doubts and here are certain requirement to be fulfill before a state or an organization is allowed to raise bond" Aina said.
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