My Sojourn into the Excess Crude Account

25 Feb 2013

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BEHIND THE FIGURES by Ijeoma Nwogwugwu;

When Oby Ezekwesili, former Education Minister and World Bank Vice President for Africa, made her allegation accusing the administrations of Umaru Yar’Adua and Goodluck Jonathan of squandering $45 billion in foreign reserves and $22 billion from the Excess Crude Account (ECA) left behind by former President Olusegun Obasanjo, my instant reaction was to dismiss it. I told anyone who cared to listen that Ezekwesili was wrong and was uncertain of her facts when she made the statement during the University of Nigeria, Nsukka convocation lecture last month.

I knew for a fact that even after Obasanjo left office, foreign reserves accretion continued and peaked at almost $63 billion in September 2008. It was only after the global economy went into a tailspin, oil prices crashed from a peak of $147 per barrel attained in July 2008, the US government allowed Wall Street investment bank Lehman Brothers to fail two months later, and foreign investors exited the Nigerian equities market in droves during the same period, that the country’s foreign reserves took a beating.

I recall with absolute clarity how from September 2008 – well over a year after Obasanjo had stepped down – the Central Bank of Nigeria led by Professor Chukwuma Soludo fought valiantly to defend the naira from speculative attacks. Despite the central bank’s best efforts, the naira plunged against the US dollar from N118 to N180 in a space of months. Had Nigeria not had sufficient reserves to meet its foreign obligations, the naira would most likely have been devalued to N250 or more to the US dollar.

I was also certain that funds were drawn down from the ECA to meet our mounting fuel subsidy obligations; for the National Integrated Power Projects (NIPP) started by the Obasanjo administration, which were initially suspended but later continued by the late President Yar’Adua after he had obtained the consent of the 36 states of the federation to continue withdrawals from the ECA for the power projects; and by the three three tiers of government which were reeling from the aftershock of the global financial meltdown; as oil revenue, which accounts for about 80 percent of total federal revenue, had declined. Two factors were to blame for this: Lower oil prices and declining oil production as a result of rising militancy in the Niger Delta at the time. So how did Ezekwesili get her facts all muddled up, I wondered.

Expectedly, the Jonathan administration came out on the offensive. Starting with Labaran Maku, the Information Minister and later Doyin Okupe, the president’s Senior Special Assistant, Media, the government attacked Ezekwesili, dismissed her offer to a debate on the issue, and published advertorials in several newspapers with facts and figures to drive home their point. It was the advertorials that actually gingered my interest.

The figures published by Okupe from January 2007 to January 2013, as provided by the central bank, showed that the country’s foreign reserves by May ending 2007 when Obasanjo stepped down was $43.130 billion. In the same advertorial, an explanatory note signed by CBN’s Deputy Governor Financial System Stability, Dr. Kingsley Moghalu, showed that Nigeria’s external reserves are jointly owned by the federal government, CBN and the federation. The federal government’s portion consists of funds belonging to the federal government and its agencies such as the Nigerian National Petroleum Corporation (NNPC) for the joint venture cash calls, and the Ministries of Defence and Power, among others. The CBN portion, which is the largest, consists of foreign currency purchased (monetised) by the central bank from the government and oil companies, among other autonomous sources. The federation portion of the reserves consists of the excess crude funds yet to be monetised and belongs to the three tiers of government.

The tables in the advert further gave the breakdown of gross reserves by May ending 2007. The $43.130 billion was made up of FGN reserves of $2.18 billion, CBN reserves of $31.52 billion, and federation reserves (ECA) of $9.43 billion. When I saw the figures purportedly provided by the central bank, I did a double take. There was something amiss. They could not be correct, I said to myself.
I even called Okupe three times and argued furiously that he had published the wrong figures, insisting that the amount credited to the ECA as at May 2007 was incorrect. I told him he had mixed up the external reserves position with that of the ECA and the difference between $43.130 billion (as provided by CBN) and $45 (as espoused by Ezekwisili) was insignificant to have prompted a response from the federal government.

I kept insisting that the ECA was distinct from our external reserves and what was left in the account when Obasanjo vacated office was well over $20 billion, not $9.43 billion. In my conversations with him, I even went as far as calling the central bank dishonest the disingenuous for trying to deceive the public. On my urging, he reverted to the central bank, but came back adamant after each phone call insisting that the figures the CBN had provided were correct.

Given the confusion arising from the May 2007 figures, I studied those provided for subsequent months up till January 2013 (especially the ECA figures) and did some research on the CBN website to compare the data provided therein with those published by Okupe. Historical quarterly and annual reports from 2007 to 2012 on the CBN website showed that what Okupe had published was in tandem with the central bank’s data.

I then proceeded to google as many old stories as possible that had been published from 2006 to date on the ECA. It was the stories that confirmed my worst suspicion: The figures on the ECA that the federal government had regularly made available to the public through Dr. Ngozi Okonjo-Iweala, starting from her first stint as Minister of Finance, were significantly different from the central bank figures. I wasn’t going to give this matter a rest. 

Stories in 2012 also credited to Okonjo-Iweala or her minister of state Dr. Yerima Ngama on the ECA also showed that the figures her ministry churned were at variance with CBN’s data. For instance, by June 2012, the finance ministry said the ECA stood at $5.8 billion; July - $6.9 billion; August - $7.9 billion (after the three tiers of government had withdrawn $1 billion); September - $8.027 billion; October - $8.4 billion; December - $9.6 billion but went down to $9.242 billion in January 2013 after the three tiers has shared $1 billion from the account. On other hand, the CBN showed that the ECA stood at $6.564 billion in June; $8.464 billion in July; $9.602 billion in August; $9.273 billion in September; $9.603 billion in October; and $11.462 billion in December.

Seeing the glaring conflict as well as the dawning realisation that my initial dismissal of Ezekwesili’s statement was knee-jerk, prompted me to make some discreet enquiries from the central bank to ascertain who was telling the truth. Having spoken to CBN officials, past and present, they confirmed that they could only provide data on the amount available in the ECA domiciled with the central bank in any given month. They acknowledged the differences between their figures on the ECA and those of the finance ministry, stating that only the minister and Accountant General of the Federation can give the true picture on the account. Most significantly, one CBN official drew my attention to the fact that since the furore over the $67 billion started, there had been an eerie silence from Okonjo-Iweala, who was central to the entire ECA saga.

This, in my estimation, was the trump card Ezekwesili was holding over the federal government. Should the government ever take her up on her invitation to a debate, some rather uncomfortable questions would need to be answered on the true status of the ECA. How much exactly did Nigeria have in this all-important account before and after Obasanjo left office and how much is in the account today?
Another significant discovery from my research on Nigeria’s external reserves and ECA was the rate of accretion that somehow could not be justified. Information from the International Energy Agency (IEA) showed that average Brent crude spot prices for the years 1999 to 2007 stood at $17.9 per barrel (1999), $28.66 per barrel (2000), $24.46 per barrel (2001), $24.99 per barrel (2002); $28.85 per barrel (2003); $38.26 per barrel (2004); $54.57 (2005); $65.16 per barrel (2006); and $72.44 per barrel (2007). Yet the rate of accretion for both the external reserves and ECA was much higher during this eight-year period.

From 2008 to 2012, on the other hand, when the average price of Brent crude stood at $96.94 per barrel (2008); $61.74 (2009 – when oil dovetailed to $35 per barrel); $79.61 per barrel (2010); $111.26 (2011); and 110.00 (2012), respective growth and savings of external reserves and the ECA, have been significantly slower.

To be fair, managers of the economy could argue that oil earnings were impacted between 2008 and 2010 due to the drop in Nigeria’s crude oil production arising from militancy in the oil producing areas, as well as the global economic downturn. However, what could they possibly use as their defence for the years 2011 and 2012 when production was restored to normalcy and crude oil consistently sold at over $100 per barrel? Using crude oil theft as the perfect excuse would certainly sound hollow, as this criminal activity predates 2007.

The lesson I picked up from this whole saga was that Nigeria still has a long way to go in accounting efficiently and with precision for her crude oil revenue. It is not just NNPC, the Department of Petroleum Resources (DPR) and international oil companies (IOCs) that are incapable of rendering a proper account of how much oil the country produces and exports. The same challenge presents itself in the finance ministry and central bank, which cannot agree on how much Nigeria earns and how much is saved from crude oil sales. Is it any wonder that there is so much corruption and leakage in the system?

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