Solution for bail-out closure of ECA+SWF = N720b


By Dele Sobowale

“Every great enterprise starts off with enthusiasm for an exalted aim and ends up bogged down in petty politics.” Charles Peguy, 1873-1914. (VANGUARD BOOK OF QUOTATIONS, VBQ,  p 49).


Peguy a French philosopher who died just over a hundred years ago, after leaving us with those words on marble must have had something like the rogue account, called Excess Crude Account, ECA, created by the combination of President Obasanjo and Minister Okonjo-Iweala in 2004. As one of those present at the creation of this illegal account at the time, I had raised objections to the ECA in 2004 and predicted that it was bound to create conflict in the future. But Obasanjo and Dr Okonjo-Iwela were operating with the enthusiasm of new evangelists, they were immune to other ideas.

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“Economists are like theologians…”, said Karl Marx, 1818-1883 (VBQ p 45). OBJ and the Minister had one exalted aim for creating the ECA. They believed, quite correctly, that Nigerian governments should save for the rainy day when the price of crude started climbing steadily as the global economy expanded for several years. But, that called for the persuasion of thirty-six governors and 774 Local Government Chairpersons. But, that would take a long time. Evangelists are not known for patience when there is a message from Above to deliver. So, they took a short-cut.

That sleight of hand manifested itself as the Excess Crude Account; an account not known to law and which flew in the face of our constitution. The Federal Government did not even bother to request for a bill to be passed by the National Assembly, NASS. It was simply decreed that “excess” revenue from the sale of crude oil should be paid into the ECA, to be saved for the rainy day. All objections were brushed aside because it was in the interest of the country. Underlying that attitude was another exalted aim; this one not so honourable. It assumed that the Federal Government, especially the President and the Minister of Finance know better than the states and Local governments how to handle their own financial affairs. The Federal Government could be trusted more than the other two tiers of government.

Today, the element of trust is being called into question. Early last week, the National Economic Council, NEC, started probing the ECA. It is certainly the first step towards abolishing it.


Governor Oshiiomhole, APC, of Edo State, leading other governors, including Udom Emmanuel, PDP, of Akwa Ibom State read the query to the media. According to him, “We looked at the figures for Excess Crude Account, ECA, the last time the Minister of Finance [Okonjo-Iweala] and Co-ordinating Minister for the Economy, reported to the Council, and it is in the minutes, she reported by November 2014, that we had $4.1 billion. But today the Accountant General’s Office reported we have $2.0 billion, which means the Honourable Minister spent $2.1 billion without authority of the NEC.” (VANGUARD, June 30, 2015).

The former Minister of Finance, in 2004 and 2015, wasted no time in calling the accusation “a lie” through her spokesman. One certainly hopes she is aware that probes and answers to questions are not conducted on the pages of newspapers. But, it is divine justice that the same Minister who initiated the ECA in 2004 is the one suffering from the unintended consequences of withholding other governments’ money by force. Sooner or later some people are going to accuse you of cheating – whether it is true or not. “If you work with glue, sooner or later, you are bound to get stuck”, said Leo Tolstoy,      , (VBQ p 76). Dr Ngozi is stuck now. Certainly, she now wishes she never heard of the damn thing called ECA. The reasons are not hard to discover.


Because there was no public discussion before the Excess Crude Account was created, there was also no consensus on who and how to manage it. The Federal Government simply withheld revenue which should otherwise be distributed to the states and Local Governments.

Yet the first question to ask is: when is excess generated? Every year, the Federal Government presents a budget based on a benchmark for crude prices, as well as volume of crude expected to be produced and exported. From 2004 until last year, except for brief reversal in 2008/9, global crude prices had exceeded the benchmark. Simultaneously, output and exports have been close to or exceeded budget estimates. That explained why Obasanjo’s government left over $40bn in the account for the Yar’Adua administration. Indeed, the first recourse to drawing from ECA to beef up monthly allocations to states occurred under Yar’Adua. But, there had been withdrawals from the ECA in the past which were not distributed to the states and Local Governments. This will be discussed later.

As long as price of crude and volume exported were above budget there was no dispute about what constituted excess. Problem started during the last year of Yar’Adua administration, when price of crude was higher than benchmark (at one time it was $140 per barrel against $77 benchmark) but volume exported was far below budget levels. Was excess of $63 per barrel generated even if the quantity exported was less than half? That question was not answered until late 2012/2013 when, the problem of massive crude oil theft and declining global demand for Nigerian oil combined to drive the aggregate revenue from crude oil down. The United States of America, our historical best customer, not only stopped buying Nigerian crude but started exporting shale oil. Angola surpassed Nigeria as the largest African producer and International Oil Companies, IOCs, in Nigeria started divesting. The danger signs were there for discerning people to see, but Nigerian government officials ignored them. Instead of taking a long term look at the developments, they took two approaches – started depleting the Excess Crude Account and took on loans in excess of what they could service as revenue continued to decline.

As far back as 2013, former Governor Emmanuel Uduaghan, of Delta State had cried out about states problems with payment of salaries. Reproduced below is an article published on these pages in December 2013. From mid-2013 till now, the three tiers of government had relied on the ECA to augment the declining current revenue for each month – until November last year when the account dwindled to $4.1bn. In January 2015 another $2bn was withdrawn and shared which brought the balance to $2.1bn found by the NEC. Those governors in office in January should ask their Commissioners of Finance about the allocation.

While that last statement might be construed as a defence of the former Finance Minister, let me quickly point out that the ECA is an illegal account whose management was deliberately made mysterious. In fact, the determination of how much to declare as “Excess” was left almost at the total discretion of the Minister. This is unacceptable.



Because “a week is a long time in politics”, according to Harold Wilson, British Labor Prime Minister in the 1970s, it is fait to declare that once upon a time the Excess Crude Account had balances over $45 billion; today, the politicians and Dr Okonjo-Iweala are at daggers drawn over how $2.1 billion vanished between December 2014 and now. To more serious observers, they are like people trying to find out how only two cows are left in the barnyard out of 45 in 2008.

What makes the ECA a rogue account can easily be explained and the NEC will discover that they will need to go further back to probe that account – as far back as 2004. Let me explain.

There was a rising balance in that account every month from 2004 to the first withdrawal from it for allocation to states. Governor El-Rufai, then Minister for the FCT, recently told us that it was agreed that the Federal Government was required to tell all the states the balances in their favour in the ECA. So, when it was $45 billion, Abia, for instance, should have known its share of that amount. But, that was never done. When Obasanjo’s government decided to withdraw funds from ECA to fund the Power Project, each state should have been told what was its own contributions to that fund. Lagos State, my state by the way, which consumes close to 40% of power supply generated, should have been told it was contributing 40% of that amount. Other states, like Taraba, should have chipped in less. That was not done. But, those are small issues compared to custody of the $45 billion.

Who had custody and where was the $45 billion kept? Was it, incredibly kept in an interest-free account? That would not only be foolish; it would be criminal. Was it invested in interest paying securities? If so, who deiced where to place the funds and was it done without benefit to the officer authorizing the placements? And, who collected the interests paid on the $45 billion? Strictly speaking, it belonged to all the three tiers of government. Has this ever been reflected in the reports rendered to the Finance Commissioners of the States or was this something the Federal Government kept to itself?

Without mincing words if the truth must be told, the operation of the ECA, from the start was as transparent as mud; and Okonjo-Iweala knows it. It was a con game played according to the rules as determined by Aso Rock and the Ministry of Finance.


Only in July was revenue generated in excess of budget for 2014. For the rest of the year, the nation ran a deficit. This accounted for the rapid depletion of ECA last year. And, the account would have been totally exhausted if two things did not occur. First, the Federal Government tapered the amounts being withdrawn by mid-year. But, even then that did not stop the tendency of the account to zero. From absolutely nowhere $1 billion increase was noticed in the account in the third quarter of last year. Till today, given the culture of immunity and impunity which characterized Jonathan’s administration, nobody bothered to explain to the Finance Commissioners the origin of the mysterious $1 billion. So when Dr Okonjo-Iweala, in her emotional reaction to the NEC’s announcement boasted of transparency, one can only politely use her own words for rejoinder – it’s a lie Madam. Nothing had been transparent about ECA.



The Minister of Finance and Obasanjo were told in 2004 that ECA was not only illegal, it would eventually get bogged down in corrupt practices. That we are now arguing about how it got down to $2.1 billion (from $45billion) has vindicated those of us who argued against it in 2004.

If the ECA had not been created, the steady decline in revenue from crude oil from 2013 would have been noticed by all the tiers of government. Loans taken since then might have not been taken; projects embarked upon might have been shelved.

The ECA created a false sense of security even as the ships of states were sinking.

The only way forward is to share the remaining $2.1 billion and to close the account permanently. It is an experiment which has failed miserably.

But, ECA is not the only account which should be closed. Professor Monye, former Special Adviser to Jonathan on Monitoring and Evaluation, live on Channels Television, told us that Jonathan left $1.5 billion in Sovereign Wealth Fund, SWF, and $2.09 billion in Excess Crude. If Monye is expecting applause for this disclosure, then he must assume his Fellow Nigerians are fools. The $1.5 billion in SWF, which was imposed on the nation in 2011 was financed from mysterious sources; some of us believe it was stolen from the ECA. So much for the chest-beating on SWF.

Even Monye, given his apparent disdain for the intelligence of Fellow Nigerians, must admit that a President who inherits over $40 billion in ECA in 2010 and leaves behind only $2.09 billion in 2015 cannot by any stretch of sane peoples’ imagination be judged to have done well. So SWF too will have to go.

Professor Monye, despite his puerile defence of utter failure by the Jonathan administration had inadvertently provided a way out of the accumulated salaries by states. Many people had been upset by the seemingly lackadaisical manner with which President Buhari dismissed the request for bail-out by the states at the meeting with the governors. We now have a plausible solution which should be satisfactory to all concerned.

The $1.5 billion in Nigeria’s SWF is, by global standards, a cruel joke. With a population about 170 million, Nigeria among nations maintaining the SWF has the lowest. In 2012, when the SWF was first proposed to be started with US$1 billion, I wrote  a three part series on the SWF – PROSPECTS AND PROBLEMS. In that series I pointed out that unless we have developed the will to steadily increase the investment, it would amount to a silly joke. The reason was not too difficult to understand. In 2012 the investments in SWF by selected countries were as follows:


  1. UAE        US$627bn.
  2. Saudi        US$439bn
  3. Kuwait    US$202bn
  4. Quatar    US$85bn
  5. Libya        US$70bn

Obviously, Nigeria with US$1bn was like a poor man joining a billionaires club. Unless we increased the investment steadily, it would amount to tying down funds sorely needed for current needs. Since then, we added a miserable US$0.5bn. Let’s face it: we are not ready for this game. We missed the opportunities offered to us by allowing too much of our revenue to be embezzled without expected benefits (US$13-16 billion for IPP; unknown US$bns not remitted by NNPC, NPA, NITEL, 400,000 barrels of crude lost per day, fraudulent crude for fuel exchanges, etc). If we exercised the required degree of diligence and control, we could have up to US$30bn in SWF by now. But, we lack the honesty and discipline from the top to the last persons in public service. We might as well close the miserable account until we have re-organised our society to actually maintain a decent SWF account.

Added together, $1.5bn in SWF and $2.1 in ECA, give us $3.6 billion or N720bn. Share that among the states and most, if not all, of the backlog of unpaid salaries is gone. We would have prevented turmoil in the states because we need peace to face the reality of under US$70 per barrel crude oil – which might be with us for quite some time.

Having wiped the slate clean, we can start all over again – SERIOUSLY.

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