The Nigerian Economic Summit Group has revealed details about the expenditure of the country’s $50 billion Excess Crude Account in 2010, funds that could have been utilized as a financial buffer for subsidies and other national needs.
This was disclosed by the Chief Executive Officer of NESG, Dr Tayo during a courtesy visit to the headquarters of PUNCH Nigeria Limited on Wednesday.
Aduloju explained that the ECA, which had provided a significant fiscal buffer during the 2007-2008 global financial crisis, was depleted after state governors challenged its legality in the Supreme Court.
He noted that, following the court’s ruling, the funds in the ECA were distributed to the 36 state governors between the death of late President Umaru Musa Yar’Adua and the assumption of office by former President Goodluck Jonathan.
This depletion of the fiscal buffer shifted the subsidy funding model from savings to a revenue-based approach, compelling the Federal Government to finance fuel subsidies through crude oil sales rather than using ECA funds.
“Between 1999 and 2010, we operated a savings-based subsidy operation. In other words, we were paying for the subsidy from savings. We were not borrowing to pay the subsidy.”
We were simply paying from the Excess Crude Account because we managed our first boom well. I think when former President Obasanjo left office, the Excess Crude Account had over $60bn.
“If you remember, Okonjo Iweala once told us we were broke. And her argument at that time was that a country cannot call spending all its money progress. But something happened, and Jonathan’s government was in a boom. So we moved from a transformative agenda to a Change agenda under President Buhari, and in the first six months of his government, he had concerns with the production of crude oil.
“Shale oil in the US crashed the price of crude oil to less than $22 a barrel, which is lower than the production cost. With this, every oil-producing country automatically entered deficit financing in oil production. Saudi Arabia defended its economy in 2015 with $45bn. But Nigeria didn’t have savings at that time because it had shared the savings among the 36 state governors. So we went into deficit financing in oil production. In other words, we were selling crude at a loss. And we maintained this deficit position for eight years (during Buhari’s regime),” he explained.
Aduloju argued that since 1999, successive Nigerian administrations have employed various fuel subsidy models. However, he emphasized that poor management of fiscal resources has exacerbated the financial crisis, particularly due to the mismanagement of the fuel subsidy.
“The subsidy removal that Tinubu inherited is not the same as the subsidy removal that Buhari inherited, and it’s also not the same as what Jonathan faced. They are different operations. But the consistent issue is that each mismanagement of our fiscal resources by previous governments compounded the problem for the next government,” he stated.
According to him, the biggest challenge under the current administration is not the removal of the fuel subsidy, but the lack of transparency. Until the Federal Government fully examines the financial strain on the economy, there will be no headway.
He said, “When President Tinubu took over, I insisted that what we needed was transparency before choices. Somebody should have first turned on the light and answered the simple question: what are we looking at? What is the size of the fiscal deficit? What were the commitments made in selling crude forward into the future? How much was committed? How much do we owe? How much of our reserves are encumbered?
“Without answering these questions, the policy choice—such as balancing the current account, of which subsidy removal is one option—becomes a facade. And therein lies the problem.”
He emphasized that the fuel subsidy itself is not the core issue facing the country.
Instead, he highlighted that the lack of transparency surrounding the subsidy has created a significant trust gap between the government and the public.
He said the myriad of economic problems facing the country would be effectively addressed at the upcoming NESG at 30 Summit, which will take place between the 14th and 16th of October, 2024, in Abuja.
Responding, the Acting Editor of The PUNCH, Oyetunji Abioye, who led the company’s team to receive the visitors, said the vision of NESG aligns with that of The PUNCH, and the company would offer its strong support for the upcoming summit, beginning with its press conference slated for Friday (tomorrow).
The NESG team included the Chairman of the Media and Publicity Subcommittee for the 30th NESG Summit, Mr Udeme Ufot; NESG Senior Communications Specialist, Francis Jakpor; NESG Associate, Oluwatobi Abodunrin; and Executive Assistant to the NESG CEO, Biodun Shittu.
