FG withdrew N359.39bn from ECA for fuel subsidy –FRC

The Federal Government withdrew the sum of N359.39bn from the
Excess Crude Account in 2015 to fund the payment of petroleum
products subsidy in 2015, the Fiscal Responsibility Commission has
said.

The FRC said this in a report on the Excess Crude Account
obtained by our correspondent in Abuja on Monday.

According to the FRC, the withdrawal of N359.39bn to fund
subsidy on petroleum products was illegal because it contravened
the purpose for which the ECA was set up.

However, the report noted that for the first time, the
government withdrew N98.19bn from the ECA to share among the three
tiers of government after satisfying the condition stipulated for
withdrawing money from the account.

It said the withdrawal was the first time the three tiers of
government were sharing money from the ECA when oil prices fell
below the budget benchmark in three successive months, indicating
that the governments had been sharing money from the account even
when the oil prices were above the benchmark.

To show how low the fortune of the country had fallen, the
report said the total remittance into the ECA in 2015 amounted to
only N48.94bn compared to N796.7bn paid into the account in
2014.

The report said, “The ECA was created as a stabilisation and
savings fund to augment budgets, mainly on account of the
volatility of the international oil market. The account is,
therefore, funded with proceeds accruing from oil revenues in
excess of the oil benchmark price as approved in the Medium-Term
Expenditure Framework and budget.

“The sum of N458.14bn was withdrawn from the ECA in 2015
compared with N927.33bn withdrawn in 2014. Other than the
distribution of N98.19bn shared among the tiers of government, the
withdrawal of N359.39bn for the payment of petroleum products
subsidy was in violation of Section 35 of the FRA 2007. Such
payment was clearly outside the scope of the ECA.

“It is worth mentioning that this is the first time since
2008/2009 when the ECA was utilised for the purpose it is meant
for. The oil slump, which started in the second half of 2014,
resulted in international oil price falling below the benchmark
price continuously more than the three months stipulated as the
primary condition for withdrawal from the ECA to augment the
budget.”

It also said, “The operation and management of the ECA over the
years has been in breach of the FRA 2007, the consequence of which
is the difficulty in the implementation of budgets across the three
tiers of government with the continued sharp drop in oil
revenue.

“The discipline to manage the ECA with prudence was clearly
abused. The actual balance in the ECA has become contentious,
especially as this has never been disclosed in the budget
implementation reports despite repeated suggestions for this to be
done.”

The FRC added that the non-disclosure of the opening and closing
balances of the account had made the full appraisal of the account
impossible.

The Federal Government withdrew the sum of N359.39bn from the
Excess Crude Account in 2015 to fund the payment of petroleum
products subsidy in 2015, the Fiscal Responsibility Commission has
said.

The FRC said this in a report on the Excess Crude Account
obtained by our correspondent in Abuja on Monday.

According to the FRC, the withdrawal of N359.39bn to fund
subsidy on petroleum products was illegal because it contravened
the purpose for which the ECA was set up.

However, the report noted that for the first time, the
government withdrew N98.19bn from the ECA to share among the three
tiers of government after satisfying the condition stipulated for
withdrawing money from the account.

It said the withdrawal was the first time the three tiers of
government were sharing money from the ECA when oil prices fell
below the budget benchmark in three successive months, indicating
that the governments had been sharing money from the account even
when the oil prices were above the benchmark.

To show how low the fortune of the country had fallen, the
report said the total remittance into the ECA in 2015 amounted to
only N48.94bn compared to N796.7bn paid into the account in
2014.

The report said, “The ECA was created as a stabilisation and
savings fund to augment budgets, mainly on account of the
volatility of the international oil market. The account is,
therefore, funded with proceeds accruing from oil revenues in
excess of the oil benchmark price as approved in the Medium-Term
Expenditure Framework and budget.

“The sum of N458.14bn was withdrawn from the ECA in 2015
compared with N927.33bn withdrawn in 2014. Other than the
distribution of N98.19bn shared among the tiers of government, the
withdrawal of N359.39bn for the payment of petroleum products
subsidy was in violation of Section 35 of the FRA 2007. Such
payment was clearly outside the scope of the ECA.

“It is worth mentioning that this is the first time since
2008/2009 when the ECA was utilised for the purpose it is meant
for. The oil slump, which started in the second half of 2014,
resulted in international oil price falling below the benchmark
price continuously more than the three months stipulated as the
primary condition for withdrawal from the ECA to augment the
budget.”

It also said, “The operation and management of the ECA over the
years has been in breach of the FRA 2007, the consequence of which
is the difficulty in the implementation of budgets across the three
tiers of government with the continued sharp drop in oil
revenue.

“The discipline to manage the ECA with prudence was clearly
abused. The actual balance in the ECA has become contentious,
especially as this has never been disclosed in the budget
implementation reports despite repeated suggestions for this to be
done.”

The FRC added that the non-disclosure of the opening and closing
balances of the account had made the full appraisal of the account
impossible.