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Nigeria Mismanaging Excess Crude Account

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  • Nigeria Mismanaging Excess Crude Account – IMF

The International Monetary Fund has criticised the government of Nigeria for mismanaging the Excess Crude Account and not saving enough for the rainy day.

The Director, African Department at the IMF, Abebe Selassie , in an interview with Nigerian journalists after presenting the regional economic outlook on the sub-Saharan Africa at the ongoing joint annual spring meetings with the World Bank in Washington DC, explained that though the country had done well with the Sovereign Wealth Funds managed by the Nigeria Sovereign Investment Authority, it decried the poor handling of the Excess Crude Account.

Selassie said, “There have been two Sovereign Wealth Funds in Nigeria. There has been the Excess Crude Account and the Nigeria Sovereign Investment Authority. The NSIA has been run transparently and based on standard best practice and it has been doing a good job.

“The concern that we have is about the ECA, because if you recall that the ECA economically was set up to save resources when oil prices are high, and to be drawn on when oil prices are low. We do not think that the ECA has been doing effectively enough job that way.

“Because you see, when oil prices fell, the economy was very hard in the last couple of years, we feel like much better job could have been done, saving enough more in the ECA when oil prices were at $100 and $120 per barrel.”

Former President Olusegun Obasanjo established the ECA in 2004 to promote savings and every dollar above the annual oil benchmark was deposited in the account. The Obasanjo government built up the ECA to $20bn at the end of its tenure in 2007.

However, successive governments since after Obasanjo have grossly abused the ECA and treated it like a slush fund that could be spent by the President and the governors whenever they wanted.

For instance, the withdrawal of about $Ibn and another $496m from the ECA by President Muhammadu Buhari without the constitutionally required legislative appropriation sparked outrage from some states and opposition political parties recently. The funds were said to have been used to intensify the fight against Boko Haram and acquire military aircraft from the United States.

Using the management of the ECA as a basis, the IMF had ranked Nigeria second-worst performer on the Sovereign Wealth Funds user index only ahead of Qatar in the Fiscal Monitor report also released on Wednesday.

Though the IMF said the index was compiled using the corporate governance and transparency scores of the sovereign wealth funds and the size of assets as a percentage of 2016 GDP of the countries considered, Selassie clarified on Friday that IMF considered the ECA and not the fund managed by the NSIA (which was put at $2.15bn as of May 2018) to arrive at Nigeria’s Sovereign Wealth Fund ranking.

The IMF also urged Nigeria to sign the Africa Continental Free Trade Area Agreement noting that when completed, the trade deal would establish a market of 1.2 billion people with a combined GDP of $2.5tn.

Recall that President Muhammadu Buhari has yet to sign the AfCTA, saying the country could not afford to go back to the days of signing agreements without understanding and planning for the consequences of such actions.

Selassie said, “From our perspective, we think that the AfCTA will help the region integrate; it’s been the dream of our leaders dating back to independence days and we think that it’s a very important initiative and beyond politics, it will have a positive impact economically.

“Like all trade agreements, like all integration measures, there can be adverse effects but these can be identified and policies are introduced to address those. We have to look at the big picture. Coming to Nigeria specifically, we think that Nigeria will also benefit as the largest economy from joining the AfCTA and being a full participant of that. In my view, looking at how dynamic Nigeria is and looking at the business people Nigeria has, the wealth of talent and entrepreneurs that it has, I don’t think you have to fear anybody else in terms of competition.”

The Managing Director of IMF, Christine Lagarde, had on Thursday called on the Federal Government to remove fuel subsidy, saying it was the right thing to do.

According to the IMF 2019 Article IV Consultation on Nigeria, phasing out implicit fuel subsidies while strengthening social safety nets to mitigate the impact on the most vulnerable will help reduce the poverty gap and free up additional fiscal space in Nigeria.

Selassie, who reiterated the same position, noted that removing subsidy was important because the lion share of the benefit of the subsidy went to the rich people.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Federal Government Appeals to Electricity Union Amid Tariff Hike Tensions

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The Federal Government has made a direct appeal to the National Union of Electricity Employees (NUEE) amidst rising tensions over the recent hike in electricity tariffs.

The plea comes as the union continues to voice its dissatisfaction with the government’s decision to remove the subsidy on the tariff payable by Band A customers, warning of potential service withdrawal if the decision is not reversed.

In an interview with our correspondent, Adebiyi Adeyeye, the National President of the NUEE, reiterated the union’s stance against the increase, citing the impracticality of expecting their members to collect higher tariffs from customers without a proportional improvement in service.

Adeyeye emphasized the union’s concerns over the discrepancy between the promised 20 hours of daily power supply and the actual delivery, which he deemed “not feasible” due to existing infrastructural limitations.

The Federal Government, represented by Minister of Power Adebayo Adelabu, called for understanding and patience from the union. Speaking through his media aide, Bolaji Tunji, Adelabu assured that efforts were being made to improve electricity supply across the nation. He emphasized the necessity of these changes for the country’s long-term economic growth and job creation.

“We just want to appeal to the labor union to understand the context of these changes. It’s about working together to address the underlying issues within the power sector. It is not anybody’s joy that there are blackouts all the time,” Adelabu stated.

He added that the steps being taken would ultimately benefit the economy and urged the union to bear with the government during this transitional phase.

Adeyeye maintained that the union’s primary objective is to safeguard the well-being of its members, who are facing increased threats due to the tariff hike.

He stressed the need for immediate action from the government to resolve the issues, stating that the union would withdraw its services if necessary.

As the standoff continues, the public watches with interest, hoping for a resolution that will avoid disruptions to the country’s power supply and maintain a harmonious relationship between the government and electricity workers.

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Minister of Power Pledges 6,000 Megawatts Electricity Generation in Six Months

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Adebayo Adelabu has made a bold pledge to ramp up electricity generation to 6,000 megawatts (MW) within the next six months.

This announcement comes amidst ongoing efforts to tackle the longstanding issue of inadequate power supply that has plagued the country for years.

During an appearance on Channel Television’s Politics Today program, Adelabu said the government is committed to resolving the issues hindering the power sector’s efficiency.

He expressed confidence in the administration’s ability to overcome the challenges and deliver tangible results to the Nigerian populace.

Currently, Nigeria generates and transmits over 4,000MW of electricity with distribution bottlenecks being identified as a major obstacle.

Adelabu assured that steps are being taken to address these distribution challenges and ensure that the generated power reaches consumers across the country effectively.

The minister highlighted that the government has been proactive in seeking the expertise of professionals and engaging stakeholders to identify the root causes of the power sector’s problems and devise appropriate solutions.

Adelabu acknowledged the existing gap between Nigeria’s installed capacity of 13,000MW and the actual generation output, attributing it to various factors that have impeded optimal performance.

Despite these challenges, he expressed optimism that the government’s initiatives would lead to a substantial increase in electricity generation, marking a significant milestone in Nigeria’s energy sector.

Addressing concerns about the recent decline in power generation due to low gas supply, Adelabu assured Nigerians that measures are being taken to rectify the situation.

He acknowledged the impact of power outages on citizens’ daily lives and reiterated the government’s commitment to providing stable electricity supply within the stipulated timeframe.

The Minister’s assurance of achieving 6,000MW of electricity generation in the next six months comes as a ray of hope for millions of Nigerians who have long endured the consequences of inadequate power supply.

With ongoing reforms and targeted interventions, there is optimism that Nigeria’s power sector will witness a transformative change, ushering in an era of improved access to electricity for all citizens.

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Nigeria’s Economic Woes to Drag Down Sub-Saharan Growth, World Bank Forecasts

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The World Bank’s latest report on the economic outlook for Western and Central Africa has highlighted Nigeria’s sluggish economic growth as a significant factor impeding the sub-region’s overall performance.

According to the report, while economic activities in the region are expected to increase, Nigeria’s lower-than-average growth trajectory will act as a hindrance to broader economic expansion.

The report indicates that economic activity in Western and Central Africa is set to rise from 3.2 percent in 2023 to 3.7 percent in 2024 and further accelerate to 4.2 percent in 2025–2026.

However, Nigeria’s growth, projected at 3.3 percent in 2024 and 3.6 percent in 2025–2026, falls below the sub-region’s average.

The World Bank underscores the importance of macroeconomic and fiscal reforms in Nigeria, which it anticipates will gradually yield results.

It expects the oil sector to stabilize with a recovery in production and slightly lower prices, contributing to a more stable macroeconomic environment.

Despite these measures, the report emphasizes the need for structural reforms to foster higher growth rates.

In contrast, economic activities in the West African Economic and Monetary Union are projected to increase significantly, with growth rates of 5.9 percent in 2024 and 6.2 percent in 2025.

Solid performances from countries like Benin, Côte d’Ivoire, Niger, and Senegal are cited as key drivers of growth in the region.

The report also highlights the importance of monetary policy adjustments and reforms in supporting economic growth.

For instance, a more accommodative monetary policy by the Central Bank of West African States is expected to bolster private consumption in Côte d’Ivoire.

Also, investments in sectors such as agriculture, manufacturing, and telecommunications are anticipated to increase due to improvements in the business environment.

However, Nigeria continues to grapple with multidimensional poverty as highlighted by the National Bureau of Statistics.

Over half of Nigeria’s population is considered multidimensionally poor, with rural areas disproportionately affected. The World Bank underscores the need for concerted efforts to address poverty and inequality in the country.

Sub-Saharan Africa as a whole faces challenges in deepening and lengthening economic growth. Despite recent progress, growth remains volatile, and poverty rates remain high.

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