By Anthony Otaru, Abuja
•Predict imminent economy recession
Economic experts have described the creation of Nigeria’s Excess Crude
Account (ECA) also called Escrow, by the...
federal government as not only
fraudulent, but unnecessary, saying it lacks legal backing in the first
place.
They also said the uncontrolled withdrawals even when the crude oil
prices are not below the nation’s budget benchmarks, have left the
economy fragile in an environment of unstable global prices.
They therefore warned that Nigeria may be heading for another round
of recession if adequate steps are not taken to check the trend.
The Escrow account, which currently stands at less than $80million, is
the name of the account created by the Nigerian Government to save
revenue in excess of budgetary benchmark price gathered from the sale of
oil.
Established in 2004, the ECA primary objective is to protect
Nigeria’s planned budgets against shortfalls caused by the volatility of
crude oil prices.
By detaching government expenditure from oil revenue, the ECA aims to
insulate the Nigerian economy from external economic shocks.
Figures available to The Guardian indicate that from $5.1billion in
2005, and more than $20billion as at November 2008, the ECA fell
to less than $4billion in June 2010, based on budget deficits at all
levels of government.
Speaking with The Guardian in a telephone interview, weekend, the
Director-General, Fiscal Policy Studies, Godwin Ighedosa, noted that
when the ECA was created in 2004, there was no proper and clear-cut
policy in terms of its funding and withdrawal authorisation.
“It was never clear from the very beginning as to who authorizes
deposits and withdrawals; and before you knew it, there has
been a steady decline in the account. Of course, there was no legal
framework that was put in place for deposits and withdrawals.”
According to Ighedosa, the indiscriminate withdrawals by successive
governments for purposes best known to them, has today, left the ECA
with less than $80million, thereby putting the economy at a very tight
situation, especially now that the global oil prices have
become unstable.
On the implications, Ighedosa said Nigeria may continue to borrow to
finance its budgets, which in the long run will increase the cost of
production, higher prices for goods and services, more companies
closing down, and finally, recession.
Also commenting on the implication of massive draw down of the ECA,
the Lead Consultant, Centre for Social Justices, Eze Onyenkpere,
said government has need to borrow more because the 2020 budget became
dead on arrival with current collapse of oil prices.
He added: “ECA in the first instance is what I call fiscal rascality or fraudulent, because it was not put in place legally.
“If you have some savings, which you use for your family when you are
sick or when your child wants to go school or when there is an
emergency in the house, because you have resources somewhere, you’ll not
feel it. But when you did not put things in proper position, you have
nothing to fall back on; you must end up going to borrow or you may
likely have your family suffer.
“This is the position Nigeria finds itself today, she must continue to borrow.”
In his remarks, a Development Economist, Odilim Enwagbara, told The
Guardian that ECA is like keeping money idle for so-called future
generation purpose even when the present generation is hungry across
board.
He noted that “ECA was never backed by any law, which is why
government was drawing from it at will. My opinion is that any excess
crude fund should be shared by the three tiers of government for
infrastructure development that will galvanise the entire economy.”
He therefore advised that the remaining amount in the ECA be withdrawn and shared among the tiers of government.
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