Nigeria has spent $4.3 billion of its windfall oil savings this year, mostly to plug revenue shortfalls but also to appease state governors clamouring for cash, the government’s top accountant said on Friday. Figures provided by Accountant General of the Federation Ibrahim Dankwambo showed the overall savings account balance had fallen by approximately $1.43 billion since January.

Nigeria, the world’s eighth-biggest oil exporter, sets aside oil revenues above a benchmark budget price into an excess crude account. The benchmark for this year’s budget is $40 per barrel compared with an actual price of more than $60 all year. But the volume of oil production has been lower than projected because of rebel attacks on the industry. The government has therefore saved less, as it has spent a bigger slice of revenue from each barrel to fund the budget. Finance Minister Shamsuddeen Usman said on Thursday that in practice, the benchmark was $67 per barrel in the first half. He said the 2008 budget would be based on a "more realistic" price.

The excess crude account is one of the centrepieces of a reform programme launched in 2003 and supported by the IMF. It comprises a dollar-denominated component which has risen by $1.75 billion to $10.05 billion since January, Dankwambo told Reuters in an interview. But the domestic component has shrunk by 401.5 billion naira ($3.18 billion) to 226 billion naira in the same period. Dankwambo detailed monthly withdrawals from the excess crude account to plug a revenue shortfall that amounted to 376.4 billion naira from January to July.

In addition, N150 billion were withdrawn in July and August to satisfy a new crop of state governors elected in April who were complaining that their treasuries were empty, he said. Under the constitution, the federal government cannot control the finances of the states, which have their own budgets and receive a sizeable portion of oil revenues. The savings in the excess crude account belong to the three tiers of government — federal, state and local.

Asked how it was possible that states could have run out of money halfway through the year, Dankwambo said: "The spending for states in April and May was bad." In April, some governors were standing for re-election, while those who had completed the two legal terms were supporting the campaigns of their preferred successors. May was their last month in power before handing over on May 29. Since that date, five ex-governors have been charged with looting public funds and the anti-corruption police says it is investigating several others.

Dankwambo said several of the new governors had gone public with allegations their predecessors had left them with empty coffers and huge debts and that the N150 billion withdrawn from the excess crude account was to appease them. "It was for them to start with something. Everybody was involved in that decision," he said.

He also said N19.1 billion had been withdrawn in February and March to fund fuel subsidies.
The total planned subsidy for this year is N100 billion, of which half is supposed to come from federal government and half from the 36 states and 774 local governments. But the states and local governments had failed to budget for their share of the subsidy and therefore the money had been simply been taken from the excess crude account, Dankwambo said.

Source: the nation