FG, States, Councils Share $1.5bn Excess Crude Savings

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FG, States, Councils Share $1.5bn Excess Crude Savings

From Juliana Taiwo in Abuja, 03.11.2009

As reported by THISDAY yesterday, the National Economic Council (NEC) has approved that N225 billion ($1.5 billion) be shared among the three tiers of government from the excess crude account.
This amount is part of the $15 billion accruable to the government from the excess crude money.
The money is a “stimulus” to cushion the effects of the slide recorded in the federal allocations in January and February.
Addressing State House correspondents after the over six hours meeting yesterday, the Minister of Finance, Mansur Muhtar, said the $1.5 billion would be disbursed in naira – as usual.
Muhtar said the meeting, presided over by Vice-President Goodluck Jonathan, decided that following the signing of the budget benchmarked at $45, the sharing of additional money from the January and February allocations to bridge the financial shortfalls to the three tiers of governments would be released alongside the $1.5 billion.
He said the approval became necessary following some complaints from state and local governments that they were unable to pay salaries as a result of the decline in revenue owing to the global fall in international oil price which is below the $45 benchmark for the 2009 budget.
The sharing formula agreed upon by the NEC, according to the minister, is 58.8 per cent to the Federal Government, 26.7 to the states and 20.6 to the local government areas. Thirteen per cent would be set aside for derivation.
Muhtar noted that the decision to share the money was informed by the present financial realities on the ground, adding that the money would be used as “bailout” to cushion the effects of the crisis for some affected states, especially in the areas of critical infrastructural development.
He said: “As you know, many states have been experiencing difficulties and at last month’s distribution, the amount that the states received monthly has fallen drastically and there are continuous challenges as oil prices remain at low levels and we have production short fall. Some states and local governments have been unable to pay salaries as a result of this shortfall and some teachers have been on strike. Because of the threat to security, there were considerations given to utilise part of the excess crude money to provide bridge financing. As you know, the account has been set up for that purpose.
“The states have talked about the efforts they are making to increase internally generated revenue, which include borrowing from capital markets as well as to look at medium and long-term plans for adjusting their spending to basically respond to dwindling revenues. It was conceded that short-term support is needed and in that case based on the MOU that has been agreed to earlier in relation to the sharing of excess crude account, which makes provision that in exceptional circumstances, the sharing formula agreed to could be modified, a decision was taken that with immediate effect, an amount of $1.5 billion would be shared amongst the tiers of government.
“In addition to that, the shortfall as you know the payment made in the last two months, there was no bridging of the funds but now that the budget has been signed, the $45 benchmark will be used now to make appropriate adjustments to the amounts that have been paid to states. This will mean that they will get additional money to bridge the shortfall of the amount they received in January and February.”
Muhtar also disclosed that a special committee on global economic recession was set up by NEC to regularly study the economic trends with the aim of keeping the government abreast of daily happenings.
The committee which is headed by the Kwara State governor, Dr. Bukola Saraki, has as members, the governors of Lagos, Babatunde Fashola, Gabriel Suswan of Benue, Ikedia Ohakim of Imo, Isa Yuguda of Bauchi, and Namadi Sambo of Kaduna.
Other members are the Governor of the Central Bank of Nigeria (CBN), Prof. Chukwuma Soludo, Minister of National Planning, Dr. Shamsuddeen Usman, and a representative from the office of the president.
The minister also re-affirmed government’s commitment of meeting the 6,000 megawatts of electricity by the end of 2009.  The confidence, he noted, is boosted by the various ongoing power projects in the country.
Muhtar said NEC was briefed of the situation at the congested ports and it noted some of the challenges that are being faced. It requested more concerted efforts to address this situation as it is impacting adversely on Nigeria’s economy. Some suggestions proferred include ports authority and Customs Service should be held to account on delivery of the 48-hour clearance and a report will be submit next meeting.