Federal government withdraws $1bn from excess crude account to fight insecurity

FINANCE minister Zainab Ahmed has revealed that the federal government recently withdrew $1bn from Nigeria's excess crude account (Eca) in a bid to source funding for the insecurity crisis afflicting the country.

In a development certain to send shockwaves across the economic spectrum, Ms Ahmed revealed that the government was forced to take the action because dwindling oil revenue meant it had a budget deficit. Although crude oil prices have remained relatively high at over $100 a barrel, Nigeria is not benefitting from this as used to happen in the past due to two main reasons.

First of all, Nigerian output is currently at a low of 1.23m barrels a day, way down on its traditional Opec quota of 2.5m barrels a day and the 2.7m barrels recorded during the Goodluck Jonathan era. To make matters worse, all of the country's refineries have broken down, meaning petroleum products have to be imported, negating the effects of any gains from the sale of crude.

Of late, Nigeria has been wracked by insecurity, with terrorists attacking prisons and freeing their colleagues and the federal capital Abuja being threatened. Ms Ahmed said that to address the crisis, the government has to source funding from somewhere, particularly as an advance convoy of  President Muhammadu Buhari was ambushed on Tuesday in his home Katsina State.

Mrs Ahmed said: “On the issue of the excess crude account, in the past four years, because of volatility in the oil market, we have not had accrual to the excess crude account. So, what we have had has been gradually used up for different purposes and it is always used in consultation with the National Economic Council that is the governors because this is a federation account.

“The last approval that was given by the council was the withdrawal of $1bn to enhance security. We have been utilizing that and the last tranche of that has been finally released because deployment to security agencies are based on the contracts that are executed and it’s been used strictly for that security purpose, so, the utilisation of the account is with the full knowledge of the governors.”

Nigeria relies on oil revenue to fund infrastructure and settle overheads but it has struggled to benefit from surging crude prices due a combination of  pipeline vandalism and low production. Last week, details emerged of how Nigeria’s debt servicing costs outpaced public revenue, raising fears of a major debt crisis.

Warning of imminent danger, the International Monetary Fund has advised Nigeria and other African countries to take proactive measures to restructure their debts in order to avoid fiscal crises. It is now feared that by 2026, Nigeria will spend more on debt servicing than the government generates in the form of revenue.