Excess crude money: The boom, the doom

When the wicked rule, the people suffer, but when the righteous ascends the throne, the people prosper, so says the Holy Book. Part of the suffering people face when their rulers are bad is that things that should ordinarily bring joy are received with sorrow.

That was what happened at the last National Economic Council meeting where it was resolved that about $4 billion in the excess crude account should be shared between the Federal Government and the states in ratio 20:80.

All over the world, individuals, corporate organisations and governments look for funds to execute projects. But in Nigeria, once money gets into government coffers, people with reasonable understanding of economics panic because there is a certainty that the money will be squandered.

Worse still, economists get even more worried that the squandermania would create a less tolerable economic problem – inflation. They see the problem from a deeper perspective because not only would reckless spending stagnate the economy, the inflation that comes with it actually destabilises the people, pushing their living standards far below what it was earlier.

This explains why a lot of people received with apprehension, the news that the $4 billion would be shared starting from this month. Minister of Finance, Dr. Shamsudeen Usman, led two state governors in the briefing where he broke the good news that may inflict pains on Nigerians.

“The National Economic Council discussed three broad areas. One is the decision on the sharing of $4.017 billion of excess crude that has been agreed last year. You will recall that a committee was formed to advise government on the modalities of sharing this,” he said.

Rivers State governor, Mr. Rotimi Amaechi, added that “it was agreed that the money be paid to the state governors and the ratio, as agreed before, is 20:80. In a bid not to allow it affect the macro-economy, we have also agreed that it will be essentially used for the purpose of construction. So, it will be more on the side of capital projects and not recurrent.

“We also decided that payment will commence in February to enable those who have already passed their budgets and those who are still going on with their budgets factor the fund in properly and commence implementation,” he said

He added that “the payment has been agreed to be in three installments with the first installment coming before the end of February and the other two coming two months thereafter; so, after two months, there will be second installment (and) thereafter, the third installment.

“We also agreed that, even though we are still looking at it, we should set up a peer review mechanism where states will review one another; not the Federal Government or any other agencies, but the states will try and compare notes of what they are doing and see where they can borrow from another and manage the economy together.”

From Amaechi’s tone, it was clear that members of the council knew the harm such an amount of money, when inappropriately utilised, could cause. One of such harm is possible disruption of macro-economic stability. In a system where public officers keep their words, using the money to finance construction works, as agreed by the governors, would have been a good way of spending it without raising the level of inflation, because the money would be used to pay for services.

At the end of the day, we would have better roads, water supply and other necessary facilities that would make life better. But in Nigeria, politicians do not keep their words. The idea of peer review may not work either, because many of the governors squander government money. So, they may not be receptive to corrections or suggestions. Our fear is that this huge amount of money may end up in private bank accounts abroad while the part to be spent in the country may be spent on other non-economic activities that may end up increasing the level of inflation. This is the doom that may likely arise from this boom.