Sharing excess crude fund
To run a country is no mean feat. To run a country like Nigeria is a larger than life feat. This
is mostly because, while we want the best things in life, we make no efforts to ensure they
come to fruition, especially if such goodies are not meant to line our private pockets. Nature has bestowed us with great wealth of resources but the way we protect or expend them gives a lie to our assumed desires.
Due to the upsurge in world crude oil prices, Nigeria’s budget for 2008 was predicated on a benchmark of $59.00 per barrel even though the cost per barrel stood at about $96.00 at the time the budget was being formulated.
The calculation is that, should the price of the product remain the same during the budgetary period, it would then be a matter of what to do with the excess. As was done in 2007, when the oil prices shot-up to $75.00 from a meagre $35.00, the debate in the last two months has been what to do with the excess of $4.17 billion that was saved from the surplus budgeting. Others have put the actual funds accruing to the so-called excess crude account at about $9 billion.
First, we heard that the government planned to share the money in dollars (even when we have our own currency); and then that the sharing would be limited to the federal and state governments on a ratio of 80:20. Then there was a rethink which recognized the sidelining of local governments and brought them into the picture. We are yet to be told what the new ratio would be. But we at least know that the idea of paying the money in dollars has been shelved as the argument that it would stem inflation, failed to gain grounds. But, do we need to really share this money, especially given the very nature of the paucity of infrastructural development in the country today? Couldn’t we come up with some ideas that could put all that money to good and visible use instead of putting it in the hands of governors and council officials, who may just pocket it and do nothing for the masses?
As I was writing this piece, the cost per barrel of crude oil on the international market, is $104.00 – a far cry from the $59.00 we talked about earlier. Should the price hover in that region for between three and six months, the more we should be smiling to the bank. Only problem is, who will be doing the laughing? I think it is important for all Nigerians to be the happier for it, instead of a few party stalwarts, loyalists or hierarchy in-laws and friends. This is my candid opinion and I believe we now have sincere enough national leaders to come up with a formula to turn our tears and sorrows into joy and happiness. A little historical analysis about why the crude oil prices keep doing somersaults may be in order here.
Under the United States government of President George W. Bush in the last eight years, the country’s economy was beginning to crash in the hands of the Republican Party. Being an election year, Bush has had to take some daring measures, such as tax cuts, to shore-up the economy. The measures sent ripples into the international community that caused them to divest from previously lucrative areas of investments. Given the high demand for crude oil as a result of climate change, the Organization of Petroleum Exporting Countries, OPEC, was asked to increase oil production levels to bring down the prices. But the body refused, claiming instead that the high demand has nothing to do with shortages but was the result of panic buying by rich world businessmen who sought to diversify their investment profiles and prevent a likely free fall of value of their funds. In other words they are stockpiling the products, hoping that they would make huge profits and returns on their investments if the prices continue to rise.
It will not be the first time OPEC has stepped in to intervene in world oil prices. But in this case, it says it is the wiser for it. Where would OPEC countries be when these shylocks decide to call in their funds and sell out their stock-pile? Prices could fall below even our benchmark and make nonsense of the budget that now runs in the trillions of Naira. It happened before.
In the late 1950s, the amount of oil produced worldwide was greater than demand. The price of oil, which was controlled by the oil companies, dropped and with it dropped the amount of money the oil companies paid the oil-producing nations. OPEC was formed in reaction to this drop in payments. In addition to joining OPEC, some oil-producing countries nationalized the oil production and refining equipment of the oil companies, which generated large amounts of income for those countries.
In the 1970s, as oil supplies in non-OPEC countries were reduced, the organization raised the price of oil. Another price-control tactic used by OPEC is to set production ceilings that specify how much oil may be produced by each member country. In the 1980s some OPEC nations ignored the production ceilings and this resulted in overproduction and a drop in oil prices. The organization has also used the supply of oil as a political tactic that resulted in oil and gasoline shortages in many Western nations.
When one considers the myriad of problems the Nigerian nation is beset with and, the apparent neglect the populace has enjoyed, courtesy of mindless sets of previous administrations, it would be foolhardy to just wake up and share the billions of dollars and expect that any meaningful changes will visit their constituents.
My suggestion therefore is that, after a sharing formula has been agreed upon, escrow accounts be opened for each component of the three tier system. The amounts due to the various states and local governments by the formula should then be paid into these escrow accounts, to be supervised by the Accountant General of the Federation. On the basis of their various available resources, the heads of the governments should, for now, come up with verifiable estimates enumerating the intended application of the funds in their areas of jurisdictions. The funds should then be disbursed on a monthly or quarterly basis directly to each of them on the basis of compliance.
While this logic could pass for a simplistic demonstration of bureaucratic bottle-neck, we cannot quickly overlook our immediate past experience where ecological funds for instance, were grossly mismanaged and put to other uses, if any, which had any semblance of ecology. Today, many Nigerian communities are being washed away; years after the governments had been allocated intervention funds for such natural disasters. And it is not only states and local governments that are guilty of this malaise.
Several federal government establishments have been found to be guilty of misappropriation of funds. But that is not our concern at this time. Rather, it is how to get the billions of dollars of excess crude oil funds to trickle down to the masses that own them. Better methods of doing so may abound as long as they effectively achieve the desired goal.
The summary is that, if the governments must share this money at all, it should get to the desired destinations and efforts made to ensure and; appropriate machinery put in place to ensure they are properly applied.
With the level of wealth in this country, it should not be a chest-thumping feat for a government to ensure that every Nigerian community has well-paved dual carriage-ways to their local government headquarters, paved roads to all villages, food on the table, potable drinking water and electricity at all times, good and affordable education and health-care facilities, among other basic human survival amenities. It is only then can any government or political leader lay claim to delivering the so-called ‘dividends of democracy’ (a cliché we were so inundated with during the last administration, even in the bare-faced absence of any).
