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It is left to
conjecture whether last week’s stalemate among members of the
Federation Accounts Allocation Committee (FAAC) could be blamed on
fiscal recklessness on the part of the nation’s economic managers, or
attributable to legislative incompetence on the part of the National
Assembly, or both.

The late President
Umaru Yar’adua, had last November proposed a N4.079 trillion “fiscal
stimulus budget” for year 2010, computed on assumptions pegged on oil
benchmark of $57 per barrel and production capacity of 2.088 million
barrels per day (mbpd).

However, in the
wisdom of the National Assembly, the final appropriation for 2010 had
to be reviewed upwards to about N4.9 trillion, with the assumptions on
benchmark oil price adjusted to $67 per barrel, while average daily oil
production capacity was raised to 2.35 mbpd. But, not a few Nigerians,
who understand the unpredictable behaviour of oil prices, faulted their
optimism and the wisdom to tamper with the initial proposal.

Unrealistic estimate

Oladiran Fawibe,
executive chairman, International Energy Services Limited (IES), said
then that the new benchmark price was high and unrealistic, considering
the volatility in prices at the international oil market, arguing that
it could have been safer if it was pegged at between $50 and $55 per
barrel.

With oil price
hovering at about $80 per barrel at the time the budget was passed,
perhaps, their estimation was that an average of about $20 accrual in
the nation’s Excess Crude Account (ECA) from the export of every barrel
of oil daily indicated in the budget would be enough to justify the
increase.

Going by recent
revelation that each member of the House of Representatives is asking
for an increase in his quarterly financial allocation from N27million
to N42million, while their Senate counterparts are demanding for about
N100million, analysts say the decision to adjust the assumptions in the
budget may have been influenced more by political considerations than
anything else.

Besides, the
continuous dependence on the ECA by the three tiers of government has
also affected the drive for alternative sources of revenue to handle
developmental activities. In recent times, the ECA has become the last
resort for governments for augmentation in budget in times of economic
difficulties. As at July 2009, the foreign component of the account,
which had a balance of over $20.01billion at the beginning of the year,
had gone down to about $11.2 billion.

Augmentation and more augmentation

By October, the
figure came down to about $9.2 billion after about $2 billion was
withdrawn as stimulus package for the economy in the wake of the
Central Bank of Nigeria (CBN) reform agenda in the banking system. Remi
Babalola, the minister of state for finance, told journalists last
January that about $5.5 billion was withdrawn from the account to
augment the shortfalls in the budgeted revenue during the year.

Between July and
December, the domestic ECA, which had a balance of about N322 billion,
was run down to about N1.47billion, attracting an alarm by the Revenue
Mobilisation Allocation and Fiscal Commission (RMAFC) against attempts
by the three tiers of government to deplete the account.

In spite of this,
another N51.85 billion was withdrawn as budget augmentation for January
this year; another $2 billion the following month, and $1.5 billion
last March for the same purpose. At the FAAC meeting last week, Ibrahim
Dankwambo, the accountant general of the federation, had said that the
balance in the account, prior to the disbursement of about N339.627
billion to augment the arrears of allocation to the three tiers of
government for January to April stood at about $5.193billion. A
breakdown of the figures indicates that about $4.6billion is in the
foreign excess crude account, while N89billion is in the domestic
excess crude account.

The rejection of
the FAAC technical committee recommendation that members shared the
allocation of N498.3billion for April alone and allow the arrears of
N736.985billion for January to March to be paid subsequently over the
course of the year, because of insufficiency of balance in the ECA to
support any augmentation merely threw up a controversy about the
fallacy of the assumptions in the budget.

Did the nation’s
economic managers not anticipate that the country would get to the
stage where the ECA would not be able to support the profligacy of the
government at all levels?

But, indications
are that the nation ran into the crisis because the law makers took for
granted that oil price would nosedive from the levels above the $80 per
barrel threshold attained early this year to where it is today.

As at last Wednesday, the price of Organisation of Petroleum
Exporting Countries (OPEC) basket of crude crashed to $66.84 per
barrel, the lowest level since January, before rising marginally to
$68.21 the following day and $70.48 on Friday, apparently as a result
of the order by the United States that British Petroleum (BP) should
shut down its operations in the Gulf of Mexico following the spill
accident involving its offshore oil production facility in the area.