Experts flay indiscriminate withdrawal from escrow account
•Predict imminent economy recession
Economic experts have described the creation of Nigeria’s Excess Crude Account (ECA) also called Escrow, by the federal government as not only fraudulent, but unnecessary, saying it lacks legal backing in the first place.
They also said the uncontrolled withdrawals even when the crude oil prices are not below the nation’s budget benchmarks, have left the economy fragile in an environment of unstable global prices.
They therefore warned that Nigeria may be heading for another round of recession if adequate steps are not taken to check the trend.
The Escrow account, which currently stands at less than $80million, is the name of the account created by the Nigerian Government to save revenue in excess of budgetary benchmark price gathered from the sale of oil.
Established in 2004, the ECA primary objective is to protect Nigeria’s planned budgets against shortfalls caused by the volatility of crude oil prices.
By detaching government expenditure from oil revenue, the ECA aims to insulate the Nigerian economy from external economic shocks.
Figures available to The Guardian indicate that from $5.1billion in 2005, and more than $20billion as at November 2008, the ECA fell to less than $4billion in June 2010, based on budget deficits at all levels of government.
Speaking with The Guardian in a telephone interview, weekend, the Director-General, Fiscal Policy Studies, Godwin Ighedosa, noted that when the ECA was created in 2004, there was no proper and clear-cut policy in terms of its funding and withdrawal authorisation.
“It was never clear from the very beginning as to who authorizes deposits and withdrawals; and before you knew it, there has been a steady decline in the account. Of course, there was no legal framework that was put in place for deposits and withdrawals.”
According to Ighedosa, the indiscriminate withdrawals by successive governments for purposes best known to them, has today, left the ECA with less than $80million, thereby putting the economy at a very tight situation, especially now that the global oil prices have become unstable.
On the implications, Ighedosa said Nigeria may continue to borrow to finance its budgets, which in the long run will increase the cost of production, higher prices for goods and services, more companies closing down, and finally, recession.
Also commenting on the implication of massive draw down of the ECA, the Lead Consultant, Centre for Social Justices, Eze Onyenkpere, said government has need to borrow more because the 2020 budget became dead on arrival with current collapse of oil prices.
He added: “ECA in the first instance is what I call fiscal rascality or fraudulent, because it was not put in place legally.
“If you have some savings, which you use for your family when you are sick or when your child wants to go school or when there is an emergency in the house, because you have resources somewhere, you’ll not feel it. But when you did not put things in proper position, you have nothing to fall back on; you must end up going to borrow or you may likely have your family suffer.
“This is the position Nigeria finds itself today, she must continue to borrow.”
In his remarks, a Development Economist, Odilim Enwagbara, told The Guardian that ECA is like keeping money idle for so-called future generation purpose even when the present generation is hungry across board.
He noted that “ECA was never backed by any law, which is why government was drawing from it at will. My opinion is that any excess crude fund should be shared by the three tiers of government for infrastructure development that will galvanise the entire economy.”
He therefore advised that the remaining amount in the ECA be withdrawn and shared among the tiers of government.