Presidency: ECA intact, $1.7bn shared came from NLNG

Tobi Soniyi and James Emejo in Abuja

As part of measures to provide concessionary loans to cash-strapped states, the Central Bank of Nigeria (CBN) will embark on quantitative easing to increase liquidity in the financial system, which will in turn be lent to states under the 250 billion to 300 billion special intervention fund approved by the National Economic Council (NEC) to assist the state governments pay their backlog of salary arrears.

This is just as the federal government has provided clarification on the funds shared by the three tiers of government during the extraordinary meeting of the Federation Account Allocation Committee (FAAC) on Monday night, stating that the $1.7 billion (N359,374,355,607.60) came from tax paid by the Nigerian Liquefied Natural Gas Company (NLNG) and not the Excess Crude Account (ECA).

The new Accountant General of the Federation, Ahmed Idris, had on Monday erroneously announced that funds to be shared by the federal, states and local governments would come from the ECA, sending shock waves through the financial community that the Buahri-led administration had approved the decimation of the ECA which constitutes part of the country’s foreign reserves.

Speaking on the quantitative easing to be implemented by the CBN, a top official of the central bank said the special intervention fund of between 250 billion and N300 billion will be lent to states that are interested under concessionary terms in the next one or two weeks.

A central bank implements quantitative easing by buying specified amounts of financial assets from commercial banks and other private institutions, thus raising the prices of those financial assets and lowering their yield, while simultaneously increasing both broad money as well as the monetary base in the economy.

The CBN official, however, added that the states would have to meet the conditions precedent set by the central bank to access the intervention fund.

This, he said, is strictly to enable the states pay the backlog of salaries and would be deducted from source from their FAAC allocations.

“There will be moratorium on the concessionary loans for states that elect to borrow from the fund, following which the loans will be recovered as a first line charge on their FAAC allocations,” he explained.

During the extraordinary FAAC meeting on Monday night, the CBN Governor, Mr. Godwin Emefiele had informed the state governments, represented by their finance commissioners, that the federal government was worried about the inability of some states to meet their obligations to their workers.

He acknowledged that the inability of most states to pay salaries had arisen for their huge debt burden, thus necessitating the restructuring of N660 billion commercial loans owed the banks.

Emefiele observed that most states take short-term loans for long-term projects and servicing their monthly obligations to the banks hampers cash flows, thereby restricting them from payment of salaries.

The CBN governor also informed the states that the central bank was willing to assist such states in restructuring the loans owed the commercial banks.

He directed the affected states to submit to the CBN, on or before July 8, 2015, the list of their loan obligations and other indebtedness to enable the CBN assist them restructure the loans to tenures of 15 years.

He explained that the assistance by the CBN was in the form of concessionary rates to the interested states.

Emefiele said the CBN will schedule a meeting with the states upon receipt of the required data and expressed optimism that the process will be completed before next week.

He advised recipients of the CBN loans from the special intervention fund to prioritise salary payments as its first line charge, before meeting other obligations.

The meeting was chaired by Permanent Secretary, Federal Ministry of Finance, Mrs. Anastasia Daniel-Nwaobia. Also present were the Accountant-General of the Federation, state Commissioners of Finance, state Accountants-General, and representatives of Federal Inland Revenue Service (FIRS) and Nigerian Customs Service (NCS).

Meanwhile, the federal government and presidency have both clarified that the $1.7 billion shared by the three tiers of government on Monday was not deducted from the ECA but funds paid to the Federation Account by NLNG.

In a statement from the Accountant General of the Federation, he noted with great concern that the information in the public domain was inconsistent with the details of the amount distributed at the extraordinary FAAC meeting held on Monday.

The statement signed by Kenechukwu N. Offie, Head and Deputy Director, Press and Public Relations in the office of the Accountant General, said: “The amount distributed was not from the Excess Crude Account (ECA) but rather the accrued company income tax (CIT) realised from the Nigerian Liquefied Natural Gas (NLNG) N359,374,355,607.60 ($1.7 billion)

“The amount that was distributed was less the cost of collection. The federal government got 56.68% amounting to N181,745,674,112.72, the state governments got 26.72% amounting to N92,183,834,705.62, while local government councils got 20.60% amounting to N71,069,872,564.96.”

He stated that Idris was making this clarification in order to provide Nigerians with the correct and authentic information about the outcome of the proceedings at the FAAC meeting, adding that no withdrawal was made from the ECA and that the current balance still remains $2.1 billion.

Similarly, the Special Adviser to the President, Media and Publicity, Femi Adesina stated that the relief package by the federal government for states and local government councils to pay their workers’ backlog of salaries would not be taken from the ECA.

In a statement he issued yesterday, Adesina stated that the measures approved by President Muhammadu Buhari did not include drawing down the remaining balance in the ECA or the “liquidation” of the account.

He said: “No such decision has been taken or approved by President Buhari, and last week’s meeting of the National Economic Council clearly concluded that the Excess Crude Account should be left untouched at this time.”

Adesina ‎listed the measures approved by Buhari to deal with the problem of unpaid public sector salaries in many states as:

·The sharing of the $1.7 billion tax paid to the Federation Account by the NLNG;

· A central bank-packaged special intervention fund that will offer financing to the states, ranging from N250 billion to N300 billion. This, he said, would be a soft loan available to states for the purposes of paying backlog of salaries; and

·A debt relief programme designed by the Debt Management Office (DMO) which will help states restructure their commercial loans currently put at over N660 billion, and extend the life span of such loans while reducing their debt-service obligations.

http://www.thisdaylive.com/articles/fg-excess-crude-account-intact/214173/

Excess crude account is untouchable with the present economic realities.

Okay

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Okay

you don't have anything to say. Very good.

Good to know that this intervention fund to each state will still be recovered directly from their FAAC

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Okay

jcross19:
you don't have anything to say. Very good.

@ jcross19 how are you different?

jcross19:
you don't have anything to say. Very good.

You don't have anything to say too so you are quoting me. Pretty intelligent.

Buhari, appoint finance minister that will coordinate all these; so that you will not need to explaining all these everyday.

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You don't have anything to say too so you are quoting me. Pretty intelligent.

madam at the top na you biko.