[size=14pt]FG to scrap excess crude account for SWF .[/size]

Thursday, 06 October 2011 00:00 TUNJI OLAWUNI, ABUJA    . .

The Federal Government plans to end the operation of the Excess Crude Account, President Goodluck Jonathan has informed the National Assembly.

President Jonathan in the 2012-2015 Medium Term Fiscal Framework he sent to the National Assembly on Tuesday, admitted the illegality of  the Excess Crude Account and said extra budgetary revenues would now go to the Sovereign Wealth Fund, which the state governors had wanted run side by side the Excess Crude Account.

Jonathan said in the letter to both chambers of the National Assembly, that: “The NSWF (National Sovereign Wealth Fund) will manage Nigeria ‘s excess earnings from crude oil. The current administration stated the current Excess Crude Account has no real legal backing, since it was formed under a political arrangement from the previous administration.

“In continuation of the adoption of an oil-based fiscal rule, oil benchmark prices significantly below the current market prices, will be adopted for the 2012-2015 period. Revenue in excess of the benchmark price, will continue to be set aside in the Sovereign Wealth Fund (SWF).

“The SWF, which formalizes the ECA, was designed to guarantee savings for future generations, to promote the development of critical infrastructure, thus promoting growth and diversifying the economy and to protect the budget against negative oil price shocks.”

Jonathan however explained that in the mid-term framework, government would adopt a gradual slash in recurrent expenditure and concentrate on completing on-going capital projects.

In the letter and for year 2012, N2.581 trillion is budgeted as recurrent expenditure while N1.319 trillion will be spent on capital projects.

The president explained further to the lawmakers, that recurrent expenditure was pushed up by the new minimum wage including increment in wages of medical personnel across the country, and that of the Academic Staff Union of Universities (ASUU).

He said: “Government will also continue its strategy of fiscal consolidation by which expenditure, particularly on recurrent spending, will be reined in and directed to its most productive and growth-enhancing use while efforts will be intensified to increase revenue…

“To correct this bias, government is implementing a four-year capital project plan, commencing in 2012, which will ensure that we exit from the current portfolio of on-going projects.

“The reduced size of the 2011 Amended Appropriation Act, relative to the 2010 budget, signals government’s intent to scale down its spending, from the highs reached in recent times, largely due to the fiscal stimulus extended during the peak of the global economic crisis and the recent increase in the wage bill”.

“In recent times, the outlay on recurrent spending has outstripped the growth of spending on capital projects. This increase can be attributed largely to the rising wage bill, an outcome of the increase awarded to civil servants, medical personnel,  ASUU staff, etc.

“The 2012-2015 period, will focus on correcting this structural imbalance in our expenditure profile, thus ensuring that more funds are allocated to critical infrastructure.

“The report of the Expenditure Review Committee, which concluded its work in April 2011, will provide a starting point for this key initiative. PPP funding for infrastructure projects will also be pursued aggressively.

“The share of recurrent spending in aggregate expenditure, is set to decline from 74.4 percent in 2011 to 72.5 percent, in 2012, while capital expenditure as a share of aggregate spending is set to increase from 25.6 percent to 27.5 percent in 2012.”

http://www.businessdayonline.com/NG/index.php/news/76-hot-topic/28212-fg-to-scrap-excess-crude-account-for-swf