The Nigerian Economic Summit Group (NESG) has shed light on the expenditure of the country’s $50 billion Excess Crude Account (ECA) in 2010, which was intended to serve as a financial buffer for subsidies and other urgent national fiscal needs.
During a recent visit to PUNCH Nigeria Limited, Dr. Tayo Aduloju, the Chief Executive Officer of NESG, noted that the global financial crisis of 2007-2008 had minimal impact on Nigerian businesses due to the substantial fiscal reserves in the ECA.
However, in 2010, state governors challenged the legality of the ECA in the Supreme Court, which led to the distribution of the funds held in the account.
Dr. Aduloju explained that the Federal Government disbursed the $50 billion to the 36 state governors during the transition period following the death of President Umaru Musa Yar’Adua and the assumption of office by former President Goodluck Jonathan.
He emphasized that the depletion of this fiscal buffer, built over a decade, transitioned the country from a savings-based subsidy model to one reliant on revenue, compelling the Federal Government to finance fuel subsidies through crude oil sales rather than utilizing ECA funds.
“From 1999 to 2010, we operated a savings-based subsidy system, funded through the ECA, which had over $60 billion when former President Obasanjo left office,” he stated. “However, following the economic boom during Jonathan’s administration, we shifted to a revenue-based model.”
Dr. Aduloju further explained that the decline in crude oil prices, exacerbated by the rise of shale oil in the U.S., forced Nigeria into a position of deficit financing in oil production.
He noted that while Saudi Arabia managed to defend its economy with substantial reserves, Nigeria found itself without savings due to the earlier distribution of ECA funds among state governors, resulting in prolonged financial challenges during the Buhari administration.
