Nigeria removes $1 bln from oil savings to give governors

Written by Reuters

Nigerian President Goodluck Jonathan approved the removal on Tuesday of $1 billion from the country’s oil savings to distribute to state governors for unspecified projects, one of the governors said after a meeting with him.

The withdrawal leaves $8.242 billion in the Excess Crude Account (ECA), Nigeria’s mechanism for oil savings, Rivers state governor Rotimi Amaechi said after the meeting.

Finance Minister Ngozi Okonjo-Iweala has been on a drive to boost savings for Africa’s second largest economy, doubling the balance in the ECA over a year before this withdrawal.

Economists have welcomed Nigeria’s improved savings levels, but cautioned that there is nothing in place to stop them being rapidly depleted, as has happened in the past.

Jonathan and his team will be hoping this latest handout appeases the state governors, who have threatened to take the federal government to court over what it says are unconstitutional withdrawals from the ECA.

The governors are also in court trying to block the expansion of a Sovereign Wealth Fund (SWF) launched last year, which was supposed to replace the ECA and which has greater safeguards to prevent savings being removed. It will now run alongside the ECA with an initial sum of just $1 billion.

The SWF would in theory help Nigeria better manage its oft squandered oil funds by putting them out of the reach of its political elites, but without the governors’ full support it is unlikely to take off.

State governors are among Nigeria’s most powerful figures, some of them controlling budgets that are larger than those of other African countries.

Savings are usually depleted to pay for patronage just before elections and economists worry that if the SWF is not in place before a 2015 presidential vote, this will happen again.