$1bn ECA withdrawal to fight b/haram: How justified?

 

Why is the Federal Government withdrawing $1bn from the Excess Crude Account to fund the fight against insurgency in the North-East after Nigerians have been made to believe that Boko Haram had been defeated? What about the huge sums of money allocated annually to defence spending? Has the Federal Government considered the opportunity cost of this decision given that the amount in question (about N365bn) is more than the combined 2018 capital allocation to critical sectors of the economy such as  Agriculture (N118.9bn), Health (N71.1bn), Education (N61.7bn), Science & Technology (N43.2bn), Mines & Steel Development (N12.9bn)? Shouldn’t approval have been sought from the National Assembly to withdraw money from an account having no constitutional backing?These are some of the questions agitating the minds of many Nigerians following a recent decision of the National Economic Council (comprising all state governors as members with the Vice President as the Chair) to permit the Federal Government withdraw $1bn from the Excess Crude Account (with a balance of about $2.3bn) for the “purchase of security equipment, procurement of intelligence and logistics and all what is required to ensure that we finally put an end to the scourge of insurgency” to borrow the words of the Edo State Governor, Godwin Obaseki, who made the disclosure to journalists after a meeting of NEC. Expectedly, Defence Minister, Mansur Dan-Ali, was excited about the approval arguing that it was in line with decisions reached at the conference of ministers of defence and chiefs of defence staff of member states of the Multinational Joint Taskforce held in Chad. So, what is the justification for this NEC decision in the light of genuine concerns by well-meaning Nigerians?

The Federal Government maintains that the counter-insurgency which intensified in 2015 has left Boko Haram a spent force or “technically defeated or degraded”. The reduced scale of destructions wrought by this sect in many cities including the Federal Capital Territory lends credence to the claim that the terrorist group has been “technically defeated”.  However, attacks on military bases, including suicide bombings against civilians, are still being witnessed in the towns of Borno, Adamawa and Yobe states. Many Chibok girls are still missing. Only recently in Algeria, the African Union’s Commissioner for Peace and Security, Smail Chergui, drew the attention of African leaders to an intelligence report which disclosed that “over 6,000 African fighters among the 30,000 foreign elements who joined the terrorist group (ISIS) in the Middle East,” were on their way to Africa and are most likely to join forces with Boko Haram, an affiliate of ISIS. Indeed, the return of these elements to Africa poses a serious threat to national security and stability and requires a proactive measure such as the one being contemplated by the Federal Government which has necessitated dipping hands into the ECA.

It is true that annual defence budgets have been huge in absolute terms especially since the counterinsurgency began but the bulk has remained recurrent spending. In 2016 for example, data from the website of the Budget Office indicate that a total of N443.1bn was allocated to defence. This amount comprised recurrent spend of N312.2bn and capital expenditure of N130.9bn. Again in 2017, out of a total of N465bn meant for defence, the capital budget was N140bn with the recurrent as high as N325bn. Like many other sectors, the implementation of the capital component must have been adversely affected due to shortfall in projected revenue. As of the end of the third quarter 2017, the capital component of the 2017 budget recorded just 15 per cent implementation. The 2018 budget before the National Assembly is also following the same trend with a total of N567bn voted for defence out of which recurrent expenditure is expected to gulp N422bn. Against this backdrop, resorting to the fiscal buffer to augment the funding of the war against insurgency could be justified.

It is also a fact that the opportunity cost of this decision is high as $1bn could do a lot in the education and health sectors or even improve the poor state of infrastructure in the country but it pales into insignificance when viewed against the consequences of insurgency on the economy. Boko Haram attacks have devastated the economies of the North-East region leaving in their wake collapsed public infrastructure especially schools. In Borno State for example, out of the N183bn projected expenditure in 2017, the largest chunk of N33bn was allocated to reconstruction of schools destroyed by Boko Haram. The Yobe State Government has proposed a budget of N92.1bn for the 2018 fiscal year while the Adamawa State Government has made a budget of N162.7bn for the 2018 financial year with modest projections for Internally Generated Revenue which will be largely unrealised if the spate of Boko Haram insurgency is not curtailed. Recently, the North East Nigeria Recovery and Peace Building Assessment team disclosed that the impact of the devastation which occurred between 2011 and 2015 in the region cost the nation about $9bn with loss of agricultural production put at $3.5bn. The team also indicated that to rebuild the crisis-torn region would require at least $6bn. In the 2018 budget, the Federal Government has earmarked N45bn as counterpart funds for the reconstruction of Borno, Yobe and Adamawa states. But for the insurgency, these huge sums could have found better applications. Moreover, for a country that is in dire need of capital inflows, insecurity thwarts efforts to attract the much-needed foreign investments.

Therefore, the NEC decision appears justified. However, the government should ensure that the money is judiciously utilised and properly accounted for. The major concern of civil society organisations is that past allocations to defence and the anti-terrorism operations had yet to be properly accounted for. The opaque nature of the ECA operations has not helped matters. On December 16, 2014, the Federation Account Allocation Committee meeting ended in a deadlock because representatives of the 36 states and the FCT accused the Federal Government of not accounting for about $1bn withdrawn from the ECA, an allegation the then Minister of State for Finance, Bashir Yuguda, denied. Also, not too long ago, a former Edo State Governor Adams Oshiomhole, alleged that given the number of barrels of oil produced in the country and the crude oil price between 2012 and 2014, the amount in the ECA was short by at least $30bn. This allegation was refuted by the former Minister of Finance, Ngozi Okonjo-Iweala. What all these suggest is that the operation of the ECA leaves much to be desired.

It will be recalled that the ECA was established in 2004 as a fiscal buffer with the primary objective of protecting government budgets against shortfalls arising from volatile crude oil prices thereby insulating the economy from external shocks. But it had no backing of the law and so in 2010, NEC approved a plan to replace the ECA with a national Sovereign Wealth Fund which received legal backing in 2011 via the Nigeria Sovereign Investment Authority Act with an initial financing of $1bn. Despite the coming into being of the SWF, the ECA has remained in operation. So, it is time the government activated the legal process to close the ECA and have the balance transferred to the SWF.

Although the ECA belongs to the three tiers of government, the National Assembly has a responsibility to subject this $1bn withdrawal to thorough interrogation and ensure that the process of purchase of security equipment is done in a transparent manner. The seeming lack of disclosure and transparency in procurements carried out by security agencies makes the security sector susceptible to contract inflation. This is more so with intangible items of expenditure such as “procurement of intelligence and logistics” which may not be easily measurable. The President should ensure that before the $1bn is withdrawn, adequate mechanisms are in place to follow the money. Indeed, much as Nigerians are anxious to see the end of the Boko Haram insurgency, they are also demanding accountability and transparency in the use of public funds.