Excess Oil Funds Challenges

THE Revenue Mobilisation and Fiscal Commission, RMAFC, has acquitted itself well in its quest for the use of the countries funds in line with the constitutional provisions that only National Assembly should decide how federally generated revenue is shared.

Revenue from oil is the most contentious of these funds. The Obasanjo administration created the Excess Crude Oil account Funds to warehouse funds, in excess of the budget benchmark for the sale of crude oil.


The account was at the disposal of the former President, who put it into uses that matched his own plans, one of which was the national power projects that are currently under the scrutiny of the House of Representatives.


Sections 80 and 81 of the 1999 Constitution state that all funds the Federation earns should go the Consolidated Revenue Account. The Excess Crude Oil account is therefore illegal. Debates about how extra money from oil should be used are resolved in favour of the monetary authorities who claim that the economy could go into a spin if the Constitution is followed on this issue. The excess oil fund also boosts foreign reserves.


Dr. Haman Tukur, Chairman of RMAFC has proposed for the money to be spent on infrastructure. This proposal would halt the practice of the Federation Accounts Allocation Committee, withdrawing occasionally from the money to augment funds shared at its monthly gathering.


Reasonable as this proposal seems, it has its challenges. The most tasking of these are legality and equity. How would we ensure that these infrastructures are of national benefit? When we talk about infrastructure, attention is always on urban Nigeria, not the rural areas. Funds in the Excess Crude Oil account belong to all tiers of government, with various responsibilities.


Is it equitable for the money to be managed from a central purse, through the dictates of the National Assembly, when the constitutional provision is for it to be shared to all tiers of government?
The National Assembly can determine the method for sharing money in the Federation Account, not how states and local governments use the money.

To determine expenditure, the National Assembly would then be looking at the Appropriation Act, which it can only make for the Federal Government and the Federal Capital Territory. Our Constitution is succinct about this.


RMAFC must distinguish between revenue allocation and budgeting. The new proposal confuses both. The National Assembly approving the proposal may be a veneer of legality, but it would amend Sections 80 and 81 illegally.


An agreement on how to spend this money would require more profound proposals to ensure equity, instead of stopping one illegality for another - stopping an illegal fund and handing its proceeds illegally to the Federal Government for use at its discretion. It would be a worse position than the current practice.


The solution actually lies on derivation, where various tiers of government generate their own funds and pay appropriate taxes to the Federal Government.