NEITI wants ECA funds moved to NSIA as part of economic reform

The Nigeria Extractive Industries Transparency Initiative (NEITI) has advised that the federal government boost its savings by channelling more funds to the Nigerian Sovereign Investment Authority (NSIA).

In a policy brief titled ‘Insulating Nigeria from perennial oil price volatility’, NEITI said the NSIA is one of the smallest sovereign wealth funds in the world with $2 billion.

Providing ways to achieve better savings, NEITI recommended the abolishment of the excess crude account and the 0.5 percent stabilisation fund and then transferring the balance in those accounts to the NSIA.

Since its establishment in 2003, there have been questions about the legitimacy of the excess crude account.

NEITI also advised that the oil price-based fiscal rule (OPFR) which allows for revenues in excess of the oil price benchmark be abolished and replaced with a mandatory saving of a percentage of daily oil production.

All these, it said, would help Nigeria build buffers against the volatility of crude oil prices.

The COVID-19 pandemic, which resulted in lockdowns across various countries of the world, reduced demand for crude oil and a supply glut made crude prices tank on the global market.

However, countries have begun to emerge from lockdowns and a supply cut implemented by the Organisation of Petroleum Exporting Countries (OPEC) and its allies have helped prices rise to above $41 per barrel from a period when the US West Texas Intermediate (WTI) was offered to buyers at negative prices.

NEITI advised that Nigeria should not be distracted by rising oil prices saying the “next oil price crash is a matter of when not if”.

In total, all three crude earnings savings account held by Nigeria have a cumulative sum of $2.25 billion.

“By contrast, Norway (a country of 5.3 million people) has a sovereign wealth fund worth more than $1 trillion. The Scandinavian country is withdrawing $37 billion (382 Kroner) or less than 4% of its hefty savings to fund its 2020 budget,” NEITI said.

It also recommended that the stabilisation fund be increased from 20 percent to 40 percent of NSIA’s holdings and dividends from NSIA earnings be shared among the three tiers of government every year.

Other recommendations provided by NEITI include increasing tax revenue using a low rate-wide base technique by capturing the informal sector, boosting non-oil exports, blocking leakages in the oil and gas sector, fast-tracking the passage of the petroleum industry bill and boosting gas production and utilisation.

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