Confusion Over Funding of Yar'Adua's $5bn Emergency in Power Sector

By A. G. Umar Kari, Economic Confidential

An ominous whirlwind of controversy and tussle, over who funds what and how, has been steadily gathering and may torpedo plans of a smooth take- off and successful execution of the much -touted and soon ÔÇô to- be- declared state of emergency in Nigeria's power sector.

The power sector in Nigeria has over the years remained in a comatose state despite multi- billion dollar investment, a notorious feat that has earned the sector a dubious distinction as the open sore of the country's economy.

President Umar Musa Yar'Adua has repeatedly pledged to introduce a comprehensive package of emergency remedial measures towards turning the key sector around. But just when it appears that Yar'Adua has managed to mobilize a national effort toward tackling the seemingly intractable power problem, a fast- brewing multi- dimensional crisis is threatening the president's pet project, especially on the recourse to use funds from the Excess Crude Account.

It would be recalled that while the Federal Ministry of Finance was reluctant in the initial stage to temper with the Excess Crude Account for the project to avoid any scandal that may emanate from such an action considering the ongoing bashing of previous administration on the same, the Revenue Mobilisation Allocation and Fiscal Commission initiated a memo on workable of using parts of the share of the Federal Government to fund it. In the euphoria of the advice, President Umaru Musa Yar'Adua on June 13, 2008, in far away France announced the decision of the government in conjunction with the states to inject $5 billion for the rehabilitation and expansion of Nigeria's power generation, transmission and distribution infrastructure.

On the same day after the monthly meeting of the Federation Account Allocation Committee (FAAC), the Finance Minister of State who is also Chairman of the committee said that "we are going to take $5billion from excess crude account. It has been approved by the FAAC that it should be put into power projects based on the inputs that will come from Mr. President and if that is done, the three tiers of governments will own a substantial part of the power infrastructure according to their share of the revenue formula. There will be no repayment. But once those assets are privatized, the proceeds will be shared according to their revenue formula."

Governors of Nigeria's 36 states had also on Thursday June 19, 2008 endorsed Yar'Adua's proposal to fund the power sector emergency from the excess crude account. Subsequently, the National Economic Council which is chaired by the Vice President Goodluck Jonathan okayed the immediate release of $5.37 billion from the account for the project.

After a directive from the Presidency for the setting up of a stakeholders' Committee to work out a plan on the funding of the power emergency project, Babalola was reported to have set up the committee which excluded the RMAFC. This decision angered the RMAFC, which insisted that it is the only body constitutional empowered on the disbursement of funds from the Federation Account.

The Economic Confidential exclusively gathered that RMAFC Chairman, Engr. Hamman Tukur, is insisting that Yar'Adua has no power to touch a kobo from the excess crude account, which is jointly owned by the three tiers of government ÔÇô at least without involving the commission.

The Commission after its plenary session also hinges its objection on the argument that none of the bodies which gave authorization for the withdrawal of the funds from the federation account for the purpose of funding the power emergency have such constitutional responsibility to do so. It argues further that only the commission is the sole body vested with constitutional responsibility on revenue accruals to and disbursements from the Federation Account.

Some competent sources in the government wonder the reason for keeping the RMAFC at arm's-length over the power emergency issue. The decision not to involve the Commission is easily the genesis of the furor.

At the Plenary Session of the RMAFC, convened at the instance of Tukur on July 3, 2008, the commission asked Yar'Adua and the 36 governors to seek the approval of the National Assembly and the states assemblies before the emergency power intervention is released. In the alternative the federal government could solely fund the project from its share in the Excess Crude Account which could be accommodated but subject to the approval of the federal legislators.

To compound matters, some federal legislators are kicking against the release of the $5.37bn without their approval. They are questioning the legality of the withdrawals from the Excess Crude Account on the ground that the Account itself is illegal and its existence violate Section 162 (3) (10) of the 1999 Constitution, which recognizes only the Federation Account. Indeed there is a Supreme Court pronouncement on that in the case between the AG and Abia State in 2002.

A groundswell of opinion amongst the federal legislators, based on investigation by the Economic Confidential is that if the National Economic Council's decision is allowed to succeed, it would confer legality on an act of illegality. Members appear ready to tell Yar'Adua that they recognize only the Federation Account.

A leading technocrat, who craved anonymity, feared that a fifth columnist may be lurking around deliberately misleading the President into committing impeachable offences; for releasing $5.3bn from the Excess Crude Account without the approval of the legislative arm is a grave constitutional violation.

There are also the local councils whose consent is never sought in matters of the Federation Account including the power sector emergency. Indeed, there is no indication that local councils were ever consulted on the proposal for the withdrawal from the excess crude fund, notwithstanding that the councils are joint owners of the account.

The plight of the local councils is indeed pathetic. They never seem to have a say in matters that concern the Federation Account. They are simply swallowed up by the states with whom they share the State Local Government Joint Account for the purpose of collecting disbursement from the national purse. Over the years, the local councils have become mere appendages of the states, with governors arrogating to themselves powers to decide for the local councils. This has been possible apparently because in most cases the heads of such councils are handpicked by the governors. But that does little to vitiate the fact that the local councils are almost always short-changed. The legality of dipping into the excess crude account without the express consent of the local councils may also be tested in court, the Economic Confidential exclusively gathered.

Another controversial area is the extent of the participation of the three tiers in the power sector intervention as well as what each stands to gain. According to Governor Rotimi Amaechi of Rivers State the fund injected into power sector emergency would be treated as equity, and that states would take 45% of the total equity. The question that readily comes to mind is what is the equity share for both the federal and the local councils?

This is coming against the insistence of some including key stake-holders, that the Federal Government has played a fast one on the other beneficiaries of the excess crude account, the way it effortlessly got them involved in funding the emergency of power project.

A top economist confided to the Economic Confidential that by virtue of the country's constitution, the Federal Government is solely responsible for power. It therefore amounts to abdication of responsibility for the Federal Government to coerce the other tiers of government to partake of the power emergency project.

Controversy equally trails the composition of the 21-man committee constituted by the National Economic Council to implement the emergency measures. The committee, to be chaired by the Vice President, comprises nine governors, five ministers, one representative each from organized labour, the media, oil sector, and two from the banking sector. Again, the local councils were excluded. Not a few Nigerians expressed disappointment and dismay over the inclusion of Liyel Imoke, Olusegun Agagu and Danjuma Goje, governors of Cross Rivers, Ondo and Gombe in the committee. All three were Ministers of power in the immediate past administration during which an estimated $16 billion was squandered in the power sector. Indeed, a recent House of Representatives probe into the sector witnessed damning revelations against some of the ex-ministers.

There is also the likely implication of the impending release of about $10 billion into the economy. However, Charles Soludo, the Central Bank governor dispelled the fears of inflationary impact "since the expenditure has already been factored into the nation's monetary policy for the fiscal year"

As Nigerians await the proclamation of the power emergency, they hope that government and other stake-holders will address all the controversial and grey areas, so that there will be light at the end of the emergency tunnel.

A. G. Umar Kari

Abuja, Nigeria


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Re: Confusion Over Funding of Yar`Adua`s $5bn Emergency in Power Sector
Datuouwadaberechi posted on 07-08-2008, 18:03:55 PM
thanks for this informative piece. brings a lot of enlightenment.
abeg, let them sort the matter out and iron out all the rough edges since this is like a first for this kind of thing.
its true that power in nigeria needs emergency treatment, but let there be no building of illegality upon illegality.
laws are meant for a reason....although that our constitution is something else.
Re: Confusion Over Funding of Yar`Adua`s $5bn Emergency in Power Sector
ALORAINIDDEVIL posted on 07-08-2008, 18:33:16 PM
... na wayo wayo gofment we dey O! ye kparikpa O!............
Re: Confusion Over Funding of Yar`Adua`s $5bn Emergency in Power Sector
Icmarshall posted on 07-09-2008, 09:46:38 AM
I think there is nothing wrong to circumvent the law if that is the only option and alternative to address emergency problems. UMYA calls his project Emergency in Power Sector, he can therefore apply emergency approach if that can immediately solve the problem
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