The presidency has denied that N11.7 billion of the total amount recovered from friends and family of late head of state, General Sani Abacha, was not paid into the looted fund account and is therefore missing.

The Senate Public Accounts Committee had in a report presented to the Senate last Thursday noted that N40.7 billion recovered as looted funds, have not been remitted into the Consolidated Revenue Fund as provided for in section 80 of the constitution.

It also noted that in the process of the banking of the recovered funds, N11.7 billion has been discovered missing leaving only N29 billion in the looted fund account.

However, the presidency in a statement of responses to the observation of the Senate committee made available to THIS DAY yesterday noted that the said amount never existed in the first place, but arose as a result of different exchange rates used in the conversion of the dollar amount.

According to the Presidency, “There is no basis for claiming that N11.7 billion said to be the difference between the N40.7 billion included in the 2002 Appropriation Act by the National Assembly and the actual balance in the Looted Fund Account monetised at N29.2 billion was missing, as this difference never existed in the first place”.

The Presidency in the statement noted that the National Assembly had in the Appropriation Act 2002, made a provision of N40.7 billion as income from Looted Fund Account whereas actual balances in the account as at December 31, 2001 were $243,151,024.22 and €6,766,672.95.

This amount was further monetised by the Federal Government at the prevailing Central Bank of Nigeria (CBN) exchange rate of about N120 to US $1 to yield N29.2 billion, whereas the National Assembly monetised the money at the parallel market rate of between N137 and N140 to US $1.

The presidency also noted that a statement of account showing the balances was made available to the investigating Committee, so that there was no basis for the inclusion of N40.7 billion in the 2002 Appropriation Act as revenue from the looted fund which was already domiciled in the CBN.

The Senate Committee among other things observed that the “recovered looted funds were not paid into the Consolidated Revenue Fund in violation of the Constitution and also a specific resolution of the senate thereby affecting funding of the budgets from 2000”.

The presidency in the statement of response noted that the recovered funds ought to have been used to defray the debt created by the loot in the first place, adding, however, that the federal government alone is currently servicing the debt because the recovered monies were paid into the Federation Account for distribution to all tiers of the government.

On the observation of under-funding of capital provisions in all the budgets since 1999, the Presidency noted that “recurrent expenditure of a budget particularly personnel cost is a first charge. The surplus arising thereafter, if any, is dedicated to the capital programme”.

Furthermore, the presidency statement read, because capital expenditure is a function of recurrent surplus from Consolidated Revenue Fund Account, capital projects would be difficult to fund if there is no surplus after meeting recurrent obligations.

The presidency also accused the National Assembly of over stating the revenue profile for the year 2002 budget and cited the example of the increase of the revenue profile from privatisation proceeds to N200 billion, as against the N102.7 billion projected by the Presidency.

It blamed the National Assembly for cutting the budget of the privatisation agency by nearly 75 per cent, “making it impossible for the agency to operate at optimal levels to generate the ambitious revenue target assigned to it”.

The Senate Committee on Public Accounts had Thursday last week presented to the Senate their nine-point observation report on the non-implementation of budgets since 1999, in which it concluded that the implementation of the budgets shows “a virtual slide into financial anarchy”.

The presentation of the report was to adequately educate senators as they prepare to begin tomorrow the impeachment debate of President Olusegun Obasanjo for non-implementation of Appropriation Acts from 1999 to date.

Below are the presidency’s comments to the observations of the Senate committee:

Observation No.1

Capital provisions in all the budgets from 1999 to date have always been under-funded.

Comment

A budget is an indicative plan and may be implemented to the extent that the parameters encapsulated therein are realised.

Recurrent expenditure of a budget, particularly Personnel cost, is a first charge. The surplus, arising thereafter, if any, is dedicated to the capital programme.

Capital expenditure is a function and product of recurrent surplus from the Consolidated Revenue Fund Account. If there is no sufficient surplus after meeting recurrent obligations, capital projects will be difficult to fund.

Observation No.2

Excess spending has always been recorded in the Recurrent Budget. One of the most guilty party being the Presidency. An example is 2000 where N6.2 billion was provided in the Budget and there was an actual expenditure of N31.0 billion.

Comment

It is a fact that excess recurrent expenditure has occurred in budget performance since 1999. This excess expenditure is mainly due to increased Personnel Costs arising partly from the implementation of the new minimum wage introduced in 2000. In the aggregate however, there are savings in some ministries while a few ministries, such as Police, Defence, Foreign Affairs, Internal Affairs and National Assembly recorded huge over-expenditure in their recurrent account.

The Presidency, as provided in the Appropriation Act 2000, as amended, covered the following agencies:

Agency Recurrent Appropriation

(a) State House 5,835,312,960

(b) VP’s Office 824,041,860

(c) State Protocol 321,242,990

(d) SGF 593,395,676

(e) Other Agencies and Parastatals under the Presidency 9,490,905,460

(f) NSA & Security Com. 415,290,110

(g) National Planning Commission 549,681,068

(h) Federal Office of Statistics 476,556,859

(i) Ministry of Co-op. & Integration 130,992,097

(j) Police Affairs & Police Pension 418,195,600

(k) Code of Conduct Bureau 199,986,467

TOTAL:- N19,255,601,147

From the above, it is shown that the approved Budget in respect of recurrent expenditure for the Presidency was N19.256 billion and not N6.2 billion as claimed. Moreover, the actual expenditure was N19.175 billion, which showed an unspent balance of N80.669 million at the end of year 2000.

Observation No.3

Operation of fund outside the Consolidated Revenue Fund have continued whereas that is in clear violation of the Constitutional provisions and negatively affects the appropriation of budgetary process. For example the excess crude oil account.

Comment

There is no operation of funds outside the Consolidated Revenue Fund that is not created by law. The Excess Crude Oil Account is a creation of the Appropriation Act, which set the Crude Oil price benchmarks.

The Appropriation Acts 2000, 2001 and 2002 have always provided for the harvesting of excess proceeds into the budget as a financing item.

Therefore, Crude Oil price above the benchmark set by the Act is automatically paid into the excess crude oil proceeds account from where it is transferred, when necessarily, into the Federation Account for allocation among the three tiers of government.

Observation No.4

Illegal expenditure of Public Funds affecting budgetary performance exists within the period. Example, grant of $10.0 million to Government of Niger Republic without Appropriation and without Legislanve functions.

Comment

The grant of US$10 million to Niger Republic was an additional commitment inherited from the previous Administration and was funded from the recovered loot. Nigeria has for reasons of security and enlightened self-interest pursued a policy of good neighbourliness towards the countries in the West African Sub-region.

This is partly because the negative consequences of socio-economic and political crises in these countries are likely to spill over into Nigeria, if action is not taken to check or stem the eruption of such crises. It was for these same reasons that Nigeria got involved in ECOMOG.

Observation No.5

Recovered looted funds were not paid into the Consolidated Revenue Fund in violation of the Constitution and also a specific resolution of the Senate, thereby affecting funding of the Budgets from 2000.

Comment

Since Year 2000, the balance in the looted funds account has always been provided for in the Appropriation Acts as revenue item. Transfers from the Looted Fund Account are made to the Federation Account from where it is shared among the three tiers of government. The FGN’s share has always been credited to the CRF Account. For example in Appropriation Act 2002, a provision of N40.7 billion was made by the National Assembly as income from Looted Fund Account whereas the actual balances in the account as at 31/12/2001 were $243,151,024.22 and €6,766,672.95, since monetized at the prevailing exchange rate to yield N29.2 billion.

The Statement of Account showing these balances was made available to the Public Accounts Committee. There is, therefore, no basis for the N40.7 billion included in the 2002 Appropriation Act as revenue from looted fund already domiciled in the Central Bank of Nigeria (CBN). There is also no basis for claiming that N11.5 billion, said to be the difference between the N40.7 billion included in the 2002 Appropriation Act by the National Assembly and the actual balance in the Looted Fund Account, monetised at N29.2 billion was missing, as this difference never existed in the first place.

In reality, the recovered funds ought to have been used to defray the debt created by the loot, in the first place. The Federal Government alone is currently servicing this debt, whereas the recovered loot was paid into the Federation Account for distribution to all tiers of government, up to 2001.

The transfers to Federation Account from Looted Funds from 1999 to 2001 are as follows:

09/7/1999 – $75.0 million

20/7/1999 – $27.6 million

13/2/2001 – $574.8 million

14/2/2001 – €101.2 million

Observation No.6

Since 1999, price of crude oil, which is the main source of budgetary funding, has not fallen below the budgeted price. Indeed, it has sold in excess of the benchmark provided in all the budgets up to 2002.

Observation No. 7

Since 1999 till date there has been continuous claim of low revenue affecting budgetary performance. Which leads to either inference of non-disclosure of actual revenue collected or false declarafion of the revenue profile prior to collection. For example between January – October 2001, the estimated revenue was N1,657,341,700 whereas actual collection was N1,871,750,000 showing the surplus of N241,408,300.

Comments 6 and 7

It is true that revenue budget performance in the area of oil revenue has been favourable since 1999. However, oil revenue is not the only source of revenue. For example, revenue budget performances in the areas of liquid gas, tax on petroleum products as well as FGN Independent Revenue have not been favourable. Thus, in the aggregate, total budgeted revenue has not always been favourable whereas expenditure had continued to increase. The following scenario is the true position.

Prorated Jan-

May 2000 2001 2002

Total Rev. (Budgeted) 536.80 718.29 435.59

Total Rev. (Actual) 597.98 699.57 236.62

Variance 61.18 (18.72) (198.97)

The revenue performance, as shown above, clearly explains why it has not been possible to implement budget 2002 adequately. In future budgets, it may be desirable to be more conservative in revenue projections and allow our budgets to be revenue driven rather than being expenditure driven. For example, the profile for 2000 to 2002 is as follows:

Prorated Jan- May

2000 2001 2002

Total Exp. (budgeted) 657.10 919.78 448.94

Total Rev. (actual) 597.98 699.57 236.62

Variance (59.12) (220.21) (212.32)

Thus, the actual revenue had always been below the budgeted expenditure.

Observation No.8

Contracts for projects are awarded without Appropriation of funding from the National Assembly as prescribed by the Constitution only for Budgetary funding to be sought after the event, e.g Abuja Stadium, Airport Extension, Ring Road.

Comment

Projects approved by the Federal Executive Council (FEC) are not necessarily awarded. The approval is to enable the projects to be admitted into the Rolling Plan, where this is not already the case, and for eventual appropriation. This is the case with the Abuja Stadium, Airport Extension and Ring-road projects.

Observation No.9

The policy of Government releases of budgeted funds were to be on quarterly basis but this policy has been observed more in the breach than in the compliance resulting in epileptic and haphazard releases of funds into the economy.

Comment

Warrants are issued on quarterly basis. However, the cash backing of recurrent warrant is done on monthly basis when revenue from the Federation Account is received into the Consolidated Revenue Fund (CRF). The funding of capital warrants is subject to availability of surplus fund after taking liability for recurrent expenditure.

From January to May 2002, the total receipt into the Federal Government Retained Revenue amounted to N236.62 billion whereas the prorated recurrent expenditure was N280.77 billion. It could be seen that the available income is not sufficient to fund even the recurrent expenditure and this is a major crisis.

General Comment

This is hardly surprising as the National Assembly right from the beginning over stated the revenue profile for the year 2002 budget. For example, the Executive projected N75.0 billion and N27.7 billion or a total of N102.7 billion as proceeds from privatisation and recovery of looted funds, respectively. These were subsequently increased to N200.0 billion and N178.7 billion, respectively or a total of N378.7 billion by the National Assembly. The revenue projection for the year 2002 was thus ab-initio overstated by N276.0 billion just on these two scores alone, by the National Assembly. The National Assembly then proceeded to cut the budget of the privatization agency by nearly 75% – making it impossible for the agency to operate at optimal levels to generate the ambitious revenue target assigned to it. Other agencies faced similar cuts in capital and recurrent estimates.

Nneoma Ukeje-Eloagu, This Day, June 17, 2002