The Nigerian govt purchases offshore patrol vessels worth $35 million with funds from the Excess Crude Account

According to the Federal Government (FG), the $35 million disbursement from the Excess Crude Account (ECA) is from June 2022 and is an advance payment for the purchase of brand-new Offshore Patrol Vessels (OPVs) for the Nigerian Navy. This is in response to a report that showed that Nigeria's Excess Crude Account shrank from $35.37 million to $376,655.

Despite greater oil revenues, the federation has not contributed to the ECA this year. The ECA is a savings account held by the Federal Government. It is financed by the difference between the market price of crude oil and the budgeted price of crude oil as stated in the appropriation bill.

With regard to the Excess Crude Account, the Finance Minister Zainab Shamsuna Ahmed stated that in the past four years, market volatility on oil, Nigeria has not had accrual to the excess cause account. This is why the ECA has not been funded for a while now.

“So, what we have had, has been gradually used up for different purposes and it is always used in consultation with the National Economic Council, that is the governors, because this is a federation account,” Ahmed said. “The last approval that was given by the council was the withdrawal of $1billion to enhance security. We have been utilizing that.”

“The last trench of that has been finally released because deployment to security agencies are based on the contracts executed and it’s been used strictly for that security purpose.”

It was further said that the action was taken as part of efforts to build on the improvements in marine security seen in the Gulf of Guinea.

Lately, the International Maritime Bureau (IMB) observed that there were zero actual and attempted piracy/ship-armed-robbery events on Nigerian waters in the first half of this year. In addition, Nigeria was removed from the International Maritime Bureau (IMB) Piracy list earlier this year.

Because of pipeline theft, underinvestment, and other factors that have restricted oil shipments, Nigeria, traditionally Africa's major oil exporter, has found it difficult to profit from rising crude prices.

The Excess Crude Account (ECA) and oil subsidies have both depleted state coffers. In the first four months of 2022, Nigeria's debt servicing expenditures exceeded public revenue.

The Nigerian economy is "hurtling towards a fiscal crisis without the buffer that the ECA provided in 2008 to 2010," according to Tunde Ajileye, partner of Lagos-based risk advisory firm SBM Intelligence.

“The Excess Crude Account, which stood at $2.1billion when President Buhari took over in 2015, has dropped to $376k [now],” he said. “This is in spite of oil prices that have been consistently above the oil price benchmark of the federal budget.”

Costs of debt in Nigeria typically fall below income. The nation's budget was supported by oil money for many years. It is now attempting to increase its tax base, but is constrained by an antiquated tax collection system.