How We Manage Federation Account and Excess Crude Proceeds – Ibrahim Dankwambo, AGF

After six years of immaculate performance as Accountant-General of Gombe State, Alhaji Ibrahim Dankwambo was appointed the youngest Accountant General of the Federation (AGF) in the history of the country by the former President Obasanjo in 2005 to reform the Treasury and the Office of the AGF. In this interview with Economic Confidential Associate Editor, Tunde Akin, Dankwambo spoke virtually on all the areas the public need to know about Reforms, oil sales, NNPC accounts, Excess Crude and Federation Accounts management, among others. EXCERPTS:
In 2005 when you were appointed as the AGF, the president specifically gave you instructions as to what to do. What were the instructions?
You see, I came because somebody was retiring; not because there was any problem. But, the president also felt that since this was a time that the institutions of government were undergoing reforms that I should also not forget to continue the reform processes being implemented by this administration. The president was indirectly telling me to continue to abide with the reform policies of the government.
At what stage is the implementation of the reforms in the Office of the AGF?
Since I assumed office, we have looked at the structure of the office. This was done in consultation with all the stakeholders of the Office of the Accountant General of the Federation (OAGF). Firstly, we looked at the organisational chart. When we reviewed the organisational chart, we found out that there were some departments that were doing more work while some other departments did less. Again, there were lots of duplication of duties. And wherever you go where there are lots of duplication of duties, there are tendencies to be bureaucracies. And when there are a lot of bureaucracies there are tendencies for corruption. So, the first assignment was to streamline the functions of the OAGF, so that on an average basis each of the departments would be a professional department and would pursue what it was created for. That assignment has been completed.
What about areas of leakages in revenue?
We also identified overtime that one of the areas of government’s revenue problems was that there were lots of leakages in the sense that 100 per cent revenue accruing to government were not being collected or some agencies of government were not being run efficiently because somebody was not doing his or her job very well. The second stage was to get somebody to look at how we think – a typical and ideal revenue department function and what job procedure should be given to each and everybody that is in the revenue department. This will ensure that those in the revenue department know what their assignments are when people come to our office and also know where their limit of authority stops. We have finished documenting the work processes and work procedures. We have also succeeded in bringing out a treasury manner. The next thing we did is to also fix these positions we have created with very competent people. Competent people can be created in so many ways. We can look at the performance and C.Vs of some people and they can fit in; and some may also have good qualifications but not too much experience. What this set of people need is sharpening of their skills and they will be perfect. There are some other people that no matter how much sharpening you do they cannot fit in. That does not mean that these people are useless people because some of them have all the relevant qualifications that you are talking. So, we are looking into areas where this group of people can be redeployed so that they can be useful. And there are some other group of people that no matter what you do they cannot fit in. So, we will have no option than to ask them to go. All these processes are ongoing and we are doing them. That is the structure. Also when I came in, it was an era that the National Universities Commission undertook a review of some of the accounting courses in some universities. The universities that were producing substantial number of graduates in accountancy were disaccredited. This in effect means that when they are re-accredited they will not produce graduates for one to three years. Once graduates of accountancy are not produced within those periods of time there will be manpower shortage in the system. This is because during those periods a lot of people would go out of the system either by retirement or by change of job or other reasons, and you expect that new people should also come into the system to replace them. But, when you see that there are no people coming in or there are substandard people coming in, then you have to start preparing.
Do you have institution for training your accountants?
We have a training centre at Orozo in the Federal Capital Territory, Abuja. We have commissioned a consultant to re-organise the school because what was lacking in the school is that anybody you sent to the Federal Treasury Academy, Orozo is like you are sending that person to a punishment ground to go and teach. We said no to this. We don’t want to continue things like this. There are people who derive joy in teaching. So, it is better to get these people to manage teaching practice in the school as well as the administration of teaching in the school so that we can get maximum value. This is ongoing. Apart from that, we also examined the qualifications that we give to the students. It is very likely that these qualifications would only be recognised by the public sector. How do we make these people (students) to be able to work in other sectors, including private sector. So, we invited a professional institute in the United Kingdom and two Nigerian Universities as well as the professional accountancy bodies in Nigeria – the Institute of Chartered Accountants of Nigeria and the Association of National Accountants of Nigeria to come and work together and see what relevant qualification can be awarded at every stage of qualification of the programme, which will not discourage people from going to that school. They are working on it and we expect their recommendations by the end of June, this year. All what I have been talking about is restructuring in the OAGF, but the function of the AGF is also in the ministries, departments and agencies (MDAs) of government.
What are you doing to restructure that aspect?
Before I came, there was an approval by Mr. President that we should establish the Finance and Accounts Department in all the MDAs. But at that time, it could not be implemented because we did not have sufficient number of accountants at the directorate level that could do that. It may be very risky too to say go ahead and employ all these people that you retired to work in those positions. This is because you will discourage the people that are going through the system and are aspiring. Now we have reached a stage where we have sufficient number of accountants that can man all the ministries of government. The head of civil service of the federation has agreed that all ministries of government that have any accounting function will be headed by a director of finance and accounts. Now that we have a structure and an establishment that when you go to a ministry, let’s say Education ministry, this is the structure that you will have to efficiently run a finance and accounts department. When you go to agriculture or any other ministry, we already have a standardised organogram for that ministry to guarantee maximum efficiency and eliminate duplication. For our accountants in the ministries, departments and agencies (MDAs) of government, we also organise regular trainings for them. Hitherto, the payment of their salaries and trainings and skilled development were entrusted with the ministries. But, what we found out is that when we send an accountant to go to a ministry like Agriculture and Water Resources, which is a specialized ministry that will only have training for may be agric research, agric development and crop production, among others. There is less training and skilled development or nothing for the accountant. So, we have decided now that from this year we will be bringing all the pool of accountants in the MDAs together for at least two trainings and an enhancement course. Wherever you are if you are in the pool of OAGF, you will attend that particular course to enhance your performance.
What about computerization of your office?
We are also working with the World Bank to automate the Treasury and the Office. When you come to the office you will see a lot of people moving files up and down because most of the processes are still being done manually. The accounting function is a very sensitive function. It is not a function that I can come one day and say leave all the files, I have a computer where we can do all our processes. I will not be fair to this economy or the Nigerian people. What we have done is that we are introducing a Government Integrated Financial Management Information System (GIFMIS), to cater for all the revenue collections of government and all the expenditures/spendings of government, and to manage the pool of accounts of government as well as link the OAGF with all other major stakeholders of the OAGF which includes the Central Bank of Nigeria, the Federal Inland Revenue Service, The Presidency and the Federal Ministry of Finance. At the back of our building, we have finished networking the building in such a way that those communications will be facilitated. Today, if the president wants any information on any particular aspect of the government’s finances, he can do that from the Villa without asking us to bring a sheet of paper for it. That is the ultimate objective. And also if the AGF wants to get account balances from the CBN, he could do that from the Office here with the press of a button. All these things are ongoing projects we are seriously working on. The CBN is doing its own, so also the Federal Ministry of Finance and the Federal Inland Revenue Service.
What are the challenges to the realisation of the ongoing reforms and restructuring in the Treasury and OAGF?
There is no reform that does not have its own challenge. One, where there is a reform or change people are not sure of what is coming. And once people are not sure of what the next thing is, they prefer what currently obtains. Like they say, the devil you know is better than the angel you don’t know. People will kick against those changes or reforms. So, the changes are with the people that you are trying to change. But, we have tried to minimise the kick against through carrying the people along in all these processes and educating them on all the processes and projects that are being undertaken. We also try to make the people part owners of all the changes that are being done. If you ask any staff of the OAGF about what is going on about the reforms of the office, he or she will tell you that the office is doing something and progressing on the reforms. This is because the staff are part owners of the reforms in OAGF. We have been able to eliminate this challenge through training, workshop and educating them. We also have challenges of infrastructure. People say we have infrastructural challenge because there is no adequate funding. I cannot tell you that I don’t have a challenge in funding because funding is something that can never be sufficient. But overtime in the last few years, the infrastructural challenge has been overcome. The Federal Government has graciously relocated us to a new building where everybody has a table, seat and computer to work with. The staff have a good working environment. Secondly, we have also to a larger extent been provided with logistic in terms of funding to enable the people that are supposed to go round to monitor revenue and reconcile accounts to be able to do so. With prudent utilisation of the resources that we have, we have been able to overcome the challenge of funding. The other challenge, which may not be very significant to us as at today, is those people that we have found we cannot do anything with. This is because by the structure of the OAGF we operate under the Civil Service Regulation. And under the Civil Service Regulation, no matter how much you don’t like a person you cannot easily tell him or her to go away. You have to go through a lot of processes and procedures, which we are doing. I also agree that these procedures sometimes tend to be very slow or they take time to implement. This is still a challenge to us; but may be by the time the whole reorganisation of the ministries are concluded we will be able to overcome it.
What has your office done in reconciling the NNPC accounts and ensuring transparency in the full payment of oil revenue into the Federation Account?
You see, why that is not a challenge to me is because there is a body that is constitutionally empowered to monitor all accruals of revenues of NNPC, the Department of Petroleum Resources (DPR) and to check crude oil sales and distribution. That body is called the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) and that is its responsibility. I don’t have any direct linkage apart from them remitting monies into an account in the CBN, which is a non-checking account. The challenge will be for these bodies – RMAFC and CBN – to now come and tell us that this is what NNPC has listed or paid. I am not an engineer. Even if I am shown a tank where oil is taken, I don’t know how many barrels are contained and it will be foolish of me to say I will go and look at a tank of NNPC, which is 100. I cannot come to report to you and say NNPC has taken 100 barrels of crude oil. I am not that technical person that can do that. I am not also a technical person that goes to the London Stock Exchange (LSE) where crude oil stocks are being bidded and sold, and say at this period of time NNPC sells one barrels at $16 or NNPC sells at $20 or $46 per barrel. It is those agencies or commissions that are in charge of monitoring crude oil sales and distribution that should be monitoring. That has nothing to do with the OAGF at all.
Does this include the oil sales’ account held by the NNPC in JP Morgan of United States?
That one also is an account of the CBN. All dollar-denominated accounts are not accounts of the OAGF; they are all under the control of the CBN. I don’t have anything to do with them until they go into Federation Account where they are shared and I get my own, which is what I have control over. Otherwise I don’t have any statutory power. The revenues that I monitored are local revenues from ministries, departments and agencies of government. You see, people misunderstand the role of the AGF in that when there are inefficiencies in some other agencies of government in relation to finance; they say it is the AGF. But, the AGF does not play any role in crude oil sales and distribution as well as dollar-denominated accounts. I am also looking forward to them collecting more money into the Federation Account, so that we will get more money to finance our budget.
How transparent is the management of the Excess Crude Proceeds Account by the Finance Ministry and OAGF?
As at April 2007, the excess crude proceeds account has a balance of over $9 billion. A part of the account has been used to finance the joints projects of the three tiers of government such as power, railway and gas. All these are investments going on for the three tiers of government. It is just like the Nigerian National Petroleum Corporation, which is the major source of revenue for the Federation Account. Everybody says Federation Account money but where is NNPC in it? Is NNPC under the control of Borno State or Gombe’s local government councils? No. You see, somebody has to do business with NNPC for the corporation to get this revenue that is being shared. And you cannot say because we have only one source of revenue — Oil, which is paid into Federation Account, we should not look for alternative revenue sources to feed the Federation Account. Federation Account needs alternative sources of revenue apart from oil. That is why it was agreed that we have savings. We now have these savings but they are saying it is illegal. There were periods when the budgeted debt service payment was $2 billion and we paid $2 billion, but our debt stock still went up because we were not paying what we should have been paying. We incurred penalties. So, on the issue of excess crude savings everyone was carried along on the decision to save.
What could have been the bone of contention on this regard?
The Constitution is about understanding on how we will operate. There are some people in charge of approvals for any withdrawal from the excess crude account. We have processes for approvals and some of these approvals were also obtained. Take for instance, the approval that was obtained for appropriation done by the Federal Government and where is Federal Government of Nigeria? Is it only in Abuja? It is the whole of the country. These are the kind of things we are facing challenges on. These challenges are happening because may be people felt they were having some challenges in their states and they want to draw from time to time from the excess crude account. And now they want the account closed. If the account has been closed long time ago, where would they (states) have gotten these monies to pay their external debts and others? The excess crude money is a blessing and we have been very lucky in the last eight years that we have something from time to time to fall back on. Don’t forget that there was a period prior to May 1999 when oil prices were only $9 per barrel. God forbid but if oil prices go back to $9 per barrel today what happens to the economy? What the three tiers of government share now from Federation Account is over N200 billion monthly. When I was accountant-general in Gombe State, what we share from Federation Account was only about N20 billion in 1999. That amount is not up to the share of one state now. In 1999, oil prices were between $8 and $9 per barrel. Supposing we go back to sharing N20 billion, can we now say we are bringing down salaries? Can we say we will bring down the cost of running operations of government’s machineries? So, it is a dynamic thing and we have to look at ways of alternative revenue sources so that the pool will continue to be sufficient. It is better for us to keep arguing that the money is accumulating and everyone wants a share, than to say where can we get money to borrow and to spend? We agreed that all these processes of withdrawals from the account should go through the established legal procedures and the established constitutional procedures.
The capital expenditure accounts of Ministries, Departments and Agencies (MDAs) for 2006 and 2007 were closed on March 31 and April 10, 2007 respectively. What is the MDAs’ capital expenditure utilisation for 2006 and 2007?
The capital utilisation for 2006 as at the close of March 31, 2007 was about 87.2 per cent. The capital utilisation for 2007 was a little bit lower because of the extension of the 2006 capital expenditure. It was about 40 per cent. As at today, the capital warrant for the second quarter is coming. And by next week, the warrants will be cash-backed because our target is to ensure that by June 2007 we should have cash-backed not less than 50 per cent of the capital expenditure for this year.
But a new government would have been in place by June?
It doesn’t matter because the structure continues. The system is a little bit different now because if a capital warrant is released and is cash-backed, the capital vote is cash-backed in total unlike before. Before when a capital warrant comes, the AGF can pick which items to cash-back and which items to leave. That creates a lot of corruption. Now, as soon as the warrant is released and let say it is for N10 million, I cash-backed all the N10 million into a Central Capital Account and it remains there until the capital is closed. This is why it is very easy for me, on a day-to-day basis, to know how much has been utilised by the ministries, departments and agencies and how much is yet to be utilised and their percentages. Like I said earlier, the capital warrants for the second quarter of 2007 that will be released is N222 billion and it will be fully cash-backed. The capital utilisation for the first quarter of 2007 was N102 billion, out of the total release of N235.7 billion. For the whole year of 2006, the capital vote utilisation by MDAs was N550.6 billion out of the total capital expenditure for the year of N648 billion.
How have you been able to address the issue of corruption in the Treasury and OAGF?
Corruption arises when you are subjected to a lot of checks and balances and when you think you are not getting what you are supposed to get. One unfortunate thing about the OAGF is that anybody who has any reason to receive money today if he or she comes to the OAGF wants the money to be paid immediately. If you ask him or her to come tomorrow, he or she may not come. They want to collect the money immediately. So, the person coming for the payment at the OAGF initiates the corruption because when he or she comes and he or she is told it will take five days to go through the processes of approval and release, the person will want the payment to be done in two days. The person would now promise the people in charge of payment that if they can do it in two days, he or she can give them something. This is what I found out to be very rampant.
Why does this happen?
This happens because you allow contact between people who come for payment and those people who pay. If you look at my office you can see a lot of cameras around that have been installed. If I see you hanging around for a long time, I will ask the security men to go and ask you what you are looking for. I have also discouraged as many as possible people coming here to check or pursue their money because we have established procedures which we have documented in our servicom value. For any documents that comes to the OAGF takes a maximum of one or two days to leave, and also for any document that is for payment to the department of revenue takes maximum of two days to come out. We have documented these procedures. I think what we need to go ahead and do more is to educate people on some of these our procedures. We have telling people but I think we need to do more. The other thing I would like to mention is that all processes are done manually. We are now automating the file and approval movements, so that when a warrant is coming from the Budget Office you don’t need to print 200 pages of warrants to bring to me. All this could be electronically from this point to the CBN. Like we have discussed in the payment system, the challenge is that the laws of evidence in Nigeria still require hard copy. No matter how efficient I run this Office, I still have to make it within the framework of our laws. If I do it electronically and there is problem I am on my own because I did not do it legally. We will however continue to devise ways of eliminating these undue bureaucracies to reduce the processes of payment, and as much as possible to ensure that controls are not compromised.
What is the situation with respect to the payment for the petroleum products imported by the marketers during the first four months of 2007 after the payment of N17.8 billion?
The Petroleum Support Fund (PSF) was created to encourage oil marketers to import petroleum products. This is because they were importing the products at a higher price and made to sell at a lower price in the country. One of the omissions when the PSF was created as an agency is that the OAGF is not represented in the PSF. We are not members of the Council. So, decisions are taken and they are passed to the minister of finance, who in turn passed them to the director-general of budget of the federation. The D-G Budget gets professionals to go and verify the claims of the marketers and then he now raises an Authority to Incur Expenses (AIE) for the AGF to pay the share of the Federal Government because the PSF is supposed to be funded by the federal, state and local governments. And they have agreed that it is going to be shared 50-50. The Federal Government pays 50 per cent of the fund while the State and Local Governments through their State Local Government Joint Account pays 50 per cent. The challenge we have now is that as soon as the Federation Account is shared, how do I go to Gombe or other states to go and collect money to fund the PSF? Because of the ruling of Supreme Court we cannot deduct money directly, and you and I know that if any money goes to any state or local government and you ask them to bring the money to fund PSF there will be a problem. I only have power over the share of Federal Government of the PSF, but I don’t have power over the share of State and Local Governments. In spite of this problem, we have to move forward. What we are currently doing is to pay the oil marketers through our domestic excesses. For January and February 2007, the subsidy figures were just submitted by the marketers to us and we have to go through the processes of verifying and auditing these claims.
How much is the subsidy claims submitted by the oil marketers?
The amount the oil marketers have submitted to us for January and February is about N2.4 billion, which is being subjected to verification and audit.
The government budgeted crude oil production of 2.5 million barrels per day for 2007, but the actual production has been 2.1 million barrels since January. How do you ensure that this year’s budgets of the federal, state and local governments do not suffer?
What we have done now is to have a budgeted amount to be shared. What we were doing before was that we had a ceiling on oil price but we do not have a ceiling on oil production volume. So, irrespective of the volume once the price is exceeded we set aside the excess. This is why we should encourage some savings. What we have done is that at the end of each month we look at the amount we are supposed to share irrespective of the oil price and volume and whether we have sufficient money. From March allocation we have started that. And for January and February where there were gaps in supply, those gaps in supply where blocked through the sharing of the excess crude. And this is one good reason for us to have a reserve. Once revenues are falling and we cannot finance our budgets, we go to those savings and fund the budgets. And when we have excess revenue that we don’t need, we save them. So, we share money from the excess crude on a month-to-month basis to finance the shortfall in revenue as a result of reduction in crude oil production.
The president had at a time directed that all federal workers and other security personnel must receive their pay before the 26th of each month. How have you been able to adhere to this presidential directive?
Since that time, all military personnel are paid as specified in the schedule. All officers of the military are paid on the 15th or 18th of each month, but the 20th. For all the civilians, the mandates to the CBN leave my office before the 20th and it is paid to them. But we have challenges in that one because all these things are being done manually. One of the challenge, may be I did not tell you, is that it becomes very difficult for me to monitor the accounts of ministry of information from here. The moment I sent money to the Ministry of Information, the money has gotten out of my control because they are self-accounting on their own. The permanent secretary determines which account he picks and how regular he makes the payment. That is just for instance. What we are doing now is that we would be able through linkages with the CBN have on a daily basis know how much money ministry of power is holding or how much money is with environment ministry and others. So, if these monies are not paid before the 20th is because of this challenge. But, we are trying as much as possible to be on top of these accounts to ensure that these payments are done.
There have been cries for the Creation of another Accountant General of the Federation to represent the two lower tiers at the Federation Account. While that of your office remains for Federal Government Is this practicable?
People should understand that the gap that has existed between the OAGF and the Nigerian people is that people do not have the understanding of what the accountant-general does. The accountant-general of the federation is merely an officer that executes his assignments such as implementing an approved budget by the National Assembly and an approved warrant by the Finance minister using a standardised way. What is particularly different about Federation Account is that people still do not understand how it operates. You see the Federation Account is a zero account. It is an account that does not have any balance in it. Really, I don’t know what they meant by Accountant General of Federal Government or Accountant General of the Federation. In each of the state, there is an accountant general and it would have been better to have Accountant General of the Local Government too because it is the local governments that are being managed by the states through the State Joint Local Government Account, where the accountant general of the state acts as accountant-general of the local governments. But in case of Accountant General of the Federation, the AGF does not do anything apart from maintaining the zero account (Federation Account).
How does the Federation Account work?
The Federation Account is basically zero account. Monies accrue into the Federation Account just less than 24 hours before sharing. This is because constitutionally all monies that are supposed to be shared go into the Federation Account. The Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS), Nigerian National Petroleum Corporation (NNPC), Department of Petroleum Resources (DPR) and other federal revenue collecting organisations collect these monies. These monies are collected in piece-meal with the Central Bank of Nigeria, where all the accounts are kept. The NNPC opens a revenue collecting account with the CBN and monies continue to accrue into that account. All the monies are credited into the Federation Account less than 24 hours to the Federation Account Allocation Committee (FAAC) meeting and sometimes they are credited into the Federation Account on the day of the meeting. Before monies are accrued all the collections of each of the agencies of government that is charged with the responsibility of revenue collection will be reconciled at two levels before the FAAC meeting. The first level is the Revenue Reconciliation Committee, which consists of all the revenue collecting agencies and other people that meet in my office to reconcile. The second level is another committee chaired by the Revenue Mobilisation Allocation and Fiscal Commission, which meets with all the Revenue Collecting Agencies to reconcile. On the day of the FAAC meeting when all the reconciled monies are credited into the Federation Account, the summary of what has been collected will be circulated to all the accountants-general of the states. This is where the Accountant General of the Federation comes in. May be because he is the senior accountant-general, the AGF chairs the Technical Committee meeting of the accountants-general. They are just to scrutinise all the revenue collected to ensure that no revenue-collecting agency short-changes anybody. The Technical Committee meeting of the FAAC is the only meeting the Accountant General of the Federation chairs. The meeting is not just statutory meeting; it advises the main FAAC meeting on the technicalities of the revenue that has been generated for the month. So, the following day a draft communiqué is issued to the FAAC, which also scrutinises it. At this forum, both the accountant-general of the federation and accountants-general of the states are just ordinary members of the FAAC.
Who actually heads the Federation account?
The FAAC meeting is statutorily under the chairmanship of the Minister of State for Finance. So, from the arrangement of the Federation Account an accountant-general of the federal has no single input into what the other people accused the AGF of such as manipulation of the figures. Secondly, on the day of sharing of the Federation Account the total money that accrues into this account is shared and distributed among the three tiers of government. After the sharing of the money, the Federation Account becomes zero. So, what else do you manage? You cannot say you want to go and manage Sokoto State’s money; it has gone to the state. You cannot go and manage Gombe’s local government’s funds; they have been distributed to the local governments.
What are the factors for the distribution of revenue from the Federation Account?
There are indices used for revenue distribution to the extent that it affected the Federal Government in vertical distribution. The Federal Government takes 56 per cent; States, 24 per cent and local governments, 20 per cent. On the horizontal basis, this 24 per cent is shared all the 36 States and the 20 per cent is shared across all the 774 local governments. So, which one will I manipulate that will be to the Federal Government’s advantage? Can I just say the share of the Federal Government is not 56 per cent? Is it possible for me to increase it to 60 per cent? The Revenue Mobilisation Allocation and Fiscal Commission develops these indices for revenue sharing and the commission submitted these indices to us to implement. People should know that when they say you are the Accountant General of the Federation does not mean that I go to Gombe State and other states to be accountant-general to manage their allocations. Constitutionally, the word Federation cannot be actually separated from the Federal Government. We have Secretary to the Government of the Federation not because he is Secretary to the State Governments or Secretary to the Local Governments. We also have the Head of Service of the Federation not because he is Head of Service to the State Governments or Head of Service to the Local Governments. Nigerians just like titles. The accusation always is that sometimes the president instructs the accountant-general or somebody else to withhold somebody’s money and they (states) felt that if there was an accountant-general of federation, somebody autonomous from that of the Federal Government, he wouldn’t have done that type of thing like the money from Lagos State. Then I asked myself who does the Chairman of the Revenue Mobilisation Allocation and Fiscal Commission ultimately reports to? Which instruction can the president pass to the RMAFC or the National Assembly that would not be debated and adopted? The President of the Federal Republic of Nigeria is the umbrella for all institutions established in this country. We don’t need to continue to talk about issues that are not very important. What is very important to us now is that overtime there has been improvement in the way revenue has accrued into the Federation Account. The RMAFC is even constitutionally empowered to monitor the revenue collecting agencies while the accountant general of the federation is not constitutionally empowered to do that. The RMAFC has the responsibility not only to develop the indices but also check that all revenues collected by the collecting agencies are actually collected into this Federation Account. If somebody is lacking because of technical expertise or otherwise that he cannot do his job very well, the AGF should not share the blame. The important thing is that everybody knows that as at today that the operation of Federation Account has increased. Transparency with which the Federation Account is distributed has also increased. I want to tell you that as AGF there is no transparent system in Nigeria today that is more than Federation Account because it is only in Federation Account that you have three stages of reconciliation before FAAC meeting. First, there is the Technical Committee reconciliation. Secondly, there is the FAAC plenary session, and the third; there is the post-mortem reconciliation. No system in Nigeria enjoys this transparency.
What is the present situation on the Lagos State’s withheld funds which was more than N15 billion sometimes ago?
Lagos State Government based on the advice of some of the agencies of government that were in charge of the distribution of federally collected revenue had its allocations withheld. It is a legal thing that has to do with distributing money to non-existing local government councils. Because of the legal, the financial and to some extent the political implication of revenue sharing, there were a lot of ups and downs as to what will be done. At a point in time, a certain degree of agreement was reached but 50 per cent of the money was not released to then local governments, pending the time when the state will tidy up some outstanding things. I am not sure if the state had complied with the mutual agreement. But up till today, there is money that has been escrowed. The escrow money is not money that the AGF just wakes up one day to escrow. The president used all the parameters at his disposal to take that decision, which he passed to the Finance Minister to implement. It was the same thing that happened to Gombe State in 2003, where I was an accountant-general. We came for the Federation Account meeting after the elections in 2003 and the money of the state government was withheld. And this was on the advice of the RMAFC. A letter was written to us to confirm the withholding of the Gombe State’s allocations and when a new governor came the money was released to the governor. The withholding and non-withholding of money has so many factors such as legal, financial and political, which we don’t really need to discuss.
Would Lagos State be paid interest on the accrued funds?
All monies of the Federal Government are with the Central Bank of Nigeria. And it is the policy of the CBN that it does not pay interest on all the government’s monies. But if the CBN is paying interest on any rate then the bank will pay the state the money. The Lagos State’s allocations are kept in an escrow account in the CBN. The amount of the Lagos State’s escrowed allocations is N10.8 billion.
The RMAFC has described the continued use of the old revenue formula in sharing revenue allocations from the Federation Account as illegal. It is the belief that the old revenue formula favours the Federal Government more than the other tiers of government. What do you think?
What happened was that there was a reviewed revenue formula. The review of revenue formula is the responsibility of the RMAFC that is passed through the executive to the National Assembly for approval. I am not sure that the RMAFC is saying that the formula is illegal. May be, what the commission is saying is that it is outdated. It cannot be illegal until the commission brings a new one that is approved by the National Assembly. As I am taking to you, everyday we receive amendments to the formula on derivation allocation because of adjustment of oil wells. These are basically the responsibility of the RMAFC. The commission determines which oil well gets what and what production comes out of each oil well, and based on that the commission develops indices. So, to that extent I am not sure the commission is saying the revenue formula is illegal. It may be outdated but unless a new one is issued and passed and is not being implemented before you can talk about illegality. Until that happens, the one we are implementing will continue to be very relevant.


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