Nigeria’s Finance Minister, Dr. Ngozi Okonjo-Iweala, said on Thursday that while some of the money in the country’s excess crude savings was legitimately used to offset revenue shortfalls arising from quantity shocks and to narrow the fiscal deficit, significant portions of it were shared to Governors, against her ministry’s advice.

Nigeria, Africa’s biggest oil producer, is grappling with financial difficulties owing to a 30 percent fall in the price of oil since June, which has added pressure on the government’s already depleted savings from the days of high oil prices. The Excess Crude Account (ECA) had around $9 billion in December 2012, but it has since fallen to around $4 billion, most which happened during a period of record high oil prices, when oil savings are supposed to accrue.

Okonjo-Iweala told capital market authorities yesterday that a significant portion of the billions of dollars drained from the Excess Crude Account over the past two years was distributed to governors instead of being saved for a rainy day. “States argued that rainy days were already at hand and in fact [the rain] was already pouring, so the money needed to be used right away.”

The central bank devalued the naira by 8 percent on Tuesday because it was running out of foreign exchange reserves with which to defend the currency. Nigeria’s oil revenues are the source of around 80 percent of government spending and are distributed each month to the three tiers of government: federal, state and local.

Money from oil sold over and above the finance ministry’s benchmark price is in theory deposited into the ECA, which can later be used to protect against oil price shocks or to plug the deficit. However, there are disputes about who should control this money, and state governors often argue the central government is hoarding the money and should distribute more to them. President Goodluck Jonathan, approved two dispersals of $1 billion last year to state governments.

•Text courtesy of Ventures Africa. Photo shows Okonjo-Iweala.