Nigeria’s finance minister said on Thursday that a significant portion of the billions of dollars drained from the oil savings account over the past two years was distributed to powerful governors instead of being saved for a rainy day.The central bank devalued the naira by 8 percent on Tuesday because it was running out of forex reserves with which to defend the currency.

The Excess Crude Account (ECA) had around $9 billion in December 2012, but it has since fallen to around $4 billion, Finance Minister Ngozi Okonjo-Iweala noted in a speech to capital market authorities. Most of the falls occurred during a period of record high oil prices, when oil savings are supposed to accrue.

Okonjo-Iweala said some of the money had been needed to cover revenue lost due to outages caused by oil theft and pipeline vandalism, thought to drain hundreds of thousands of barrels a day.

“Some of it (the ECA) was then legitimately used to offset revenue shortfalls arising from quantity shocks and to narrow the fiscal deficit,” she said. “But against our advice, significant portions were also used to augment monthly allocations,” to local and state authorities.

“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,” Okonjo-Iweala said.

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.

 Credit: Yahoo News