THE NIGERIAN CONTENT DEVELOPMENT FUND (NCDF) AND THE TREASURY SINGLE ACCOUNT THROUGH THE EYES OF THE CONSTITUTION

On the 7^th of August, 2015 the Federal Government via circular HCSF/428/S.1/120 directed all MDAs, to pay all receipts due to the Federal Government or any of her agencies into the Treasury Single Account (TSA) maintained in the Central Bank of Nigeria. The MDAs affected include all MDAs funded through the Federal Government Budget, MDAs partially funded through the Federal Government Budget and which generate additional revenues, MDAs not funded through the Federal Budget but which are expected to pay operating surplus /25% of Gross Earnings to the Consolidated Revenue Fund (CRF), MDAs that are funded from the Federation Account, Agencies funded through special accounts (levies), profit oriented public corporations/business enterprises, revenue generated under Public Private Partnership, and MDAs with revolving funds and project accounts.

The directive is to take effect from the date of the circular, which is 7^th August, 2015 and non-compliance will attract serious sanctions. In compliance with this directive, all government Ministries, Departments and Agencies (MDAs) have complied or have taken steps to comply and have moved their revenues to the Central Bank of Nigeria, unless those that were granted exceptions. The Nigerian Content Development and Monitoring Board (NCDMB) is not one of those granted exceptions and as such is expected to pay all its revenue into the TSA. The government further directed that the Nigerian Content Development Fund (NCDF), which technically is an industry fund held in trust for the industry by the NCDMB, be paid into the TSA. The question agitating the mind of industry stakeholders is whether the NCDF is government’s revenue that should be paid into the Treasury Single Account.

The NCDF is established pursuant to section 104 of the Nigerian Oil and Gas Industry Content Development Act, 2010 (NOGIC Act). For ease of reference, the section provides as follows:

104(1): A Fund to be known as the Nigerian Content Development Fund (the “Fund”) is established for purposes of funding the implementation of Nigeria content development in the Nigeria oil and gas industry.

104(2): The sum of one per cent of every contract awarded to any operator, contractor, subcontractor, alliance partner or any other entity involved in any project, operation, activity or transaction in the upstream sector of the Nigeria oil and gas industry shall be deducted at source and paid into the Fund.

104(3): The Fund shall be managed by the Nigerian Content Development Board and employed for projects, programmes, and activities directed at increasing Nigerian content in the oil and gas industry.

To answer the question subject matter of this piece, it is important to find out what are the revenues required to be paid into the TSA by the Constitution.

The relevant sections pursuant to which the circular was issued are sections 80 and 162 of the 1999 Constitution of the Federal Republic of Nigeria (As Amended). Also, the sections are quoted for ease of reference.

Section 80(1): All revenues or other moneys raised or received by the Federation (not being revenues or other moneys payable under this Constitution or any Act of the National Assembly into any other public fund of the Federation established for a specific purpose) shall be paid into and form one Consolidated Revenue Fund of the Federation”.

Section 162(1): The Federation shall maintain a special account to be called “the Federation Account” into which shall be paid all revenues collected by the Government of the Federation, except the proceeds from the personal income tax of the personnel of the armed forces of the Federation, the Nigeria Police Force, the Ministry or department of government charged with responsibility for Foreign Affairs and the residents of the Federal Capital Territory, Abuja.

Section 162(10) defines “revenue” for purposes of that section to include any receipt, however described, arising from the operation of any law; any return, however described, arising from or in respect of any property held by the Government of the Federation; and any return by way of interest on loans and dividends in respect of shares or interest held by the Government of the Federation in any company or statutory body.

Does the NCDF qualify as “revenue” by the government or a “public fund” and as such payable into the TSA? To answer these questions we have to make recourse to the NOGIC Act. Section 104(1) of the NOGIC Act expressly shows that the funds payable into the NCDF are not collected by the government. It is a fund independent of the government. It is a pool of fund put together by the industry players for the sole purpose of developing local content in the Nigerian oil and gas industry. Section 162(10) of the Constitution which defines “revenue” as meaning any receipt, however described, arising from the operation of any law must refer to any receipt by the government. Is the government receiving the NCDF? The answer is an emphatic No! The monies in the NCDF are of the industry, by the industry and for the industry, only to be managed by the NCDMB. It is an industry fund, not a government fund.

Importantly also, all monies in the Federation Account and the Consolidated Revenue Fund is not spent at will, but can only be spent by the federal government for purposes stated in the Constitution. To this end, section 162(3) of the Constitution mandates that the monies in the Federation Account be shared between the three tiers of government. With respect to the Consolidated Revenue Fund, section 80(2) of the Constitution forbids the withdrawal of any money therefrom except to meet an expenditure charged on the fund by the Constitution, or where it is approved for budgetary purposes. It follows that once the NCDF is put into the TSA, withdrawal therefrom for the purposes for which it was established by the Act becomes unconstitutional, as the said withdrawal is not pursuant to the Constitution, is not to fund the budget and is not to share among the three tiers of government. In other words, withdrawing the funds to fund the implementation of Nigerian content in the oil and gas industry (the purpose for which the fund was established) becomes unconstitutional. It must be noted that the NCDF cannot be used for any other purpose other than funding the implementation of Nigerian content in the Nigerian oil and gas industry as provided by section 104(1) of the NOGIC Act. Once it goes into the TSA, it must be used only as stipulated in sections 80 and 162 of the 1999 Constitution.

It is thus clear that it is unconstitutional to pay the NCDF into the TSA as the NCDF is not revenues received or collected by the government of the Federation or the Federation. It is an industry fund meant for the industry but managed by the NCDMB. The money does not go into NCDMB’s account, it goes into the NCDF which is a separate account maintained in the custodian banks.

Other issues like access to the NCDF and the willingness of industry players to contribute to the fund also arise from the directive of the federal government that the NCDF be paid into the TSA. While those issues are genuine and justified, this piece focuses on the constitutionality of the directive with respect to the NCDF. 

Harrison Declan is an energy lawyer, and author of the book “Local Content in Africa’s Petroleum States: Law and Policy”.