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Nigeria has no savings - Excess Crude Account has only $3.6bn - Dr. Okonjo-Iweala
| April 13, 2012
Nigeria's co-ordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, has warned over the depletion of Nigeria's Excess Crude Account, which currently holds only $ 3.6 billion. Speaking at a forum with civil society organisations in Abuja, Dr. Okonjo-Iweala, blamed demands by governors’ for equitable distribution of the Nigeria's resources as the main reason for the depletion of the Excess Crude Account and that the current value of the account, $3.6bn, cannot sustain the country if there is an economic crisis.

She said, “The Excess Crude Account and its successor, the Sovereign Wealth Fund (SWF), are very important, but we have the state governors saying no, we will only allow $1bn. In fact, we managed to get that, and now, they said it is illegal; and so, the country is not able to save in the Excess Crude Account and we have left today in that account only about $3.6bn.

“Every month, because they say it is illegal, we have been dipping hands into it. Instead of moving that money into the sovereign wealth account, it is being shared until it is almost at the bottom.

“What that means is that should the price of oil drop today, we have no cushion because $3.6bn for this economy is not enough to take us to any length of time, and that was what I told them at the governors’ Forum during the National Economic Council meeting the last time.

“I told them that their argument about the legality or illegality is a moot point because we have spent almost all the money.”

She also stated that fiscal federalism creates problems for the management of Nigeria's economy, saying “Nigeria, because of fiscal federalism, cannot save. The constitution says the President should manage the economy for the benefit of everybody. The decision to save is also part of the management of the economy for the benefit of the people of Nigeria. Every state can save but the Federal Government can save for all Nigerians. The governors can insist on accountability in the management of the SWF as a guarantee against their apprehension."

“It is difficult getting governors to agree to $1bn savings for the SWF. We had the state governors saying they can only allow $1bn, now they say it is illegal and the country is not able to save. In the excess crude account today we have left only about $3.6bn. Should the oil price drop today we have no cushion because $3.6bn for this economy is not enough to take us to any length of time.”

“The fear is that the Federal Government is dipping hands into these accounts but it is not true. We can tell you at any point in time how much is in what account. So there should be no fear that these monies would disappear.” The governors are 100 per cent right to demand for transparency and how and what the money saved is spent, but, they are on the council of the SWF as well as Civil Society Organisations; there should be no fear. Saving is the right thing to do.”

"The Federal Government is not dipping hands in anything. I can tell you how much is in every account. We must save for the future because soon Ghana and Angola will join the league of countries that have savings, whereas Nigeria is fast depleting the little she has.”

Dr. Okonjo-Iweala aslo spoke about the effects of developments in the global community on Nigeria's economy especially since the main source of foreign exchange is oil which is sold primarily to Europe and America; regions that currently have severe economic problems. She said, “There is no money stacked up anywhere, which is why I am pushing for savings in case the Nigeria National Petroleum Corporation (NNPC) does not sell crude oil or cannot remit money as is being experienced in recent times."

This country depends on a product that is sold internationally and whatever happens there affects us. That is why we need to have savings. Sixty per cent of our oil is sold to the US and Europe, and these countries are facing big economic problems. For instance, the US has an unemployment rate of eight per cent; Spain, 24 per cent; and India, 9.9 per cent.

“So, if 60 per cent of our oil is sold to them, then we have a problem and any country that has great volatility such as ours will always have problem, and this will lead to crisis in the economy. “it was difficult getting governors to agree to $1 billion savings for the Sovereign Wealth Fund (SWF)”.

“Now that the price of oil is high, we should be happy but because the quantity we produce as a country has dropped, we are not selling expected quantities. So, not much money is coming in. We are selling below budgeted quantities."

The minister also pointed out that the period between 2003 and 2007 was the only steady period in Nigeria’s recent economic life because Nigeria saved but since then, the government has been drawing from the account to pay bills.

(2) Comment


Comments

"The views and opinions expressed in these comment(s) or article(s) do not necessarily reflect the views or opinions of NGEX, its partners or its affiliates."
OMOTAYO, J. A.    Lagos, NIGERIA    April 14, 2012
Psalm 146:3 states: "Do not put your trust in nobles...". I disagree with the Mrs Okonjo-Iweala. There has been fiscal indiscipline in Nigeria since 1999 till date, whether at Federal, State or Local Government levels. With the Fed Govt, it was worst between 2003 and 2007. Budget 2002 had N1.447trn accual expenditure even with COJA, Commonwealth Heads of States Meeting (CHOSM), etc. held. Budget 2003 with N1.5trn without COJA, CHOSM, etc surpassed budget 2002 by a margin. Budget 2007 was worse. It was N2.3trn even after the "downsizing" in the public service.

Do you call a flood a water dam just because the rainfall outweighs the drainage capacity? That was what happened between 2003 and 2007. A barrel of crude at $18 benchmark in 2002 rose to over $70 in 2007. PMS sold at N26 per litre in 2002 went up to N65 per litre. Forget about Mr. Obasanjo's N75 per litre. Crude production was 0.8 mbpd in 2002 but went up to 2.4 mbpd in 2007. Any one can do the Arithmetic.

God save Nigeria.
abiamone    London,     April 13, 2012
One source of expenditure is paying bills. What about the billions stolen by politicians? What effort is being made to recover these? The government should embark on money-saving exercises. One such exercise is to agree with EFCC on "No-Win-No-Pay". The EFCC seems to be costing more than it is recovering from Ibori and the likes.
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