ABUJA – Coordinating Minister for the Economy and Minister of Finance, Mrs. Ngozi Okonjo-Iweala, yesterday raised alarm over the depletion of the Excess Crude Account, which stands at a mere $ 3.6 billion.
Speaking at the first civil society forum organized by her ministry to acquaint civil society groups with the Jonathan transformational agenda, Okonjo-Iweala also appealed to state governors challenging the constitutionality of the Sovereign Wealth Fund to have a re-think, noting that the Fund is critical to national survival given Nigeria’s mono-economic status.
According to her, the nation could go broke in the next few years if it does not initiate savings from oil proceeds while lamenting that the Excess Crude account which has depleted to $3.6bn cannot sustain the nation in the event of an economic crisis.
“Should the price of oil drop we have no question. The $3.6bn in the excess crude account is not enough to sustain Nigeria for any period of time. 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”.
She also disclosed that the Sovereign Wealth Fund which was created from the excess crude account could have been launched with more than $1bn but for stiff opposition from state governors who only sanctioned its creation with a capital of $1bn.
She allayed fears among state governors and Nigerians that $1bn-capital Sovereign Wealth Fund would be mismanaged by the Federal Government, pointing out that the Sovereign Wealth Act which establishes the Fund adequately provides for accountability in its management.
The Minister noted that fiscal federalism has created problems for the management of the Nigerian 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.”
According to the minister, the Nigerian economy is being affected by developments in the global community that depends, especially as the nation’s only main foreign exchange earner, oil, is consumed mainly in Europe and America, regions that now face severe economic problems.
“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. 60 per cent of our money and products comes from and goes to Europe and USA, if they are not doing well we suffer too. Unemployment in the USA is at a crisis level same as in Europe.
“That product determines how the economy grows and the nation’s expenditure fluctuates with revenue, such volatile pattern of development crashes the Gross Domestic Product (GDP). To make expenditure smooth necessitated budget benchmarking,” she said.
Giving an insight into why she supported the controversial fuel subsidy removal at the beginning of the year, the finance minister said it was economic suicide for government to subsidize products that are laundered to neighboring countries at the detriment of developing critical national infrastructure.
She admitted that had the government taken time to explain the subsidy removal to Nigerians, the policy could have attracted support instead of disdain.
She however regretted that the petroleum subsidy was not removed before she resumed as finance minister, hence she was labeled as the proponent by Nigerians.
“I prayed for subsidy to be phased out before I came back otherwise it would be said that Okonjo-Iweala is the propagator and proponent of subsidy and that is exactly what happened. Of course I subscribed to the subsidy phase-out, make no mistake and I will tell you why.
By the time I got back I spoke with DG Budget that we were up to N1.3 trillion in (subsidy) payments and we were alarmed because this amount kept mounting. Now in finance we don’t know how much is consumed but we know how much is imported and it is against that that we disbursed after the accountants have checked and certified to us that the invoices are valid.
“So we did what any finance Ministry in any country would d and that is what we discussed with Mr. President. Now why it was on that day we cannot debate that but the essence of what happened is that the president was trying not to play into the hands of corrupt people and ship more of our resources into their hands.
And that was really it, we didn’t explain ourselves well the way we should have maybe, and not long enough but that really was the crux of the matter and it still faces us today because we are still paying that subsidy partially.”
