28 October 2014, Abuja – The Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, on Monday disclosed how insistence by the states to share the money in the Excess Crude Account (ECA) resulted in the depletion of the account from $9 billion to $2 billion last year.
Okonjo-Iweala, who made this disclosure while defending the 2015-2017 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Policy (FSP) before the Joint Senate Committee on Finance and National Planning, said for the economy to remain stable, the ECA which she said later rose from $2 billion to $4.1 billion needs to be further raised and stabilised at $5 billion.
She insisted that Nigeria was not broke despite obvious cash fluctuations in its revenue stream, arguing that the nation possesses sufficient resources but only requires prudent management and mobilisation of its assets.
“Nigeria as a country has quite enough assets and I think anybody inside and outside will agree with that. That is why it is very difficult when people say the country is broke, I say absolutely not because if we wanted to mobilise any of our assets to cover for any shorfalls, we could do that. Of course it could take a little bit of time.
“However, that does not mean that we cannot have some cash flow fluctuations. We just have to manage it because we have an economy that is reasonably self-sufficient. If we are able to manage ourselves well and everybody is willing to do a few things, we should be able to get through tough times,” she said.
On the proposed 2015 budget as captured in the MTEF and FSP, the minister said whatever oil benchmark is approved by the National Assembly must provide the basis for enormous savings in view of the economic uncertainty of the moment.
The federal government had proposed a 2015 budget estimate of N4.8 trillion based on $78 per barrel oil benchmark and exchange rate of N160 to the dollar.
“My belief is no matter what is settled on at this point in time, what is pleasing and that brings us all together is the realisation that what we were trying to say a few years ago has happened and it is happening in front of us and all of us need to come together to find a solution. Whatever the decision will be, even if we agree on another benchmark, we still need measures to be in place because we have no idea on whether the oil price will continue to drop or go up.
“So I think we need to prepare ourselves in two or three scenarios and we can share some of the scenarios that we have been thinking about that will guide our development of those contingency measures.
“I think that the excess crude account was built to be able to cushion us at times like this, when we have some kind of difficulties and I think it played that role to perfection during the crisis of 2008, when oil fell to $38 to $40 per barrel, even worse than what we have now.
“At that time, we had saved up quite a lot of money and as such we were able to draw on it at least for quite a few months to sustain the economy.
“I was very proud that time, sitting at the World Bank, as Nigeria was one of the few countries that didn’t come to the International Monetary Fund (IMF) and the World Bank for urgent support.
“So you need a certain amount there to cushion such shocks any time. Before you spend the rest, you need a certain amount and I think what happened even after the need for augmentation, the amount continued to be shared; that was where the mistake was made and the habit set in.
“And when we do that, it means that during times like this when you actually need the money you don’t have enough. We have calculated that in order to help us regain this stability, we need a minimum of about $5 billion and anything about that is good. But the IMF actually recommended $6.3 billion to be maintained in that account,” she explained.
– This Day