28 October 2014, Lagos – ABUJA—MINISTER of Finance and Coordinating Minister for the Economy, Dr Ngozi Okonjo-Iweala, said yesterday that for Nigeria to sustain stability of its economy, it has to raise its excess crude account, which currently stands at $4.1 billion to $5 billion.
This came as indications emerged that the Senate may peg oil benchmark in the 2015 fiscal year at $78 per barrel as against $77.5 benchmark in the ongoing year.
Dr. OKonjo-Iweala, who spoke in Abuja, when she appeared before the Senate committees on Finance and National Planning, during consideration of the 2015-2017 Medium Term Expenditure Framework, MTEF, as a working document for the 2015 Budget, also dismissed claims that the country was financially bankrupt in spite of some cash fluctuations it was experiencing.
“Nigeria as a country has quite enough assets and I think anybody will agree to that. That is why when people say the country is broke, I say ‘absolutely not’ because if we wanted to mobilise any of our assets to cover, 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. We are able to manage ourselves well while everybody is willing to do a few things and we should be able to get there,” she said
While answering a question on whether the 2015 budget would be a workable one or not, based on its proposed parameters in the MTEF document, the minister said irrespective of whatever oil price benchmark will be approved by the National Assembly, the most important thing was for the country to arrive at a price that will give leverage for enormous savings against times like this.
“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 crises of 2008, when oil fell to 38 to 40 dollars per barrel, even worse than what we have now. At that time, we still saved up quite a lot of money, as such we were able to draw at least for a quite a few months to carry the economy.
She added: “We have calculated that in order to help us regain this stability, we need a minimum of about five billion dollars and anything about that is good. The IMF actually calculated 6.3 billion to be maintained in that account.
“It helps to cushion our exchange rate so if we go and withdraw it abruptly beyond that amount it causes a problem and you know we went down to two billion last year and then we built it up to nine billion and there was insistence that we must share which made it to come down to $2 billion but we later at least built it back to $5 billion. Right now we are at 4.1 billion”.
Although, none of the committee members at the meeting could disclose the benchmark arrived at during the session, Vanguard gathered that members of the Red Chamber in the two committees opted for $78 oil price benchmark.
In the 2015-2017 MTEF, the executive had proposed the $78 oil price benchmark for the 2015 budget.
The minister told the committees that: “Every country faces a certain amount of risks and uncertainty at different times, so it is how you manage it that is a problem.”
“Are we prepared with a list of measures that can help us manage any of these outcomes? Have we thought through the various scenarios to say if anything happens? Yes, at the present time, we are reasonably stable compared with other countries but if those risks materialize, we need to have action in order to keep the economy stable.
Asked by the committee whether the 2015 budget was workable, Okonjo-Iweala responded: “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 whether it is going to go.”
*Johnbosco Agbakwuru & Joseph Erunke – Vanguard