•Insists Nigeria not broke at Senate hearing
•Reps summon her, Budget Office DG
•Senators may peg oil benchmark at $78
MINISTER of Finance and Coordinating Minister of the Economy, Dr (Mrs) Ngozi Okonjo-Iweala, has said the continuous fall of the oil price will have a negative effect on the nation’s economy.
According to the minister, in an interview with Financial Times of London, on Monday, the unrelenting oil price crash may force the government to merge some agencies.
“We will have to look hard at recurrent expenditure and identify overlapping agencies. When the price is heading down, everyone sees the necessity, but that doesn’t stop them from hating you,” she was quoted as saying.
The minister, who said the country’s buffer line was slim, pointed out that Nigeria had about $4 billion in the Excess Crude Account (ECA), which is $2 billion short of the recommendation of the International Monetary Fund (IMF).
The minister, however, noted that lower oil prices would lead to a stronger incentive for the government to wage war against oil theft, which she said had deprived the country of billions of dollars in revenue.
She added that it would motivate the government to drive through stalled oil sector legislation to stimulate production, saying “that would enable us to pick up quantity to help us cushion on the price side.”
Okonjo-Iweala indicated that the government might have to resort to the ECA in the event that oil price dipped further than the $77.5 per barrel benchmark used for the 2014 budget.
“Our intention is not to run in there and raid it,” she said, adding that “even if prices continue to go down, we can survive sufficiently for two to three months. That is the time needed to get other measures in place.”
Nigeria was in a much stronger position the last time oil price crashed, with about $22 billion stashed away in the ECA. The funds helped the country weather the 2008 global financial crisis with economic output relatively unscathed.
But during the recent boom years, the government has persistently used the ECA, dividing out the proceeds among the 36 states in the federation, which are constitutionally entitled to their share.
Nigeria also holds foreign reserves equivalent to $39 billion. These have come under recent pressure as the Central Bank of Nigeria (CBN) has stepped in to prop up the naira, but still cover nine months worth of imports.
Nigeria’s ratio of non-oil tax revenues to GDP, at 4.5 per cent, is among the lowest on the continent. McKinsey helped South Africa broaden its tax base to the tune of about $3 billion and Okonjo-Iweala believed similar gains were possible over the longer term in Nigeria.
The finance minister added that she was encouraged by an exhaustive data review, which saw Nigeria’s economy overtake South Africa’s as the continent’s largest.
“In an oil country you can never feel at ease exactly. But I feel we can master this situation because we have a diverse base,” she said.
Okonjo-Iweala, however, insisted on Monday that Nigeria was not broke, adding that the country had enormous amount of assets that stabilised it.
At the Senate, while answering questions on the Medium Term Economic Framework (MTEF), being assessed by the Senate Committee on Finance, Okonjo-Iweala said the country was not broke.
According to her, Nigeria was not broke notwithstanding the cash fluctuations in the system.
“Nigeria as a country has quite enough assets and I think anybody inside and outside will agree to that. That is why it is very difficult when people say the country is broke, I say absolutely not, because if we want 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 and everybody is willing to do a few things we should be able to get there,” Okonjo-Iweala said.
She also said Nigeria was in need of $5 billion to retain its current stability, adding that the excess crude account, which has now been depleted to the tune of $4.1 billion, would have to be jerked up to further stabilise the economy.
Speaking on the 2015 budget, the minister said whatever oil price benchmark approved by the National Assembly, it was important that the cuntry adopts a benchmark that would enable savings.
It was leant that the senators were considering the adoption of $78 as oil price benchmark for the 2015 budget.
Chairman of the Senate Committee on Finance, Ahmed Makarfi, however, refused to volunteer information at the end of the meeting, saying “you will know whatever amount we arrived at when we submit our report.”
Meanwhile, the House of Representatives Committee on Public Accounts has expressed serious concern over the state of the nation’s economy and resolved that Okonjo-Iweala and Director General of the Budget Office, Dr Bright Okogwu, should appear before it.
Chairman of the committee, Honourable Solomon Adeola, who dropped the hint while speaking with newsmen in Abuja, claimed that the Federal Government had not released statutory allocations to various ministries, departments and agencies (MDAs) since July.
To this end, he said his committee had summoned the duo to appear before it and explain the reason behind the non- release of the statutory allocaations of MDAs since July
According to him “if you listen to the Minister of Finance as she was talking about budget performance, you will be shocked, because she will give you the picture that the budget, as passed by the National Assembly, is truly performing.
“The last all the agencies of government have got is the second quarter. Many of them have not been cash-backed. To me, the question is: is Nigeria broke?
“If Nigeria is not broke, there has not been any issue of war in the Niger Delta region that constitute more than 60 or 63 per cent of our generated income,” he stated.
Source: Tribune
