But the news is not cheery. The country is going broke, with only $3.6 billion left in the excess crude account, Finance Minister Dr Ngozi Okonjo-Iweala said.
The Coordinating Minister for the Economy (CME) spoke when she met with members of Civil Society Organisations (CSOs) in Abuja to discuss the government’s transformation agenda.
In her view, governors’ insistence on sharing every revenue is unhealthy for the country.
With just $3.6 billion left in the excess crude account after withdrawals to augment monthly allocations to the three tiers of government, Dr Okonjo-Iweala warned that “should the price of oil drop, we have no cushion”.
“The $3.6 billion in the excess crude account is not enough to sustain Nigeria for any period of time,” she said.
Following the governors’ determination to share everything that comes into the federation account as stipulated by the Constitution, the minister wondered aloud: “how many governors have saved any money? They should understand the dynamics.”
While she admitted that some governors have saved some money from their states’ allocations, Dr Okonjo-Iweala noted that “if we don’t have arguments of constitutionality and fiscal federalism, we will progress and we need to address this”.
By this, she meant that there should be less talk about what the Constitution says and the desire for fiscal federalism and concentrate on saving for the future.
But, advocates of fiscal federalism insists it should be no problem, if the Federal Government agrees to reduce its share of the revenue allocation and allow the states and local governments, which carry bigger loads to have more cash.
The minister recalled that “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,” she said.
The Federal Government, Mrs Okonjo-Iweala said, “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.”
She went on: “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.”
To her, 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.”
Nigeria, she said, is not leaving in isolation and it is a part of a global community that depends on a product sold internationally. The revenue that comes from the sale of this single product (crude oil), she added, comes periodically, stressing that “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 it’s being experienced in recent times.”
Mrs Okonjo-Iweala argued that since “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,” she said.
“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 noted that the years between 2003 and 2007 were the only steady time in Nigeria’s recent economic life because it was when Nigeria saved and after the period (2008-2009), when the price of oil crashed, the government was drawing from savings to pay bills.
The minister dropped another bombshell when she disclosed that the ministry does not know how much is spent on subsidy. What the ministry does, according to her, “is to get the accountants to verify what the importers present as their imports and pay them”.
She said there was no way her ministry could accurately determine how much petroleum products are imported and how much are actually sold in Nigeria.
According to Mrs Okonjo-Iweala, “what we are doing is subsidising other countries”. “We have genuine importers, but must separate them from the smugglers who ferry petroleum products to other countries after claiming to import the products to Nigeria,” she said, wondering if there is a way of stopping the smugglers.
Mrs Okonjo-Iweala said in 2006, N256 billion was spent on subsidy, but over the years, this has skyrocketed to the extent that governors became worried that they were being short-changed.
The heavy deduction for subsidy, she said, was what resulted in the November and December 2011 refusal by governors to collect their allocations, until the subsidy was removed.
Giving an insight into what to expect from the report of the subsidy removal probe by the National Assembly, the minister said: “when the report comes out, we will know those who are genuine importers and those who are not”.
To her, the government “did not explain itself well and did not wait long enough before removing the subsidy in January” – an admittance that the government acted in a hurry. Despite the protest and the government’s conceding to the wishes of the people, Mrs Okonjo-Iweala said, the government is still paying subsidy, but partially.
She also admitted that the economy that is growing at 7.9 per cent and yet claims to be creating jobs is not inclusive. She attributed this development to “challenges”, stressing that jobs must be inclusive and target rural areas.
According to her, we are “growing at 7.9 per cent with no power. You can imagine what the growth will be like, if power was stable.”
On the erratic electric power situation, Mrs Okonjo-Iweala said privatising the Power Holding Company of Nigeria (PHCN) should be fair and transparent and not under the table. She said: “Government has decided to get away from what it has not succeeded in doing in the past. Power that we get is heavily subsidised. Investors have insisted that tariff must match cost of producing power. They will not purchase the companies, unless the government announces the new tariff, but government is scared of the backlash from the masses, if it announces the new tariff.”