As global oil price continue to drop, Nigeria has to raise its excess crude account, which currently stands at $4.1 billion to $5 billion to sustain its economy.
Minister of Finance and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala made this known in Abuja yesterday, 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.
“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,” the minister said.
“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 added.
Okonjo-Iweala, while answering further questions from the lawmakers pointed out that irrespective of whatever oil price benchmark will be approved by the National Assembly, what was important 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 noted.
She reiterated that the country was not broke, but noted that a minimum of about $5 billion was needed to ensure stability, according to her ministry’s calculation.
“The IMF actually calculated 6.3 billion to be maintained in that account,” she supplied.
“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,” the minister explained.
The government had proposed oil benchmark price of $78 for the 2015 budget, but a recent prediction by Goldman Sachs, a leading global investment bank that global oil price will slump to $70 in 2015 still puts the country’s economy at risk.