In Saudi Arabia, the government is making plans to hold billions of dollars from its oil windfall in a government current account until the end of the year and only then decide how to distribute the money, a shift in its strategy from previous boom periods.
But Nigeria is yet to come to terms with the reality of a post-oil economy as she lives as though the demand for black gold will be there forever. This is as the country keeps borrowing to bridge a budget deficit while also prioritising recurrent expenditure over capital expenditure such as building bridges, hospitals, and rail lines.
Saudi Arabia’s oil exports reached $30 billion in March, the highest in at least six years, driven by a rally in oil prices and rising production, the kingdom’s statistics office said.
According to the International Monetary Fund, the higher revenues helped the kingdom post a $15 billion budget surplus between January and March. It will be one of the fastest-growing large economies in the world this year.
Saudi Arabia’s Finance minister Mohammed al-Jadaan told the Financial Times that the petrodollar surpluses could be used to accelerate Riyadh’s ambitious plans to modernise the conservative kingdom as the government pushes ahead with grandiose megaprojects.
The Public Investment Fund has been transformed into one of the world’s most active SWFs in recent years and become a magnet for global bankers keen to tap into its riches. Its high-profile investments include $45bn in SoftBank’s Vision fund, a $3.5bn stake in Uber and a majority holding in Lucid, the electric vehicle maker.
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Jadaan insisted the state would maintain fiscal discipline as he pledged to break the oil-fuelled cycles of boom and bust that have dogged the economy.
“We need to make sure that we have predictable, sustainable expenditure that does not fluctuate with oil prices,” he said. “Otherwise we will go back to the previous [practices] when you have more revenues you spend more, and when you don’t have revenues you spend less, which is very difficult for the economy.”
He said surplus revenue in the world’s top oil exporter would be used to replenish reserves and be distributed between the PIF, which oversees many of the megaprojects, and the National Development Fund, another state entity that supports private sector investments.
The main beneficiary of the changes has been the PIF, a $620bn fund that is chaired by Crown Prince Mohammed bin Salman, the kingdom’s day-to-day leader.
When coronavirus swept across the world, the central bank transferred $40bn to the PIF from its foreign reserves after the fund went on a spending spree during the global market turmoil in the first quarter of 2020. It has also pledged to invest at least $40bn in the kingdom annually through 2025.
While other countries are investing in life after crude oil, Africa’s largest economy is tottering on the brinks, and the situation appears not to be getting any better as lack of jobs, failing health care, bad roads, insecurity in various parts of the country and an epileptic power supply continues to worsen.
Fourteen years after former President Olusegun Obasanjo and his economic team led the country to exit the debt trap of the 1980 and 1990s, Nigeria is once again wallowing in a second debt trap with absolutely no idea of how to exit, as the latest data from Debts Management Office (DMO) show Nigeria’s total external debts stood at $39.5 billion as of December 31, 2021.
The ECA is where Nigeria pays the difference between its budgeted benchmark oil price and actual receipts. It is supposed to help smoothen out the cyclical nature of oil prices on the domestic budget.
It has however become a kind of slush fund for the executive to appropriate funds as it wishes for largely opaque expenditure.
