Ngozi Okonjo-Iweala, the coordinating minister for the economy and minister of finance, signaled on Sunday of government’s plans to cut down spending and ramp up non-oil revenue to shield the economy against possible impact from today’s raging uncertainties in the global economy.
Okonjo-Iweala also signaled intention of government to rapidly strengthen the excess crude account (ECA) as buffers to guard against shocks as advised by the International Monetary Fund (IMF) during the annual meetings of the World Bank and IMF here in Washington DC.
Nigeria is currently witnessing significant drop in revenues due to oil output shocks occasioned by regular theft. The situation is even heightened by recent downward trend of oil prices which today had dropped from over $100 per barrel to slightly above $80 per barrel in the global market.
Addressing journalists attending the annual meetings in Washington, the coordinating minister said it is now critical to build buffers through the excess crude account (ECA) which is almost depleted, even as she doused fears of economic collapse.
According to her, the Nigerian government was estimating a buffer of $5 billion, but that the IMF estimates that Nigeria would need a buffer of $6.3 billion to be strong enough to weather shocks. But right now, the buffer stands at $4.1 billion.
“So we will look at our buffers and see how we strengthen that,” Okonjo-Iweala stated.
She told journalists that the Nigerian economic managers are now reviewing the situation to know the appropriate mix of contingency strategies to adopt as she completely ruled out any possible external borrowings to make up for shortfalls and keep the economy afloat.
Her words, “First, we have to review the dimensions of the situation and we are beginning to do that.
“With the team here, the DG budget, the central bank, we are looking at various scenarios.
“We are running our models in terms of the oil price shocks and so on, even quality shocks.
“And when you look at contingency scenarios, there are three ways you can manage them.
“But we are not planning going outside to get resources at this moment.
“That is the pride that we have had. Ever since we have been managing these resources, we have not had to do that and there are no plans now either.
“We have to look at the revenue and expenditure side to see how we prepare.”
The minister, however, noted that from the non-oil revenue side things were looking up already.
“Because we were a little bit ahead of the curve, in trying to bring on some extra help to FIRS, we gave a target of $500 million which is about
N75 billion to the FIRS backed by McKinsey that is helping to strengthen their capacity to improve audits and plug leakages.
“And I am happy to say of the N75 billion target, they have already hit N44 billion of additional revenues in July.
“So, at least we will be able to increase our revenues but that has actually helped us,” she stated.
She said that the fact that government was able to ramp up on non-oil revenues collection at a time when oil quantities were a little lower, the relevant agencies would be encouraged to do more because that would help.”
The minister said that there has to be understanding with the government because “this is not a situation created by anyone but it is something that has happened out of our control.
“And that is something that we have been saying for quite sometime that we have to be very careful to build up the buffers, which is the excess crude account so that when we experience a shock, we can use it,” she stated.
“We are working on those plans now. There is no cause for alarm. We think that as of now, we are on top of the game and our ability to manage it.
“So let us wait and see but the signal we are sending is that we have to get very realistic in the country about our ability to spend. We have to manage things in a very sensible manner,” she assured.
Godwin Emefiele, governor, Central Bank of Nigeria (CBN), noted that on the monetary side, the regulator will strengthen regulations to strengthen the financial system to be able to withstand any shocks.
ONYINYE NWACHUKWU
