Last Tuesday, the Minister of Finance and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, addressed a press conference to allay the fears of Nigerians that the nation is broke. While at it, she said the government was putting in place measures to address any possible fall out from the falling prices of crude oil. Meanwhile, a week before the press conference, the Federation Account Allocation Committee, FAAC, could not meet to share the usual monthly revenue that accrued to the federation account on the ground that there was no money at the time to share. The experience triggered a lot of reaction. Some of which were that the nation was broke.
The minister did not address the issue of why the FAAC could not meet and share the revenue that was due to the three tiers of government. While it may be true that Nigeria is not broke in the real sense of the word, the country is cash strapped. The nation’s cash flow is facing some challenges as there is usually a time lag between receipts of sales proceeds from oil and when it was sold.
The gross revenues received in the federation account have steadily declined to N503billion in September from N602billion in August and N630billion in July. These revenues after the deduction of fixed collection and other costs become the net amount for distribution, on which the derivation principle is applied in favour of the oil-producing states before the three-way split according to the set formula. The three tiers of government receive additional distributions from; VAT receipts, the payment of arrears by the NNPC and the Subsidy Reinvestment and Empowerment Programme. Last week’s meeting did not appear to have been straightforward. Any decline in monies for distribution is unwelcome since all states with the exception of Lagos receive the greater part of their revenues from the FAAC. CBN data for 2012, the most recent available show that internally generated revenues accounted for just 15 per cent of total revenues on an aggregate basis.
The decline in September was attributed by the accountant-general of the federation to lower oil prices and production. He also noted a fall in non-mineral receipts because some prominent companies had paid their taxes the previous month (August). A distribution from the excess crude account of $2.7billion had been approved. Yet Okonjo-Iweala is insisting that the balance in the ECA remained $4.1billion.
Every Nigerian old enough to know has come to understand that whenever there is global economic recession and the prices of crude face southward, the Nigerian economy is bound to face serious crisis, cash flow inclusive. No thanks to Nigeria’s continued dependence on oil revenue and the lazy attitude of government functionaries at making policies that have made Nigeria depend solely on oil revenue. In the last three months, crude oil price has fallen from about $110 to $85.
When in 1982 oil prices crashed, the Shehu Sagari led federal government denied that the economy was heading for the rocks. One Professor Onitiri was the instrument the then federal government used to disabuse the minds of Nigerians that the economy was in danger.
Chief Obafemi Awolowo had in a published letter to the president said “My dear Shehu, … the ship of our nation is sailing fast across a huge rock, and unless you as a leader courageously and swiftly take action to stop and redirect it to a safe shore, the result will be catastrophic. The magnitude of which has never been recorded in the annals of human history…” Awolowo aired his view as a concerned citizen of the Republic. But the National Party of Nigeria led government under Alhaj Shehu Shagari never listened to Awolowo. The socio-political and economic structures of the country ‘cracked’ and began to disintegrate. By 1983 when public office holders were booted out by the military juntas, corruption, inordinate ambition, intolerance of divergent political views especially from political opponents, deportation of legal citizen had already been established as a legacy. The rest is no economic history
Can the minister tell Nigerians how much is in the excess crude account after the $2.7 billion approved for sharing is removed? How will this government fund the budget if prices of crude oil crash beyond the budget bench mark? The 2015 budget is in the works, very soon the legislature and the executive will lurk horns on what will be the appropriate crude oil bench mark to structure the nation’s finances on. Nigeria went through this experience before 2003 when there was a fall in the price of crude from $140 to about $35 or $38 between 2003 and 2008. The Nigeria economy remained stable then because Nigeria had accumulated about $22 billion in the Excess Crude Account. It is not the same now. The question to ask the minister is $22 billion not much more comfortable than less than $5 billion in the excess crude account today?
If this government is planning to introduce another austerity measure as was in 1983 by cutting down on expenditure, it only means one thing, the execution of capital projects will have to stop. Because the government has to pay its workers and other recurrent matters have to be fulfilled. Which expenditure is this government going to cut down on? Nigerians are not deceived; this government facing an election year knows that it cannot retrench workers as that will be political suicide.
Okonjo-Iweala in floating a fathom kite said “I want to assure Nigerians that we are putting in place contingency plans so that our economy remains stable? Right now, we have fluctuations in the price of crude oil and when that happens, it means that the money that comes into the coffers is a little bit small. Does that mean that the country is broke? If we are not able to pay salaries to people or meet other obligations, then we can say the country is broke but we have not got there. Nigeria is not broke”.
Yes, not yet, it has not gotten there yet, but getting close to it. Nigerians must prepare for the worst scenario by cutting down on what is not immediately needed and save for the raining day. For certain, the raining day is knocking at the door post. It may take many unaware.
