Updated December 3, 2012

The Coordinating Minister of the economy and Minister of Finance, Ngozi Okonjo-Iweala on Monday said that the cost-cutting of the Goodluck Jonathan’s administration has helped restore Nigeria’s Excess Crude Account (ECA) to some $9 billion in oil savings, or more than double what it was a year ago.

Mrs Okonjo-Iweala was addressing delegates in Abuja at the annual Nigerian Economic Summit, whose themes include reducing the high cost of governance in the country.

“Before you can even look at the centres of the economy and trying to change them and create jobs, you must have macro-economic stability,” the Minister said. “We have introduced a measure of fiscal discipline.”

“The fact that (forex) reserves are climbing now is not a miracle. It happened because of proper fiscal management. We have about $9 billion in the excess crude account. Last year it was $4 billion, so it’s more than doubled,” she added.

The figure is still lower than the $20 billion it had in it in 2007, but this was reduced to $3 billion when Mr Jonathan took office in early 2011, despite a year of record high oil prices.

And some of it would have to be used to pay for the latest round of Nigeria’s costly fuel import subsidies, she said.

Economists have cautiously welcomed Nigeria’s improved savings level, but caution that there is nothing in place to stop it being reversed, as in the past.

“There’s been some modest accumulation of fiscal savings, but put it in context: even $9.6 billion, as we estimate it, is only 3.7 percent of GDP,” said Standard Bank’s Samir Gadio.

“Compared it with UAE (Emirates) or Saudi Arabia, where it’s 65 percent. It may be improving but its well behind the curve.”

The Sovereign Wealth Fund (SWF) launched this year would in theory help Nigeria better manage its oft squandered oil funds, by putting them out of the reach of its political elites, but powerful state governors who want more money to spend are blocking attempts to transfer the ECA into the fund.

“Without the SWF there’s no sustainable basis for savings. The risk is that as we approach elections in 2015, the ECA could be depleted quite rapidly,” said Mr Gadio.

Disputed budget

The finance minister also faces a showdown in parliament over the government’s latest budget, with some lawmakers saying too much money is being set aside as oil savings when the country needs more spending on things like infrastructure.

President Jonathan’s N4.93 trillion budget plan for 2013 assumes oil prices at $75 a barrel oil prices, but many legislators want this inflated – especially with prices now hovering around $112 a barrel.

Oil earnings over the benchmark price get deposited into the ECA, which is used to save for future generations.

Critics say running Nigeria’s government still saps too much of the budget – Mrs Okonjo-Iweala said the share of such recurrent expenditure had been reduced to 68.8 percent in next year’s budget, from its current 71.47 percent in this year’s.

Investors and rating agencies have welcomed Mrs Okonjo-Iweala’s austerity drive, with Standard & Poor’s the latest to upgrade Nigeria’s debt to BB-, with a stable outlook.

One major fiscal headache remains the motor fuel subsidy.

President Jonathan attempted to scrap it in January, but a week of strikes and protests forced him to partially reinstate it.

Since then, a parliamentary inquiry has uncovered multi-billion dollar fraud in the subsidy’s administration, and the government has exposed subsidy claims to stronger checks.

Mrs Okonjo-Iweala said that N232.2 billion of claims had been rejected so far. There is speculation President Jonathan will try to remove the subsidy – which many Nigerians see as the only benefit they get from living in an oil-rich state – next year.

Speaking at a panel in the economic summit, Vice President Namidi Sambo said it would depend on what Nigerians thought.

“We’re a democracy. Our economic policies, however well designed, have to be accepted by the public,” he said. “I believe Nigerians will come to see that deregulation is right.”

https://www.channelstv.com/2012/12/03/oil-savings-double-in-one-year-hit-9-billion-okonjo-iweala/

Why is Nigeria still borrowing?

PDP and Jonathan squandered the oil boom then

Iyaebe:
Why is Nigeria still borrowing?

Today crude is at $100 aswell, where is the savings ?, Buhari can't even pay off loans.

Iyaebe:
Why is Nigeria still borrowing?

Because

1.Seriously, we don't produce enough oil to earn the kind of revenue we need to satisfy our needs.

UAE produces 2.4billion barrels of crude, which we are capable of really. But UAE has 11 million people...while we have 211 million people. Do the math....

2.Oil prices never favour us. Our fiscal breakeven oil price is as at 2021 $133. Meanwhile, even under GEJ, oil rarely hit $130.

3.We depend on oil. Revenue from other sources...not much. Revenue from taxes...very very low. Revenue from industries....nothing.

Esseite:


Today crude is at $100 aswell, where is the savings ?, Buhari can't even pay off loans.

1.It just hit $100

2.Buhari is paying off debts, as soon as the money comes in (which is why we won't see any benefit from increased debt.). Oil rich countries run in boom-bust cycles. When it is boom time, we spend heavily, when it is bust, we pay of the debts, and get into more debt to live above water....and so on

3.GEJ had oil prices above $100 from 2011-14.....and we found it unable to save because.......the subsidy things.(WHILE Ghana cut subsides in 2011, we raised them, and lost money, including savings.)

4.The truth is, the fact that Buhari is looking at crude oil prices is an evidence of failed economics on his part...why didn't he diversify.

Baawaa:
PDP and Jonathan squandered the oil boom then

Largely because in 2012, Nigerians said no to subsidy removal...despite the fact it was costing us billions then. So, we kept it, and had nothing in the bank when oil prices crashed...meaning Buhari had to bring inrestrictive forex polices...which are still in place.

(Same thing happened in the early 1980's...a t the end of the 1973-82 oil boom. Deja vu)

backbencher:


1.It just hit $100

2.Buhari is paying off debts, as soon as the money comes in (which is why we won't see any benefit from increased debt.). Oil rich countries run in boom-bust cycles. When it is boom time, we spend heavily, when it is bust, we pay of the debts, and get into more debt to live above water....and so on

3.GEJ had oil prices above $100 from 2011-14.....and we found it unable to save because.......the subsidy things.(WHILE Ghana cut subsides in 2011, we raised them, and lost money, including savings.)

4.The truth is, the fact that Buhari is looking at crude oil prices is an evidence of failed economics on his part...why didn't he diversify.

Oil above $100 during GEJ was just for a few months.. gets your facts right, and yea it just hit $100, while Buhari just wrote for another loan. Are you sure we are paying off loans or incurring more despite the $100 crude price?

Esseite:


Oil above $100 during GEJ was just for a few months.. gets your facts right, and yea it just hit $100, while Buhari just wrote for another loan. Are you sure we are paying off loans or incurring more despite the $100 crude price?

No it was for 3 years. 2011 to 14

I know because i was paying attention to the price. Im not lying and i am not here to attack gej or buhari.

The main problem of Nigeria is we depend on oil for most of our revenue, which is why i say buhari ran a poor economy not because he had low oil prices but because he did not diversify us away from oil. Same for Gej and fod every leader since Gowon hooked us up to oil in 1973.

Below : brent crude oil prices . See 2010 to 15