Well, when you look at the Excess Crude Account is it not going to increase? But the main problem here is the benchmark. If we have money in the ECA and we are not sure of the management and we are keeping money in the capital reserve at the expense of managing our money at home, then we can say it has its merits and demerits. If the oil price is increasing and we can use it more judiciously domestically to reduce our local debt, then it is fine. But if the oil price is increasing and we are just saying that we are having more money in our reserves when we keep borrowing money, it is not the best.
When oil price increases, we are supposed to have more money but the problem is that most of this money, when the benchmark is low, goes into the ECA which is managed abroad and has no serious audit control. Then, we will be borrowing more money locally while we say we are keeping money. Some can argue that if we have more money in our foreign reserves, it will help our image and the value of the naira which is fine. But our priority now should be how can we resolve our problem locally and make more money available locally and stop borrowing?
We keep borrowing money while the standard of living and the GDP are not improving and then you say you have a lot of money abroad. That is laughable. You will also recall that the Natural Resource Governance Institute recently ranked Nigeria’s Excess Crude Account as the most poorly governed sovereign wealth fund among 33 resource-rich countries around the world. So, the increasing oil price is in itself a blessing but if the way it is being managed does not change, then we will be back to square one. •Otunba Yomi Ogunnusi (Former Deputy Chairman, House Committee on Finance)
Yes, the rising price of crude oil is good for Nigeria’s economy. The more revenue government gets from royalties and taxes the better for the economy. Generally, about 75 to 80 per cent of government’s revenue comes from the oil industry. So, the higher the price, the more revenue accrues to the government. It will be good for the Federal Government that has proved to be very prudent because the money we are making will most likely to be channeled towards the right direction.
I believe that the present administration is focussed in its use of public funds; that implies that the more revenues it has at its disposal, the less pressure it will have seeking to borrow. This simply means it will have money to invest in projects. I believe the rise in oil prices is good for the economy, but with a caveat. Let us seek to depend less on oil and gas because the price of oil especially is not stable; it may crash again. We do not want that to happen so we must manage what we get from the current price regime and hope for the best.
The (current) rise in prices is based on the collaboration between Russia and other oil producing countries with OPEC. If they can sustain the price at this level and maybe improve on it, then it will be good for Nigeria. The oil price rise should not discourage us from diversifying the economy. It should rather help to diversify the economy because in the past, the money was just being shared into people’s pockets and people were not thinking outside the box. That was why the economy was not diversified.
Now that we have suffered, I think the money that will come in will be enough to build infrastructure and provide dividends of democracy as well as diversify the economy. •Mr. Sunday Babalola (Technical Advisor, Green Energy International Limited)
The rising price of crude oil is bad and good. It is bad because it can give us some false sense of financial security such that the ‘free money’ does not shift attention away from the efforts to diversify our sources of revenue.
It is good because the country needs money now to reduce borrowing to finance annual budgets and make investments in economic growth and employment enhancing ventures that will take us fully out of recession.
This is because the present low level of growth does not guarantee escape from sliding back into recession. More importantly, the money should be used to finance capital projects like power and road/rail infrastructure rather than financing the foreign exchange market as the Central Bank Nigeria is currently doing.
When there is growth in the real sector through infrastructure development, the exchange rate will appreciate naturally rather than present artificial management. •Prof. Sheriffdeen Tella (Department of Economics, Olabisi Onabanjo University, Ago Iwoye, Ogun State)
Obviously the rising crude oil price should have a favourable impact on the Nigerian economy. Granted that we still import petroleum products and a sustained oil price rise could threaten the domestic pump price of fuel, the economy will be better off in the end.
First, we should ensure that our oil revenue projections are met, barring oil output disruptions and enhances the success rate of budget implementation. Crude oil price well in excess of budget reference price could reduce the actual budget deficit, enhance the country’s credit worthiness and is an attraction to foreign investors.
Since the bulk of our foreign exchange comes from crude oil sales, it also means our external reserves will grow placing the Central Bank of Nigeria in a stronger position to defend the naira and ensure stability in the forex market. The major reason the country went into recession was the sudden and persistent drop in crude oil price in the absence of fiscal buffers. I think bitter lessons have been learnt.
This time round, we should not only be saving for the rainy day but more importantly, seize the opportunity of favourable oil revenue to diversify away from oil. •Dr Uche Uwaleke (Head of Department of Banking and Finance, Nassarawa State University)
I see the rising price of crude oil at the international market as a blessing for our economy because this is our major source of foreign exchange. I can say Nigeria is a mono economy, although we are trying to diversify our sources of revenue now. With the rising price, government will generate more money which I think should be used to cushion the effect of the hardship on the people.
They should also use the money generated for infrastructural development which will boost the economy and make life better for the majority of the people. With the new price, I believe some of the non-performing loans given out by our banks will start performing.
But to benefit more from this rising price of crude oil, we must look for more countries to buy crude oil from us and make sure that we address the threat to oil facilities by Niger Delta militants. If we can’t produce more and export more, we won’t be able to benefit from this windfall. I call it a windfall because the price now is much higher than what we used as benchmark for our budget.
We also need to invest more in building refineries so that the volume of refined products which we import will come down drastically or better still we should ensure that we no longer import petrol and other petroleum products.
The rising price is also a double-edged sword, If we continue to import large volume of refined products, the gain will be lost because Nigerians will have to pay more for petrol, diesel and other products because we are not refining here in the country. But we will make more gains if we export more crude, refine crude oil for our local consumption and even export refined products to other countries. That is the time we can maximise the opportunities presented by this situation. •Mr. Shina Amoo (Chairman, Independent Petroleum Marketers Association of Nigeria, Ore Depot)
Compiled by: Eniola Akinkuotu, Samuel Awoyinfa, Success Nwogu, Ifeanyi Onuba and Femi Makinde
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