ON a day the price of crude oil topped $45 a barrel, touching a record 21-year high of $45.04 in New York Trade, there were indications yesterday that state governors might have lost the agitation for the immediate sharing of the excess funds from crude oil sales.
The Federal Government said while negotiation was on with the governors and other stakeholders on how much of the excess funds should be shared, part of the proceeds would still go into Budget 2005.
The price of crude has been hovering around record-breaking peaks after unrest in Iraq halted production. By 1515 GMT yesterday, US crude had eased back to $44.72. In London, Brent crude was down 11 cents at $41.45 a barrel.
Companies such as British Airways were feeling the effect of higher fuel and raw material costs, while there were worries that consumers might spend less. The price rise was also the result of the closure of some production in the Gulf of Mexico by Shell, ahead of a feared storm.
lExcess crude oil funds for 2005 budget— FG
Addressing newsmen in Abuja on the controversial excess funds from crude oil, Finance Minister, Dr. Ngozi Okonjo-Iweala, said the final decision on the proportion of the funds to be saved and that which would be spent would be determined after the on-going wide consultations with stakeholders. N327 billion is now held in the account.
Her words: "I have been speaking on the need to develop a commodity-based fiscal rule which will enable us make budgets on a measurable forecast so that we can save whatever is above the forecast and then we can fall back on the savings when prices crash. What we are doing now is consultations on what percentage of this (excess crude oil revenue) should be saved.
Whatever will not be saved will go into 2005 budget. Consultations are going on between the federal and the state governments on the best way to manage these funds from excess crude in a sustainable way that will enhance the interests of the Nigerian people.
"Specifically, the dialogue will determine the proportion of the funds that will be saved for what purpose and set out criteria under which it can be spent. A key concern would be to set aside a proportion to cushion the economy from the negative effects of oil price volatility as well as financing of infrastructural projects. At the end of the day, the results of these consultations and negotiations will be captured in the Fiscal Responsibility Bill and presented to the governors that have demonstrated a commendable spirit of partnership on this issue, and there is every indication that the dialogue with them and other stakeholders will produce positive results," she said, adding that she was working vigorously at ensuring the passage of the Fiscal Responsibility Bill.
That Bill would determine the behavioural pattern of public officers at all levels and make it mandatory for governments at all levels to publish both revenue and expenditure for all Nigerians to see. When passed into law, the Bill will make it possible for public officers who run foul of it to be jailed, particularly, when misappropriation of public funds is involved.
The minister admitted that inflation, which she blamed on the high cost of crude oil and the high interest rates in the country, remained great challenges for her Economic Team but that it would continue to work at measures to reduce the rate which has hit about 19.5 per cent until a figure close to a single digit was achieved. "Inflation continues to be a problem. This high rate is due mainly to the current high level of oil price on the international market as well as other cost-push factors. High interest rate is also a key macro-economic challenge," she said.
On the raging controversy over the N25 billion capital base for banks, the minister said the reactions were understandable because of the policy measure implications for the banking industry and the economy as a whole. She, however, insisted that there was no going back on the figure, as according to her, the number of banks was expected to significantly reduce from the present 89.
Her words: "There have been many reactions to the recent decision of the Central Bank of Nigeria (CBN) to increase the minimum capital base of banks from N2 billion to N25 billion. The reactions are quite understandable because the new policy has far-reaching implications not only for the individual banks faced with the stark choices if they must survive, but also for the landscape of the industry. Certainly, the number of banks will drastically reduce from the current 89.
"The CBN decision to encourage consolidation within the industry may be a bitter pill for some but it is, in the final analysis, a sound one which will strengthen the industry and the economy in the long-run. Consolidation will, for one, make available funds for investment in the real sector of the economy. The current situation where banks provide little or no capital for investment is not in the nation’s interest because without the factories running, there can be no jobs to take our teeming youths off the streets.
"To that extent, the strength of the banks has fundamental implications for the health of the economy as a whole. This is one of the many reasons why the new policy is fundamentally a good one which deserves the support of all Nigerians to make it a success," she explained.
Dr. Okonjo-Iweala said the nation’s current external reserves had risen to $12 billion, while foreign debt was about $32 billion. Domestic debt has also remained at N1.3 trillion. She said the Federal Government had made it a matter of policy not to borrow from external creditors and that the $42 million facilities which it has obtained from the World Bank were all concessionary credit which attracted 0.5 per cent commitment fee and a service charge of 0.75 per cent.
The minister said part of the reform agenda of the present government was the operational review which has been completed on COJA and the Export Expansion Grant (EEG) which were said to have resulted in the indictment of the management of COJA as well as the suspension of the EEG.
