By Amechi Ogbonna
Despite its current status as Africa’s largest crude oil producer, Nigeria has been listed as the only crude oil exporting country with the lowest Sovereign Wealth Savings often created to hedge against volatility in the international oil market.
According to the Nigerian Extractive Industry Transparency Initiative (NEITI), the country’s $8 Sovereign Wealth Fund per capita can best be described as one of the lowest, better than only that of war-torn Iraq and crisis-hit Venezuela, both of which are members of the Organisation of Petroleum Exporting Countries (OPEC).
Executive Secretary of NEITI, Waziri Adio, who made these observations yesterday in an Occasional Paper series titled: “The Case for a robust oil savings fund for Nigeria” presented in Abuja, to seek ways of dismantling the obstacles to developing a ‘functional natural resource revenue savings in Nigeria lamented the absence of a functional stabilisation fund to insulate the country from the shocks of volatile oil prices at the international market. He stated that the balance in the three funds currently in existence (0.5 per cent stabilisation fund, ECA and NSIA), was less than $3.9 billion, which is not sufficient to fund 20 per cent of the N7.44 trillion 2017 federal budget.
“As at June 2017, there was less than $3.9 billion in all of the country’s oil revenue funds. This is only enough to finance 16 per cent of the current (2017) budget of N7.44 trillion,” He said.
Apart from Nigeria’s current $1.5 billion sovereign wealth fund being ranked as one of the lowest in the world, the NEITI boss said the country’s 10 per cent ratio to annual budget was also one of the worst.
He said with Nigeria facing gloomy prospects of depleting oil reserves, it was time for government to take bold steps to avoid the looming danger against the future of its economy by paying attention to demands for a stabilisation fund for the country.
“Nigeria’s proven oil reserves as at 2015 was 37 billion barrels. At current level of production, the reserves are projected to last for 40 years, counting from two years ago.
“Meanwhile, in the last 40 years of production at less than current levels, Nigeria extracted about 31 billion barrels of its oil reserves. From 1980 to 2015, Nigeria exported crude oil worth about $1.09 trillion
NEITI’s presentation also underscored the need to remove bottlenecks to a functional sovereign wealth fund, (SWF) to provide cover against shocks during periods of instability in global oil prices,
.“Nigeria typically responds to high oil prices with equally high, but manifestly unsustainable, level of consumption. The absence of sufficient savings left Nigeria severely exposed when the price of oil, Nigeria’s main source of government revenues and foreign exchange, started to plunge in 2014,” Mr. Adio said.
He said Nigeria must sort out all lingering issues affecting the setting up of stabilisation funds, like most resource-rich countries, to protect the country from the negative impact of periodic volatility of crude oil prices, even as he identified the country as one of resource-rich countries of the world with the lowest natural resource revenue savings.
But in order to change the status quo, the transparency and accountability agency urged the two tiers of government to demonstrate a strong political will to establish a system that promotes the culture of saving excess revenue during periods of high oil prices.
This was as it also urged the federal and state governments to approach the Supreme Court to seek the immediate resolution of issues of legality and constitutionality of their remittances to the excess crude revenue account, ECA, and the Nigerian Sovereign Investment Authority, NSIA, funds.
NEITI called on government to initiate a process in the National Assembly to amend Nigerian constitution to determine the legal status of the ECA and the SWF fund, urging government to take steps to consolidate all oil revenue funds in the country into the NSIA fund, while strengthening appropriate guarantees on transparent and accountable governance practices to allay the fears of the various interest groups.
Besides, NEITI wants the government to make it a habit for all tiers of government to save, whether during periods of high or low oil prices, to provide regular buffers for investments, to the future benefits of the people.
In addition, the agency stressed the need for government to remove its expenditures from oil revenues for a novel system that thrives on prudent macro-economic policies and programmes.