With oil prices in the international market continuing to head south, the federal government has said there is no cause for alarm, as contingency plans are already being put in place to avert shocks to the economy.
The International Monetary Fund (IMF) also at the weekend ruled out any major shocks to the Nigerian economy on the basis of the new oil policy of the United States that brought to an end the importation of oil from Nigeria.
Although the 2014 budget is predicated on an oil benchmark of $77.50 per barrel, the price of the commodity, which is Nigeria’s dominant revenue earner, is in the middle of one of its steepest slides since the global financial crisis, with prices plummeting about 18 per cent from $105 per barrel in mid-June to $88 per barrel last Friday.
Briefing journalists at the end of the 2014 IMF/World Bank annual meetings in Washington DC yesterday, the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, said the meetings had been very successful and rewarding for Nigeria as they provided the economic management team more perspectives on how to manage the nation’s economy better.
But the minister said although contingency plans were being mulled to prevent shocks to the economy following dwindling oil prices, borrowing from the IMF and other multilateral institutions was not in the bargain for now.
She stated that the IMF had warned that the world faces an uncertain global economic outlook, prompting a downgrade of its global growth projections for the second time this year, with its Managing Director, Christine Lagarde, saying that the global economy is at a point of “mediocre growth”.
The minister said although the United States’ economy has rebounded and is doing well, the case is different for the Euro zone, which is stagnating, even as Japan as well as some frontier and emerging economies are not impressive.
Okonjo-Iweala said the case was however different for low income and frontiers economies, adding that the IMF and World Bank had advised low income countries, particularly those dependent on commodity exports to evolve a right mix of contingency plans to avoid exogenous shocks.
The minister said this was why she had continued to emphasise on building the buffers through the Excess Crude Account (ECA).
The World Bank had recommended that Nigeria needs a buffer of about $6.5 billion, but the ECA currently stands at about $4 billion.
“We have to be careful to build the buffers. We need $6.5 billion, according to the World Bank. But we have about $4 billion now,” the minister said, adding that besides building the buffers, the federal government would pursue its economic reforms and restructuring plans.
Explaining how the contingency measures will be configured, the minister said three scenarios, including modules that would consider quantity shocks, would be tinkered with.
“We are not planning to go to the market to get resources… We are going to look at the revenue and expenditure side,” she said, adding, “We are a little bit above the curve.”
The minister said the steps taken by the federal government to enhance tax revenues by contracting McKinsey was already yielding positive results, as the Federal Inland Revenue Service (FIRS) generated an extra N44 billion as at July from its target of N75 billion for the year.
On expenditure, the minister said plans had been made to help the Independent National Electoral Commission (INEC) to deliver by ensuring that funds earmarked for the electoral umpire to conduct next year’s elections are released.
She allayed fears over the probable negative consequences of the 2015 elections, stating that nothing would be spent outside what is required
Meanwhile, the Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, has disclosed that the bank would strengthen its regulations to stimulate economic growth, particularly in the real sector.
He said although the CBN has strong regulations, there is a need to strengthen them, adding that the meetings in Washington DC had enriched the nation’s economic managers on many areas, including how to manage risks.
