About the first quarter of this year, Governor Babatunde Raji Fashola of Lagos State drew the attention of the state legislature to the problem posed by dwindling monthly federal statutory allocation to states and what he referred to as ‘uncoordinated fiscal policies’, obviously at the federal level. Fashola said the National Economic Council (NEC) meeting which ought to be held monthly was stalled for six months (as at March this year); and that the situation had gotten to the point that some states had to borrow to keep their governments afloat.
Governors Rotimi Amaechi of Rivers State and Mu’azu Babangida Aliyu (Niger State) complained likewise about that time. It was revealed that revenue accruable to the 36 state governments from the Federation Account declined by about 40 per cent over the previous six months from last March. At the last count, the monthly allocation to Rivers State reportedly declined to N12bn from N26bn; and that of Osun State to N2.3bn from N4.6bn, among others. Many states are currently finding it extremely difficult to pay workers’ salaries or meet other debt and contractual obligations. The situation is worse for states battling with accumulated loans, especially with the recent advisory issued by the Debt Management Office (DMO), that banks should not grant short-term loans to state governments. It is public knowledge that for several decades now, oil money has been accounting for about 85 percent of the country’s annual budget, and virtually all the states in the federation rely on oil revenue to survive.
Unfortunately, too, Nigeria’s financial outlay for 2014 and outlook for 2015, reports say, are approaching crisis point as oil prices continue to slide. Whereas the 2014 budget set a benchmark price of $77.5 per barrel, at a time when oil was selling above $100 per barrel, the nation’s pride, the Bonny Light, now sells for $83.37 per barrel, which experts say is its lowest level in four years; while the country’s West Texas Intermediate contract dropped to $77.19, a point last seen more than two years ago. Also endangered is the nation Excess Crude Account (ECA), which is supposed to serve as a bulwark against oil revenue shortfalls. Reports say the ECA was depleted from $8.65bn at the end of 2012 to $2.5bn as at the first quarter of this year. The situation may be worse presently; while the country’s external reserves dropped by 11 per cent as at the first quarter of this year from the peak of $48.85bn recorded in May 2013. Indeed, when the Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo Iweala, claimed lately that external reserves rose from $36.6bn last June to $39.48bn by mid October, she probably forgot, or consciously veiled the fact that the reserves which stood at $45.66bn as at September last year had been imperilled.
Experts predict that the Central Bank of Nigeria (CBN) might devalue the Naira possibly before the 2015 general elections, as the national currency is said to be currently under pressure from the United States Federal Reserve’s tapering policy. The prediction, based on prevailing economic undercurrents, is that Nigeria’s current account surplus could decline to between $35bn and $30bn; and when that happens, the Naira risks a significant depreciation margin.
As we speak, latest reports indicate that the country’s crude oil reserves have declined from the 37.2 billion barrels it recorded in 2011 to 31.81 billion. The President, Nigerian Association of Petroleum Explorationists (NAPE), Mr. Adedoja Ojelabi, was quoted as saying: “The country’s reserves are showing a sign of decline as exploration drilling has hit the lowest level ever experienced. The reports of new discoveries are few and the reserves are getting smaller. Ironically, the operating landscape is experiencing a lot of challenges…”. Last year, President Goodluck Jonathan, during an interview with ‘China Television’ in Beijing, also lamented that increase in the utilisation of shale gas and other alternative sources of energy by the United States and other advanced oil importing nations was worrisome for the Nigerian economy. With such facts, realities and apprehensions staring at the country’s face, it is difficult believing the recent claim by Okonjo-Iweala that Nigeria is financially sound. Indeed, the country appears to be in dire financial straits. Therefore, if the Federal Government truly has a contingency economic plan to the rescue, it should roll it out immediately, without further delay.
