The Minister of Finance, Ngozi Okonjo-Iweala, has said that sliding global oil prices has pushed Nigeria into an uncomfortable position.
The minister, who was speaking on Friday on CNN’s Quest Means Business, said, however, that the country has responded well by reacting swiftly with austerity measures to deal with the crisis that ensued in the economy.
“Even though this (falling oil prices) has put us (Nigeria) in an uncomfortable position, the issue is how we are dealing with it,” the minister said.
“We’ve taken down the benchmark price at which we were going to do our 2015 budget, and even our medium-term framework from $78 to $73,” she said.
In addition, she said even if oil price falls below the $73, the country has a scenario-based approach that would enable it introduce additional revenue raising and expenditure cuts.
Mrs. Okonjo-Iweala said the government would be ready with appropriate monetary policies to support the austerity measures to help the country manage a softer landing for the economy.
On expectations from the meeting of the Organisation of Petroleum Exporting Countries (OPEC) scheduled for Vienna, Austria next week, Mrs. Okonjo-Iweala said whether the major oil producers would decide to cut production to strengthen oil prices or not, Nigeria would desire a fair and balanced decision in favour of both producers and consumers.
Nigeria, she noted, has since moved away from thinking of itself as an oil economy, pointing out that the recent re-basing showed how robust and diverse the country’s economy base was, with agriculture, manufacturing, and services sectors.
She said the government has been trying to expand the base with particular focus on agriculture, housing and the creative industries to continue to create jobs.
Besides, the minister said the country has also adopted some revenue-raising measures to boost non- oil revenues, in view of the country’s economic base showing it was much broader than thought.
Part of those measures, the minister said, included efforts to increase internal revenue service by strengthening the country’s tax administration system.
She said so far about $500 million was raised in revenues this year alone, expressing confidence that the figure would be exceeded next year.
Acknowledging how difficult it was to manage an economy whose revenue was dependent 70 percent on oil, the Minister said the country has always been prepared with plans in case oil prices fall.
She said part of what the country did was to put in place a mechanism that saw some savings being made when oil prices were high, adding that the country managed to save about $4 billion to enable it fall back on during the rainy days.
It was not clear how far that savings would take the country through the crisis, considering that the Excess Crude Oil Account has virtually been depleted.
At the end of the Federation Accounts Allocation Committee (FAAC) meeting earlier this week, representatives of the 36 states and the Federal Capital Territory (FCT) told reporters in Abuja that they had already sent a request to President Goodluck Jonathan to approve the release of about $2billion from the excess crude revenue account to bail them out from a potentially messy financial situation before the year runs out.
Chairman of the Commissioners of Finance Forum and Ebonyi State Commissioner for Finance, Timothy Odaah, said the money was expected to help the states settle their debts to contractors handling various projects in their domains as well as take care of security arrangements before and during the forthcoming general elections in the country next year.