The federal and 36 state governments must remove bottlenecks to a functional sovereign wealth fund, SWF to provide cover against shocks during periods of instability in global oil prices, the Nigerian Extractive Industries Transparency Initiative, NEITI, said on Tuesday.
To achieve this, the transparency and accountability agency urged the two tiers of government to demonstrate a strong political will to establish a system to promote the culture of saving excess revenue during periods of high oil prices.
The agency, which made the recommendation in Abuja at the unveiling of its latest NEITI Occasional Paper series titled: “The Case for a robust oil savings fund for Nigeria” offered recommendations on ways to dismantle the obstacles to developing a ‘functional natural resource revenue savings in Nigeria.’
They included the need for 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.
It asked 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.
Again, NEITI urged 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 importance of government to remove its expenditures from oil revenues and pursue a new system that thrived on prudent macro-economic policies and programmes.
In his presentation during the ceremony, the Executive Secretary, NEITI, Waziri Adio, lamented the absence of a functional stabilization fund to insulate the country from the shocks of volatile oil prices at the international market.
“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.
He identified Nigeria as one of resource-rich countries of the world with the lowest natural resource revenue savings.
The balance in the three funds currently in existence (0.5 per cent stabilization fund, ECA and NSIA), he pointed out, was less than $3.9 billion, 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,” Mr. Adio 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.
The country’s $8 sovereign wealth fund per capita was equally described as one of the lowest, better only than war-torn Iraq and crisis-hit Venezuela.
He said with Nigeria facing gloomy prospects of depleting oil reserves, government must 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.