The Nigeria Extractive Industries Transparency Initiative (NEITI) has called on the Federal Government to save some portions of oil and gas revenue for the rainy day and for the next generation.
Mr Waziri Adio, NEITI Executive Secretary, made the appeal on Tuesday at a news conference in Abuja.
He listed immediate transfer of all revenue savings in the Stabilisation Fund and the Excess Crude Account (ECA) into the Nigeria Sovereign Wealth Fund (SWF) as urgent measures needed to be taken by the Federal Government.
Commenting on NEITI’s occasional paper series titled “ The case for a robust oil savings fund for Nigeria’’, Adio said a national consensus on saving for tomorrow had become urgent to prepare the country to overcome frequent commodity price volatility and depletion of non-renewable resources.
The NEITI boss highlighted the portions of mineral resource revenues excluded from the national budget and held as part of the country’s reserve and could greatly enhance the country’s capital balances and attract investors’ confidence.
He also explained that these could attract significant flow of foreign capital into the economy, adding that the funds could also support the provision of critical infrastructure and social interventions during major national emergencies.
Adio expressed dissatisfaction that in spite of the benefits and huge revenues that had accrued from oil and gas over the years, Nigeria had one of the lowest natural resource revenue saving in the world.
According to him, Nigeria currently has three oil saving funds such as SWF with 1.5 billion dollars; ECA with 2.3 billion dollars, and the Stabilisation Fund with 95 million dollars.
He explained that in the last 40 years of oil production, Nigeria had extracted about 31 billion barrels of its oil reserves.
However, he said that from 1980 to 2015, the country exported crude oil worth about 1.09 trillion dollars but had a current balance of 3.9 billion dollars as at June in the three funds.
He said the different oil revenue saving funds should be consolidated and the legal framework harmonised, specifically the 0.5 per cent stabilisation funds and the ECA should be merged with the SWF “ as this multiplicity of savings with different rules has led to uncoordinated and widespread extra-budgetary spending’’.
The NEITI boss explained that apart from depleting savings in each fund, such unrestricted spending defeated the purpose which the funds were set up in the first place which was to shield the economy from revenue volatility.
He noted that Nigeria did not save enough oil revenues to sustain economic activities when oil prices began to drop in June 2014.
He said that another challenge was the level of consumption relative to non-oil exports, stressing that Nigeria typically responded to high oil prices with equal high but manifestly unsustainable level of consumption.
Adio said insufficient 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.
He expressed regret that the 1.5 billion dollars currently in the SWF was one of the world’s worst ratios to annual budget of 10 per cent and one of the lowest SWF per capita of eight dollars globally.
He provided global comparisons among resource rich countries such as Norway with a population of 5.2 million people having a SWF worth 922 billion dollars; Chile, 24.1 billion; Angola, 4.6 billion and Botswana, 5.7 billion dollars.