FG resumes savings from oil revenue, pledges transparency

Posted by admin Latest Politics Monday, February 21st, 2011

THE Minister of Finance, Mr Olusegun Aganga, has said the government has resumed savings in its excess crude account, after almost emptying the fund by September, and pledged to be more open about foreign currency reserves.

The excess account swelled to $2.2 billion in December after dropping to as little as $500 million in September from $4.6 billion in April, Aganga said in an interview in Abuja. The fund had reached as much as $20 billion in 2007.

Nigeria, the fifth largest supplier of US crude imports, relies on oil for 95 per cent of its export income, according to the Finance Ministry. Fitch Ratings lowered its outlook on Nigeria’s BB-rating to “negative” from “stable” on October 22, concerned about withdrawals from the excess crude account and a drop in foreign currency reserves.

“We’ve not been as transparent as we should be, but it’s not because we’re trying to hide anything,” said Aganga, a former executive of Goldman Sachs Group Inc. “It’s just because we’ve not captured our data in the way we should and have not made them available as other countries have made them available.”

The decline in foreign currency reserves increased the risk to the economy from any renewed drop in oil prices, Fitch said. Foreign currency reserves, including the excess crude account, slid to $32 billion in December from $42 billion in January 2010 because of the government’s expansionary policy, Aganga had said, adding that some of the money was also used to stabilise the exchange rate.

The government is meant to save money when oil prices exceed the estimate in its annual budget. That forecast was set at $65 a barrel for 2011, compared with the $92 oil is currently trading in New York. Nigeria’s planning ministry will soon be making information on the reserves available to the public, Aganga said noting that reserves are now rising again, reaching $34 billion on February 16, he said.

Nigeria, sold $500 million of Eurobonds last month, attracting buyers from 18 countries in Europe, the U.S., Asia and Africa.

It wouldn’t have been successful if the country hadn’t given investors all the information on its finances, according to Aganga. He said the Eurobond offer marked the beginning of Nigeria’s “compliance with international standard on transparency, you’ll see more of that going forward.”

Sovereign Wealth Fund Nigerian lawmakers are currently working on a sovereign wealth fund that will save some of the windfall crude revenue for future generations and invest some in infrastructure, ensuring that the government can’t use it to finance running costs.

Nigeria has seen oil production stabilize at 2.16 million barrels a day as a result of the relative calm in the Niger River delta, the hub of the country’s oil industry, Information Minister Labaran Maku said on Feb. 2. Crude for April delivery rose as much as $2.65 to $92.36 a barrel in electronic trading on the New York Mercantile Exchange today. It was trading at $92.23 as of 4:41 a.m.

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