MPC’s counsel to the government

AT the end of its April meeting, the first after its reconstitution, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) had two concrete pieces of advice for the Federal Government to facilitate economic stability. The committee asked the government to ensure quick passage of the 2018 budget and to save more. The MPC, in its communiqué, noted that “forecasts of key macroeconomic indicators give a positive outlook for the Nigerian economy in 2018.” It, however, added that the realisation of the prediction would be hinged on “the quick passage and effective implementation of the 2018 budget, improved security, foreign exchange market stability as well as favourable crude oil prices.” The committee also called on the Federal Government to “freeze the growth in its aggregate expenditure and FAAC distributions in order to create savings needed to stabilise the economy against future oil price related shocks.”

We align ourselves with the position of the MPC on the need for the government to speed up the process of passing the budget and to save more. The N8.612 trillion 2018 budget presented to the National Assembly by President Muhammadu Buhari on November 7, 2017, was christened “Budget of Consolidation.’’  This underscores the government’s understanding of the need to consolidate on the marginal growth of 0.83 per cent recorded last year to put the economy on the path of sustainable growth. The International Monetary Fund (IMF), in its report in March, said that despite exiting recession, the growth recorded by the economy was a delicate one, calling on the government to scale up its actions with a view to sustaining the growth. Delaying the passage of the budget and its haphazard implementation are the major culprits for the sluggish economic growth. To put the economy at full throttle, the budget, which will give a direction to the economy, should be passed without further ado and implemented to the letter.

• The subsidy conundrum

The failure of the country to save in the past when crude oil prices were over $100 per barrel was mainly responsible for the contraction of the economy which resulted in recession. Now that the economy is growing and oil prices are rallying again, the government should resist the temptation of spending everything it earns as there is no guarantee that crude oil prices will remain perpetually high. It is quite puzzling that despite saving being entrenched in the constitution, government functionaries insist on spending funds that ought to go into saving. Section 35 of the Fiscal Responsibility Act (2007) states in unequivocal terms that whenever the prices of crude oil rise above the benchmark set by the government, “the resulting excess proceeds shall be deposited in a separate account which shall form part of the respective Governments Consolidated Revenue Fund to be maintained at the Central Bank of Nigeria by each government.” The Act adds that “No government in the federation shall have access to the savings made in pursuance to Subsection (2) of this section, unless the reference commodity price falls below the predetermined level for a period of three consecutive months.”

So, the government has no right to dip its hands in the Excess Crude Account (ECA) for any reason other than a decline in the prices of crude oil below the benchmark set by the government for three consecutive months. Since there has not been a consistent decline in the prices of crude oil, why is the government spending from the ECA? Why has it become fashionable for the three tiers of government to rush to share funds in the ECA? Why are those who superintend over the resources of the states always eager to spend all the funds that accrue to the states in flagrant disregard of the provisions of the country’s constitution? Why are those in government keen on sharing money now rather than saving for the future?

To entrench the culture of saving, all the government needs to do is just follow its own rules. That definitely cannot be too much for a government to do. Or can it?