Friday, April 13, 2012

President Jonathan signs parliament's 2012 budget today.

Our President today signs 2012 budget into law. Capital expenditure was 1.34 naira, little more than a quarter of the total, meaning that Nigeria which is presently Africa's biggest oil producer spends most of its money on keeping government running and that may not be healthy for Nigeria. The spending plans assume a $72 a barrel benchmark oil price, up from $70 in the proposal submitted by Finance Minister Ngozi Okonjo-Iweala in December 2011, boosting revenues available to the government. Nigeria saves money it earns over the benchmark oil price to cushion the economy against price shocks and Central Bank Governor Lamido Sanusi has said it should not go above $70 barrel. There remains skepticism among economists over the government's ability to reduce spending, reflected in a continual raiding of its oil savings in its Excess Crude Account over the past few years now, despite oil prices stuck at historic highs continually. Nigeria passed a law last year to set up a sovereign wealth fund but our powerful state governors have tried to block its launch and there is no clarity on its status. The wealth fund was supposed to replace the Excess Crude Account, which can be too easily dipped into. The goal was to save for our children the future generations, finance infrastructure projects and provide a stabilization fund in case oil prices fall. Meanwhile, the reform plans have stalled since our president was elected last year. A bill aimed at overhauling the corrupt energy sector has been stuck in the house of Assembly for years, while the proposed wealth fund, constitutional reforms and power privatization plans are months behind schedule. Let pray for Nigeria because she belongs to all of us.


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