With the recent slide of oil prices in the international market, the federal government has allayed fears of any decline to the Nigerian economy.
Government maintained that contingency plans were already in place to avert any form of shocks to the Nigerian economy.
Speaking shortly after the recent International Monetary Fund (IMF)/World Bank annual meetings in Washington DC, United States, Ngozi Okonjo-Iweala, minister of finance, said although contingency plans were being considered to prevent upsets to the economy following dwindling oil prices, borrowing from the IMF and other multilateral institutions was not in the bargain for now.
This comes as IMF ruled out any major shocks to the Nigerian economy on the basis of the new oil policy of the United States (US) that brought to an end the importation of crude oil from Nigeria.
Although the 2014 budget is predicated on an oil benchmark of $77.50 per barrel, the price of the commodity, which is Nigeria’s dominant revenue earner, is in the middle of one of its steepest slides since the global financial crisis, with prices plummeting about 18 per cent from $105 per barrel in mid-June to $88 per barrel recently.
Okonjo-Iweala said the meetings had been very successful and rewarding for Nigeria as they provided the economic management team more perspectives on how to manage the nation’s economy better.
She added that the IMF had warned that the world faces an uncertain global economic outlook, prompting a downgrade of its global growth projections for the second time this year. The minister said although the US’ economy has rebounded and is doing well, the case is different for the Euro zone, which is stagnating, even as Japan as well as some frontier and emerging economies are not impressive.
Okonjo-Iweala added that the case was however different for low income and frontier economies, adding that the IMF and World Bank had advised low-income countries, particularly those dependent on commodity exports to evolve a right mix of contingency plans to avoid exogenous shocks.
The minister said this was why she had continued to emphasize on building the buffers through the Excess Crude Account (ECA). The World Bank had recommended that Nigeria needs a buffer of about $6.5 billion, but the ECA currently stands at about $4 billion.
“We have to be careful to build the buffers. We need $6.5 billion, according to the World Bank. But we have about $4 billion now,” the minister said, adding that besides building the buffers, the federal government would pursue its economic reforms and restructuring plans.
Explaining how the contingency measures will be configured, the minister said three scenarios, including modules that would consider quantity shocks, would be tinkered with.
“We are not planning to go to the market to get resources… We are going to look at the revenue and expenditure side,” she said, adding, “We are a little bit above the curve.”