Nigeria has agreed a new system for sharing surplus oil revenues among the various tiers of government, resolving a feud which threatened to undermine four years of prudent fiscal spending, according to local media reports.
Nigeria now has $11.4 billion in savings from surplus revenues from high oil prices, but the federal, state and local governments were in dispute over how to manage the money.
State governments argued that a portion of the money was constitutionally theirs to spend as they pleased, but the federal government prevented them from accessing it in order to to control money supply growth and inflation.
Central bank chief Chukwuma Soludo was quoted by Reuters as saying that the federal and state governments agreed at a meeting yesterday to save 1 trillion naira ($8.2 billion) as a “base deposit” for all three tiers of government in an interest-yielding central bank account. This base deposit will not be available for immediate spending.
“It was agreed that of what has been accumulated so far … 1 trillion naira should be saved as base deposit, and the account of all stakeholders should be credited,” Soludo was quoted by newspapers as saying at the end of a National Economic Council meeting.
The remaining $3.2 billion will be shared among the three tiers of government, after they have reconciled previous repayments of external debt, he added.
Nigeria repaid $12 billion in debt and penalties to the Paris Club of creditor nations in 2006 in return for a cancellation of another $18 billion.
From now on, 20% of excess crude revenues will be saved in the base account, while 80% will be distributed for spending in the year after it is accumulated, Soludo said.
The government had previously agreed to distribute 50% of savings a year after they were accumulated, but the previous government of President Olusegun Obasanjo had also dipped into the savings to pay for seven new power stations and other special capital projects.
The government originally used a $40 per barrel oil price for the 2007 budget, but a shortfall in production meant that the effective rate was $67.
Nigeria’s oil export price this year has averaged about $70, so there has been limited accumulation in the account so far this year.
Next year, the federal government proposes to use $53.83 per barrel as a benchmark in 2008, according to a draft budget which has yet to be finalised.