“Nigeria has two to three months of rainy day savings to cushion it while contingencies are put in place should world oil prices continue to fall,” Ngozi Okonjo-Iweala, Co-ordinating Minister for Economy told the Financial Times.
Okonjo-Iweala disclosed that should oil price dip below $78, the country would have to draw down on the Excess Crude Account (ECA).
She said, “Our intention is not to run in there and raid it, but even if prices continue to go down we can survive sufficiently for two to three months.
That is the time needed to get other measures in place. What you don’t want is a hard landing.”
“Our buffers are slimmer this time,” Okonjo-Iweala acknowledged, adding that there is about $4bn in the ECA at present, $2bn short of what the International Monetary Fund had recommended.
She further stated that the country needs to ramp up our non oil revenues on the fiscal side, adding that global consulting firm, McKinsey, has been engaged to carry out an extensive review of revenue services in order to identify potential gains.
Okonjo-Iweala added that she was encouraged by an exhaustive data review, which saw Nigeria’s economy overtake South Africa’s as the continent’s largest, showing that the economy had diversified to a much greater extent than previously thought.
She said, “In an oil country you can never feel at ease exactly. But I feel we can master this situation because we have a diverse base.
“We will have to look very hard at recurrent expenditure, and identify overlapping agencies. When the price is heading down everyone sees the necessity but that doesn’t stop them hating you.
Okonjo-Iweala agreed, however, that lower oil prices would provide a stronger incentive to government to rein in oil theft, which has cost billions of dollars a year, and help to drive through stalled oil sector legislation to stimulate production.