November 14, 2009

Fresh hopes for Nigerian economy as oil hits $79 pbl

The Minister of State for Finance, Mr. Remi Babalola, has raised fresh hopes for the nation’s economic performance as he said the raising crude oil price and higher output would ensure a strong budget performance at all levels of government.

Nigeria’s reference oil , Bonny Light, price has risen to $79 per barrel, while the end to militancy in the Niger Delta region has significantly increased the nation’s crude oil production to a level close the OPEC quota, he told the Federal Accounts Allocation Committee (FAAC) meeting in Abuja, yesterday.

“Bonny light price has increased 70 per cent, year-to-date closing at $79 per barrel. Our production level is improving and gradually approaching our OPEC quota level. The major risk and binding constraint to our economic buoyancy in the short_run is the contraction of the credit squeeze”, he said.

Nigeria’s Crude oil quota is 1.67 million bpd, while the nation’s oil production estimate for this year was put at 2.292mbpd with a benchmark $45/barrel.

Mr. Babalola, therefore called on banks to resume prudent lending to the real sectors of the economy with a view to stimulating growth, across the nation.

His words, “We therefore call on our money centre banks to resume prudent lending immediately as their pivotal role in bolstering the economy cannot be overemphasised. The automatic fiscal policy inherent in our budgetary system and discretionary fiscal stimulus from excess crude releases cannot replace financial intermediation.

“It is only lending activities to small and medium enterprises that can engender growth for the real sector in the long_run and not an unsustainable fiscal stimulant.”

The minister, however, charged the three tiers of government to adopt some strategic structural reforms to help them sustain economic recovery over the medium term.  Several state governments have gone to the capital market to raise funds through the issuance of bonds, while others have collected facilities from banks, a situation that has caused a lot of disquiet in the polity.

Mr. Babalola urged all tiers of government to ensure robust “investment in infrastructure, institutions, the environment and basic health and education, combined with greater cooperation and integration, will help make that happen.

“I believe we can all rise to the challenge and build a stronger, stable, more equitable and more prosperous future, with opportunities to participate in and benefit from growth extending to all our citizens,” he added.

The three tiers of government shared a total of N354.303 billion from the federation revenue in the month of October.

Statutory allocation accounted for N165.624 billion of the total distributed revenue, while Value Added Tax and Budget Augmentation amounted to N39.778 billion and N121.228 billion, respectively.

This month’s shared revenue was marginally higher than the N350.724 billion shared last month.