By HENRY UMORU
ABUJA—CENTRAL Bank of Nigeria, CBN, disclosed yesterday that the nation’s external reserve stands at $37 billion, just as it warned that if Nigeria must have effective monetary policy and economic growth, there was the need for the country to have savings, either in form of Excess Crude Account, ECA, or Sovereign Wealth Fund, SWF.
Speaking yesterday in Abuja when she appeared before the Committee on Economy, Trade and Investment at the ongoing national conference, Acting Governor of CBN, Dr. Sarah Alade, told the delegates that an efficient national savings strategy was an imperative to creating price stability that will drive sustainable national growth and decrease upward pressure on domestic prices.
Alade, who noted that though the country has money in reserve, it could not be compared to what it was making from oil.
She said: “We still have about $37 billion in reserve but we could have more than that at a time when oil is doing well.
“We can save more than what we have saved and that is why we are saying that we should cultivate the habit. It should be part of our constitution that a certain percentage of whatever we earn must be saved so that we can build up the excess crude account again.
‘China has $3trn’
“China, today, has more than three trillion dollars reserves and other oil producing countries have savings, while some of them do not even put the oil money as part of their budget.
“They only use it when they have shortages, but we rely solely on that and we don’t even make any attempt to save.”
The CBN governor, who told the committee that there was presently no legal framework for savings from oil and gas exports, stressed that there was the need for the creation of Sovereign Wealth Fund, SWF, to be supported by a constitutional provision as was the case with other oil-producing countries.
Alade, who noted that CBN has the mandate to deliver price stability to achieve sustainable growth, said: “Critical to achieving price stability is an efficient national savings strategy.
“There is a minimum national savings and investment requirement that guarantees price stability and sustainable growth.
“The cost of managing liquidity has been on the increase because of low national savings, particularly the absence of fiscal buffers.
“The CBN increases rates to control money supply and inflation. This leads to increased portfolio capital inflows which by extension, builds up external reserves.”
According to her, the liquidity created by activities of government and lack of national savings impacted on interest rate levels, efforts to build external reserves and realisation of the price stability objective.
“The lack of national savings from crude oil exports erodes national fiscal buffers and expose the country to major devastating shocks,” she added.
She stressed that the consequences of not having its own savings was a rise in interest rate.
She said if interest rate was not as high as it is, people will be able to borrow at a cheaper rate and grow the economy better, adding that though the country has stable exchange rate, low inflation of about 7.8 percent and a robust growth at about seven percent of Gross Domestic Product, it could do better.