MPC on saving for a rainy day
THE Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), at the end of its July meeting, observed that the Federal Government had not imbibed the culture of saving for a rainy day despite the surge in its earnings from crude oil proceeds. The committee, in the communiqué read by the CBN Governor, Mr. Godwin Emefiele, premised its observation on the increase in the share of each of the tiers of government from the Federation Account Allocation Committee (FAAC), submitting that this trend portended grave danger for the economy.
We align ourselves with the submission of the apex bank. The recession experienced in the country between 2016 and 2017 was partly precipitated by the failure of the immediate past administration to save when crude oil was selling at over $100 per barrel. This was roundly condemned by many members of the present administration, including President Muhammadu Buhari. It is, therefore, bewildering that this government is toeing the same infamous and inglorious pathway of spending money as it is earned.
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If the government’s sharing spree is informed by the belief that “the good times are here for good” then the government is in deep error. As observed by the International Monetary Fund (IMF) and other global bodies, such belief is a fallacy that might leave the country prostrate. According to IMF’s Economic Counsellor and Director of the Research Department, during the launch of the World Economic Outlook in April, the current “good times” will not last for long. He said only “sound policies can extend the upswing while reducing the risk of disruptive unwinding.” He thus advised policymakers in Nigeria and other oil exporting countries to build fiscal buffers, enact structural reforms and steer monetary policy “cautiously in an environment that is already complex and challenging.”
Perhaps the hurt of government’s penchant for “sharing all and spending all” would have been mitigated if there had been developmental evidence in place to justify the humongous amount of money that has flowed into the country since the resurgence of oil prices in 2017. Most roads in the country are still as bad as they have always been, most hospitals are worse than mere consulting clinics; most schools are still deplorable, more Nigerians are sliding into extreme poverty than nationals of any country in the world, and housing is still a challenge for many Nigerians. So, what is the proof that the country is earning more now than it did between 2014 and 2016?
As we stated in our previous editorials, governmental saving is not discretionary; it is a constitutional demand. It is clearly stated in Section 35 of the Fiscal Responsibility Act 2007 that whenever the prices of crude oil rise above the benchmark set by the government, “the resulting excess proceeds shall be deposited in a separate account which shall form part of the respective Governments Consolidated Revenue Fund to be maintained at the Central Bank of Nigeria by each government.” The Act also states that “No government in the federation shall have access to the savings made in pursuance to subsection (2) of this section, unless the reference commodity price falls below the predetermined level for a period of three consecutive months.”
So, the three tiers of government have no right to dip their hands in the Excess Crude Account (ECA) for any reason other than a decline in the prices of crude oil below the benchmark set by the Federal Government for three consecutive months. Since there has not been a consistent decline in the prices of crude oil, why are the three tiers of government sharing money that should have accrued into the ECA? Why must governors agitate for the sharing of ECA funds? Why are those in government keen on sharing everything now rather than saving part of today’s earnings for the future?
The aspiration of every administration should be to leave the country better than it inherited it. For this administration, the pathway to bequeathing a better and stronger country to the succeeding generation starts with saving part of today’s earnings for future use. If the government fails to do this, posterity might not be kind to it.