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At the end of its April meeting, the first after its reconstitution, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) had two concrete pieces of advice for the Federal Government to facilitate economic stability. The committee asked the government to ensure quick passage of the 2018 budget and to save more. The MPC, in its communiqué, noted that “forecasts of key macroeconomic indicators give a positive outlook for the Nigerian economy in 2018.” It, however, added that the realisation of the prediction would be hinged on “the quick passage and effective implementation of the 2018 budget, improved security, foreign exchange market stability as well as favourable crude oil prices.” The committee also called on the Federal Government to “freeze the growth in its aggregate expenditure and FAAC distributions in order to create savings needed to stabilise the economy against future oil price related shocks.”
The failure of the country to save in the past when crude oil prices were over $100 per barrel was mainly responsible for the contraction of the economy which resulted in recession. Now that the economy is growing and oil prices are rallying again, the government should resist the temptation of spending everything it earns as there is no guarantee that crude oil prices will remain perpetually high. It is quite puzzling that despite saving being entrenched in the constitution, government functionaries insist on spending funds that ought to go into saving. Section 35 of the Fiscal Responsibility Act (2007) states in unequivocal terms 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 adds 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.”
To entrench the culture of saving, all the government needs to do is just follow its own rules. That definitely cannot be too much for a government to do. Or can it?