Nigeria proposes radical law to control oil revenue

Dec 17, 2003 01:00 AM

Nigeria's finance minister is proposing a radical new law to control the use of oil revenues as part of measures aimed at reducing official spending and addressing continued concerns about corruption. Ngozi Okonjo-Iweala, whose first budget is due to be sent to parliament, said the government planned to introduce a "fiscal responsibility bill" next year to set limits on how federal, state and local authorities spend their share of the country's annual oil revenues of more than $ 10 bn.
The proposal, which has still to be finalised, aims to tackle the widespread problem of unrestrained spending of oil money shared directly between the federal government, 36 states and 774 local authorities.

Many Nigerians have been dismayed at the lack of progress in tackling corruption since President Olusegun Obasanjo came to power in 1999.
"This [bill] will be very important if we agree on it with the states, because it will give us a major handle on the fiscal side for managing the macro-economy," Ms Okonjo-Iweala said.
Ms Okonjo-Iweala said the bill would create a mechanism for saving oil revenues if the international oil price rose above the rate budgeted by the government. The additional money would be paid directly into special accounts and would be released if the oil price fell below the budgeted rate, helping to smooth spending patterns and reduce the impact of oil market volatility on the economy.

Analysts say the lack of both transparency and restrictions on spending since the return of civilian rule in 1999 have undermined economic management and helped sustain corruption. The central bank and others have attributed the decline of the naira currency to record lows over the past few months as evidence of heavy and unrestrained official spending, which creates a demand for dollars to buy imports.
Ms Okonjo-Iweala said the government had begun improving transparency by publishing details in newspapers of how oil money is distributed each month between the states and local governments, which between them receive about 55 % of total government revenues.
"There is great demand for this information," said Ms Okonjo-Iweala, a former World Bank vice-president brought in by Mr Obasanjo this year. "People love this. I have got so many comments from people on the street who have seen this and said: 'This is good'."

Many domestic and international observers welcomed Ms Okonjo-Iweala's appointment as evidence of belated government seriousness in tackling the problems of the economy, which is sub-Saharan Africa's second-largest but is little diversified outside the oil sector and is weighed down by foreign debts of $ 31 bn. She said that overall budget spending would be "tight" and added that the government aimed to reduce its fiscal deficit from about 4 or 5 % of gross domestic product to 2.5 %. Spending would focus on priority industrial sectors such as agriculture as well as infrastructural improvements in areas such as power, roads, health and water.
She said the government had earmarked $ 2.5 bn to pay foreign and domestic debts next year -- one third of total federal revenues. About $ 1 bn of this would go in making a partial repayment to the Paris Club of governmental creditors, which is looking for evidence of an improved official commitment to honouring debt obligations.

Source: The Financial Times
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