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FG may tie disbursements from excess crude account to projects
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L-R: Folusho Philips, executive chairman,Philips Consulting; Merilyn McGowan, senior client services manager, The Edcomm Group, USA, and Oliver Campbell White, managing director, Philips Consulting, during their visit to Business Day Media head office
Fresh strategies and ideas for the management of the Excess Crude Oil Account (ECA) are being evaluated by the Budget Office and Revenue Mobilisation and Allocation Commission as government’s expenditure went up by 67 percent in April.
The proposed plan is aimed at tying disbursements from the ECA account to specific projects and avoid the blanket release of the funds to states without any discernible projection on how they would be spent.
An insight into the new plan was given by Bismarck Rewane, managing director, Financial Derivatives, at the Lagos Business School executive breakfast meeting in Lagos on the level of economic activities in April.
Experts say tying ECA funds to specific projects is to ensure that the spiral effect of spending from the excess crude oil does not result in an unnecessary increase in liquidity, thus leading to rise in inflation and other related hazards.
For instance, the impact of inflation in April has been on an average of 7.5 percent increase in household income spent on food year-on-year. Food index accounts for approximately 60 percent of Nigeria’s Consumer Price Index (CPI) basket.
The trend has the potential of reducing the level of voluntary savings as income not consumed is saved.
A demonstration of this is the over 27 percent surge in the value of cheques cleared in April.
Data indicate that headline inflation declined slightly to 7.8 percent in March, while core inflation remained high at above 12.4 percent.
Apparently in a bid to stem this tide, the Central Bank of Nigeria (CBN) in April focused on inflation targeting and started mopping up excess liquidity.
The Monetary Policy Committee (MPC) also during the month increased the Monetary Policy Rate (MPR) by 50 basis points to 10 percent in a bid to target inflation.
The view is that the restriction on spending on specific projects will help make its impact neutral on the allocation of resources and reduce its propensity to distortion inflationary targets. Capital market regulators have already kicked in a set of new rules to help stabilise the market.
Meanwhile, the naira is said to have depreciated marginally against the dollar in the official market. It lost 0.9 percent in April to close at N117.87 to a dollar in April.
The CBN reduced the clearing days for upcountry cheques by 25 percent to three days. Experts say this will increase the velocity of circulation of broad money – money in circulation - as well as pressure prices.
The meeting explained that the passage and signing into law of the 2008 budget by the presidency in April coincided with a steep increase in revenue shared among the three tiers of government.
An insight into the new plan was given by Bismarck Rewane, managing director, Financial Derivatives, at the Lagos Business School executive breakfast meeting in Lagos on the level of economic activities in April.
Experts say tying ECA funds to specific projects is to ensure that the spiral effect of spending from the excess crude oil does not result in an unnecessary increase in liquidity, thus leading to rise in inflation and other related hazards.
For instance, the impact of inflation in April has been on an average of 7.5 percent increase in household income spent on food year-on-year. Food index accounts for approximately 60 percent of Nigeria’s Consumer Price Index (CPI) basket.
The trend has the potential of reducing the level of voluntary savings as income not consumed is saved.
A demonstration of this is the over 27 percent surge in the value of cheques cleared in April.
Data indicate that headline inflation declined slightly to 7.8 percent in March, while core inflation remained high at above 12.4 percent.
Apparently in a bid to stem this tide, the Central Bank of Nigeria (CBN) in April focused on inflation targeting and started mopping up excess liquidity.
The Monetary Policy Committee (MPC) also during the month increased the Monetary Policy Rate (MPR) by 50 basis points to 10 percent in a bid to target inflation.
The view is that the restriction on spending on specific projects will help make its impact neutral on the allocation of resources and reduce its propensity to distortion inflationary targets. Capital market regulators have already kicked in a set of new rules to help stabilise the market.
Meanwhile, the naira is said to have depreciated marginally against the dollar in the official market. It lost 0.9 percent in April to close at N117.87 to a dollar in April.
The CBN reduced the clearing days for upcountry cheques by 25 percent to three days. Experts say this will increase the velocity of circulation of broad money – money in circulation - as well as pressure prices.
The meeting explained that the passage and signing into law of the 2008 budget by the presidency in April coincided with a steep increase in revenue shared among the three tiers of government.
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