Identifier
Created
Classification
Origin
09ABUJA939
2009-06-01 10:45:00
UNCLASSIFIED
Embassy Abuja
Cable title:
NIGERIA: EXCESS CRUDE ACCOUNT BEING DRAWN DOWN TO CUSHION
how-toVZCZCXRO0849 PP RUEHMA RUEHPA DE RUEHUJA #0939 1521045 ZNR UUUUU ZZH P 011045Z JUN 09 ZDK FM AMEMBASSY ABUJA TO RUEHC/SECSTATE WASHDC PRIORITY 6141 INFO RUEHOS/AMCONSUL LAGOS PRIORITY 1400 RUEHZK/ECOWAS COLLECTIVE RUEATRS/DEPT OF TREASURY WASHDC RUCPDOC/DEPT OF COMMERCE WASHDC RHEBAAA/DEPT OF ENERGY WASHDC RUEHGB/AMEMBASSY BAGHDAD 0329
UNCLAS ABUJA 000939
SIPDIS
DEPT PASS TO USTR-AGAMA
TREASURY FOR PETERS AND IERONIMO
DOC FOR 3317/ITA/OA/KBURRESS AND
3130/USFC/OIO/ANESA/DHARRIS
DOE FOR GPERSON
BAGHDAD FOR MCCULLOUGH
E.O. 12958: N/A
TAGS: EFIN ECON EINV ENRG PGOV NI
SUBJECT: NIGERIA: EXCESS CRUDE ACCOUNT BEING DRAWN DOWN TO CUSHION
THE EFFECT OF THE GLOBAL CRISIS
REF: A. ABUJA 455
B. 08 ABUJA 2437
C. 08 ABUJA 1191
D. 08 ABUJA 2387
E. 08 LAGOS 520
F. 08 LAGOS 426
UNCLAS ABUJA 000939
SIPDIS
DEPT PASS TO USTR-AGAMA
TREASURY FOR PETERS AND IERONIMO
DOC FOR 3317/ITA/OA/KBURRESS AND
3130/USFC/OIO/ANESA/DHARRIS
DOE FOR GPERSON
BAGHDAD FOR MCCULLOUGH
E.O. 12958: N/A
TAGS: EFIN ECON EINV ENRG PGOV NI
SUBJECT: NIGERIA: EXCESS CRUDE ACCOUNT BEING DRAWN DOWN TO CUSHION
THE EFFECT OF THE GLOBAL CRISIS
REF: A. ABUJA 455
B. 08 ABUJA 2437
C. 08 ABUJA 1191
D. 08 ABUJA 2387
E. 08 LAGOS 520
F. 08 LAGOS 426
1. (U) During a May 26 interactive session with the House of
Representatives Committee on Legislative Compliance, Minister of
Finance Mansur Muhtar stated that the Excess Crude Account (ECA)
could be depleted by the end of 2010 if the three tiers of
government continue to fall back on the ECA to augment dwindling
revenue due to the global economic crisis. Commodity prices,
especially oil, have fallen drastically from their July 2008 highs,
and have resulted in a sharp decrease in revenues in an economy
where oil accounts for over ninety percent of foreign exchange
revenues. (Comment: Press reports put the ECA at about $15 billion.
End Comment)
IMF, World Bank Appear Sanguine
--------------
2. (U) Muhtar's statement corroborates statements released earlier
by the World Bank and the International Monetary Fund (IMF) on the
impact of the global crisis on Nigeria at the end of the recent
World Bank - IMF Spring Meetings held in April in Washington, D.C.
Both institutions stated that Nigeria has been able to withstand the
negative impact of falling commodity prices resulting from the
global crisis because of economic reforms implemented from 2003 to
2007 which resulted in an increase in foreign reserves and the
savings in the ECA. Both institutions asserted that ECA funds
provide an opportunity for Nigeria to augment dwindling revenues
until the end of 2010. This assertion was also made by the David
Nellor, IMF Resident Representative for Nigeria, during a meeting
with the donor community in early March.
Comment
--------------
3. (U) The ECA was established during the administration of former
President Olusegun Obasanjo as savings for the rainy day, with
specific emphasis to help flattening out revenue streams from the
boom and burst cycle associated with volatile oil prices. The rainy
day is already here and the ECA is being used. However, the
critical issue is that the funds be used for strategic investment in
infrastructure rather than consumption. Although the Government of
Nigeria said repeatedly that the funds would be used for needed
infrastructure in electricity and roads, that does not appear to be
happening as the funds appear to be going to support consumption and
agricultural inputs such as fertilizers. End Comment.
4. This report was coordinated with Consulate Lagos.
SANDERS
SIPDIS
DEPT PASS TO USTR-AGAMA
TREASURY FOR PETERS AND IERONIMO
DOC FOR 3317/ITA/OA/KBURRESS AND
3130/USFC/OIO/ANESA/DHARRIS
DOE FOR GPERSON
BAGHDAD FOR MCCULLOUGH
E.O. 12958: N/A
TAGS: EFIN ECON EINV ENRG PGOV NI
SUBJECT: NIGERIA: EXCESS CRUDE ACCOUNT BEING DRAWN DOWN TO CUSHION
THE EFFECT OF THE GLOBAL CRISIS
REF: A. ABUJA 455
B. 08 ABUJA 2437
C. 08 ABUJA 1191
D. 08 ABUJA 2387
E. 08 LAGOS 520
F. 08 LAGOS 426
1. (U) During a May 26 interactive session with the House of
Representatives Committee on Legislative Compliance, Minister of
Finance Mansur Muhtar stated that the Excess Crude Account (ECA)
could be depleted by the end of 2010 if the three tiers of
government continue to fall back on the ECA to augment dwindling
revenue due to the global economic crisis. Commodity prices,
especially oil, have fallen drastically from their July 2008 highs,
and have resulted in a sharp decrease in revenues in an economy
where oil accounts for over ninety percent of foreign exchange
revenues. (Comment: Press reports put the ECA at about $15 billion.
End Comment)
IMF, World Bank Appear Sanguine
--------------
2. (U) Muhtar's statement corroborates statements released earlier
by the World Bank and the International Monetary Fund (IMF) on the
impact of the global crisis on Nigeria at the end of the recent
World Bank - IMF Spring Meetings held in April in Washington, D.C.
Both institutions stated that Nigeria has been able to withstand the
negative impact of falling commodity prices resulting from the
global crisis because of economic reforms implemented from 2003 to
2007 which resulted in an increase in foreign reserves and the
savings in the ECA. Both institutions asserted that ECA funds
provide an opportunity for Nigeria to augment dwindling revenues
until the end of 2010. This assertion was also made by the David
Nellor, IMF Resident Representative for Nigeria, during a meeting
with the donor community in early March.
Comment
--------------
3. (U) The ECA was established during the administration of former
President Olusegun Obasanjo as savings for the rainy day, with
specific emphasis to help flattening out revenue streams from the
boom and burst cycle associated with volatile oil prices. The rainy
day is already here and the ECA is being used. However, the
critical issue is that the funds be used for strategic investment in
infrastructure rather than consumption. Although the Government of
Nigeria said repeatedly that the funds would be used for needed
infrastructure in electricity and roads, that does not appear to be
happening as the funds appear to be going to support consumption and
agricultural inputs such as fertilizers. End Comment.
4. This report was coordinated with Consulate Lagos.
SANDERS