The grim reality is here

Governor Mu’azu Babangida Aliyu of Niger state speaking in Minna on Tuesday at a workshop organised by the Co-operative Societies of Nigeria, declared that the country “is edging towards bankruptcy as a result of lack of funds from the federal purse”.
He stated: “All the states cannot survive without the Federation Accounts Allocation (FAC). There has been problem with FAC meetings since May, last year. The states have been losing 40 per cent of expected revenues from the federation accounts. The situation has worsened this month with zero allocations. My finance commissioner went to Enugu for FAC meeting and they said there was no money to share because oil prices continue to fall and we do not have excess crude oil money to augment.”
According to the data released by the Central Bank of Nigeria (CBN), the 2014 budget was crafted using a reference oil price of $77.5 per barrel (p/b). But oil prices have nose-dived in the last four months. The price of the Nigeria’s Bony Light Crude stood at $88.0 as at October 14 down from $114.6 recorded in June. Governor Aliyu is not alone. Samir Gadio, Head of Africa Strategy at Standard Chartered, reacting to the development, explained that government’s excessive reliance on revenue from oil to finance its budget meant a sustained slump in oil prices could threaten state finances, noting that the weaker oil prices – if it persists – would have negative effects on Nigeria’s fiscal sustainability.
Many factors are responsible for this turn of events: weak demand from the European markets and the loss of over one million barrel per day imported from the United States because the country now produce its own oil production, among others. Over 90 per cent of Nigeria’s revenues come from oil exports. The free fall of oil prices is a bad augury for the nation’s economy which depends solely on the black gold. Nigeria has raked in trillions of dollars in the past one decade with prices hovering around $100 per barrel and an average production of two million barrels per day most of which is lost to corruption. To avoid the gloom that now stares the country in the face, the administration of former President Olusegun Obasanjo established the Excess Crude Account (ECA). But because the ECA was open to political manipulation and abuse, the Jonathan administration in 2010 supplanted it with the Sovereign Wealth Fund (SWF). Before then, Nigeria was the only member of the Organisation of the Petroleum Exporting Countries (OPEC) without the SWF. It is difficult to establish how the Fund is being operated in view of its vulnerability to inherent abuse by government officials.
The failure of the Federation Accounts Allocation Committee (FAAC) to release funds to the federating states at its meeting in Enugu a few days ago sends a wrong signal and underpins Aliyu’s apprehension. The minister of finance and coordinating minister of the economy, Dr. Ngozi Okonjo-Iweala, has persistently denied that Nigeria is broke. A FAAC meeting held in Abuja on Wednesday, during which a total sum of N603.648bn was shelled out to all the three tiers of government for the month of September, 2014 must have happified her.
Nevertheless, the worrisome development should be a wake-up call for the government at all levels. Overdependence on oil revenues is tantamount to treading on quicksand. Before the advent of oil, Nigeria’s economy was driven by agriculture. There is virtually no state that is not endowed with one mineral resource or the other besides agriculture. But these resources have been neglected in preference for the quick cash from oil. Aside from Lagos and Rivers states, there is hardly any other state that can boast of tangible internally generated revenues (IGRs). The silver lining in the dark cloud is for the states to face the grim reality and look inwards for augmentation of their revenues rather than whining and depending wholly on monthly handouts from the federal administration.