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Depletion of ECA Leaves Nigerian Economy Vulnerable- World Bank
Nigerian economy has become more vulnerable to shocks as a result of the depletion of the Excess Crude Account (ECA), according to the World Bank.
The ECA was established in 2004 to save revenues in excess of the budgetary benchmark price generated from the sale of oil, with the aim of protecting the country’s budgets against shortfalls caused by the volatility of crude oil prices.
The account was expected to insulate the Nigerian economy from external economic shocks.
The ECA rose from $5.1bn in 2005 to more than $20bn in November 2008, but during the last meeting of the National Economic Council in December 2019, Mrs Zainab Ahmed, minister of Finance, Budget and National Planning, reportedly disclosed that the balance as of November 19, 2019 was $324.98m.
In its latest Nigeria Economic Update, the World Bank warned that a ‘moderate’ decline in oil price could trigger another recession, noting that the exhaustion of the ECA had made the country more vulnerable.
“Fiscal buffers in the Excess Crude Account have been exhausted, rendering Nigeria more vulnerable to shocks,” the bank said.
Noting that the account was mismanaged, the report added, “The ECA has rarely operated as envisaged. When it was established in 2004, it was to be drawn on only when the actual crude oil price falls below the budget benchmark price for three consecutive months.
“However, state governments contended that the federal Fiscal Responsibility Act of 2007 creating the ECA was not binding on state and local governments.”
The World Bank observed that the Sovereign Wealth Fund was established in 2011 by the three tiers of government to serve as the oil savings fund for the country.
The SWF has three components – future generations, infrastructure and stabilisation funds.
The stabilisation fund, like the ECA, was to support federation revenue in times of economic stress.
“It was envisaged that the balance in the ECA in 2011 would be transferred to the SWF.
The World Bank said, “Instead, in 2012 seed capital of only $1.5bn was transferred, plus another $0.5bn in 2017.”
The balance of the Stabilisation Account, reportedly as of December 17, 2019, was N30.5bn, while the Natural Resource Fund held N88.3 at the same date.
The World Bank further observed that Nigeria’s consolidated government revenue was very low by the standards of comparable countries.
“During the commodity boom Nigeria’s consolidated government revenue reached 12 per cent of GDP, among the lowest ratios for structural, aspirational and regional peers.
It said, “After oil price and production shocks and Nigeria’s first recession in over two decades, in 2016 general government revenue plunged to six per cent of GDP – second lowest of 115 countries for which data are available.
“Recovering to eight per cent of GDP in 2018, government revenues are projected to plateau there unless there are significant tax policy and administration reforms.”
The bank warned that the prevailing situation will continue to constrain the budget envelope and limit fiscal space for investing in physical and human capital.
In the absence of fiscal buffers such as the one that was supposed to be provided by the now exhausted ECA, Nigeria risks another recession, due to the country’s dependence on oil, the bank said.
It added, “A moderate decline in oil prices could lead to a recession in Nigeria due to its dependence on oil; the Nigerian economy is highly vulnerable to a drop in oil prices.
“The oil sector remains the dominant source of risk for growth of Nigeria’s economy, with sustained suboptimal policy decisions aggravating the size of the potential impact on the economy.
“For example, a sudden decline in oil prices to 2016 levels, sustained for a year, would undermine growth and fiscal balances and the lack of monetary and fiscal buffers would magnify the impact of any shock to the economy.
“If oil prices dropped again by about 25 per cent, the country could swing into a recession, with a more difficult recovery path.”
Evaluating the possible impact of a temporary decline in oil price, the bank noted that the development could subtract up to 0.5 percentage points from growth.
The report projected, “Yet, the indirect (spillover) effects on external and fiscal balances and the financial sector would be significant, similar to, if not worse, than what happened during the 2016 recession.
“Since the Federal Government’s deficit is already twice the size of Nigeria’s revenues, the fall in fiscal revenues proportionate to the 25 per cent fall in oil prices would virtually eliminate space for infrastructure spending, with obvious long-term repercussions for growth.
“With no fiscal buffers available –the Excess Crude Account balance is less than $0.5bn – and no likelihood of external borrowing as investor confidence drops because of uncertainty over Nigeria’s policy response, deficits would have to be financed domestically, sending the cost of borrowing soaring.
“Because there are no buffers, the nonoil economy could contract by more than in 2016, with the economy as a whole shrinking by more than two per cent.
“Recovery would be slow in the absence of structural reforms, even if the oil price rebounded by about 15 per cent as the global economy recovers.”
However, world oil prices jumped nearly $3 on Friday after the United States killed Qassem Soleimani, Iranian military chief, a development which fanned fresh fears of conflict in the crude oil-rich Middle East.
The international oil benchmark, Brent crude, hit $69.16 per barrel, its highest since September 17, 2019, before easing to $68.81 per barrel, while the US West Texas Intermediate surged by $2.03 to $63.21 per barrel, having earlier spiked to $63.84 a barrel, its highest since May 1, 2019
Accelerating artificial intelligence (AI) adoption could increase Africa’s GDP by up to 4% over the next decade, according to the International Monetary Fund (IMF).
In a report released on Tuesday, titled Africa Can Grow Faster With AI—If It Moves Now, economists from the IMF’s Africa Department say current levels of AI adoption and utilisation are expected to contribute just 0.2% to the region’s GDP over the next 10 years.
However, the report says stronger adoption, supported by the right infrastructure and policies, could raise the economic impact to about 4% by extending AI beyond today’s digitally connected firms.
Martin Schindler and other IMF economists say: “AI adoption in sub-Saharan Africa currently lags well behind every other region. If richer economies race ahead while African firms and governments lag, the productivity gap between the region and the rest of the world will only widen.”
Early signs of AI adoption are emerging across Africa, with countries including Zimbabwe, Kenya, Egypt and Nigeria developing AI strategies.
Telecommunications operators, including Vodacom, Econet, Africell and MTN, are also integrating AI into their operations and networks.
Other examples include chatbots supporting teaching and learning in Nigeria and the South African Revenue Service’s use of data analytics for targeted tax audits.
However, the IMF says AI adoption must extend beyond these early use cases to deliver meaningful economic benefits.
“For the region, AI’s main promise is not about replacing office workers, but boosting productivity across the economy—helping informal firms manage inventory, enabling farmers to increase yields, and supporting mid-sized firms to transition to formality and export readiness,” the report reads.
The IMF is urging governments to prioritise investment in reliable electricity, affordable broadband, data infrastructure and digital skills to support wider AI adoption.
Many African countries, including Zimbabwe, Kenya, Ghana, Nigeria and Cameroon, continue to face electricity shortages, while broadband services remain costly and coverage is uneven.
The Fund believes stronger investment in power, connectivity, regional data infrastructure and digital skills would help unlock AI’s economic potential.
National Population Commission (NPC) has commenced the nationwide digital registration of births and deaths under the Electronic Civil Registration and Vital Statistics (E-CRVS) system to strengthen legal identity management and improve demographic data.
Speaking at a press briefing in Lokoja on Tuesday, Mr Afolabi Yori, federal commissioner representing Kogi, said the initiative became operational nationwide on July 1, through the VitalReg platform.
Yori described the development as a landmark in Nigeria’s civil registration system, noting that it would modernise birth and death registration through a technology-driven platform that meets international standards.
He said the digital platform would improve service delivery, strengthen data integrity and ensure that every birth and death occurring in Nigeria was accurately documented and securely stored.
According to him, civil registration is more than an administrative process, as it provides reliable statistics that support public policy formulation, resource allocation and national development planning.
“Nigeria records an estimated five million births annually, yet millions of births and deaths remain unregistered.
“Birth registration coverage currently stands at about 57 per cent nationwide, while death registration remains below 20 per cent,” he said.
The commissioner said that the commission had established 4,011 functional registration centres across the country’s 774 local government areas and was working to expand the number to about 8,000.
He added that the commission was strengthening collaboration with stakeholders to improve the capacity of registration personnel and ensure prompt documentation of vital events through the VitalReg platform.
Yori said the platform would provide faster registration services, 24-hour online access, digital certificate issuance where applicable, and reduce paperwork, waiting time and unnecessary travel.
He disclosed that the platform was being operated under a Public-Private Partnership with Barnks-forte Technologies Ltd. as the commission’s technical partner to ensure system availability, cybersecurity and continuous technological improvement.
He called on parents, healthcare institutions, traditional and religious leaders, civil society organisations, development partners and the media to support the initiative by encouraging the prompt registration of births and deaths.
Earlier, Samuel Omonakpeme, director in Kogi, NPC State, described the commencement of the digital registration system as another milestone in efforts to strengthen Nigeria’s Civil Registration and Vital Statistics system.
Omonakpeme stated that the initiative aligns with the Federal Government’s digital transformation agenda and the Sustainable Development Goals, particularly Goal 16.9, which seeks to provide legal identity for all.
He appreciated the Federal Government, the leadership of the commission, UNICEF and other development partners for supporting the implementation of the initiative.
The state director also urged parents, guardians, health institutions, community leaders, religious organisations and the media to mobilise public support for the timely registration of all births and deaths.
The News Agency of Nigeria (NAN) reported that ICT personnel of the commission, led by Ehimoni Kolawole, conducted a live demonstration of the digital birth registration process using the VitalReg platform.
The demonstration showed that the registration process captures the biodata of both parents, while at least one parent must possess a valid National Identification Number (NIN) to complete the registration of a newborn.
Yola Electricity Distribution Company (YEDC) has alerted its customers to a fraudulent message circulating on social media, falsely claiming that electricity consumers can receive an additional 20 per cent bonus units when recharging their prepaid meters through unofficial channels.
In a statement issued by the company’s management on Monday, YEDC described the claim as false and urged customers to disregard the misleading information, stressing that it did not originate from the company.
According to the statement, YEDC does not offer bonus electricity units through individuals, agents, personal bank accounts, phone numbers, or social media contacts.
The company advised customers to purchase electricity tokens only through approved cashless payment platforms, including the YEDC Pay App, OPay, Interswitch, and other authorised vending channels, or to visit the nearest YEDC office for assistance.
YEDC also cautioned customers against sharing their meter details or personal information, or making payments to unauthorised persons claiming to represent the company.
The company further urged customers to rely exclusively on information disseminated through its official communication channels to avoid falling victim to fraud.
The management thanked customers for their continued cooperation and reaffirmed its commitment to serving them.
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