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President Umaru Yar’Adua has set up a committee to oversee the management of the nation’s excess crude proceeds account (ECA), which the Central Bank of Nigeria (CBN) yesterday said stood at $9.6 billion at the end of July.
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The establishment of the committee might not be unconnected with the suspicion by the 36 states of the Federal government in the management of the excess crude proceeds account in particular and the Federation account in general.
They had called for an independent umpire like the Revenue Mobilization Allo-cation and Fiscal Commission to oversee the management of the Federation account.
The announcement of the establishment of the committee came on a day the CBN disclosed that the nation’s external reserves made a plunge to the present level of $42.74 billion from $43.17 in May 2007 .
The reserves had dropped from $43.17 billion at end May 2007 to $42.74 at end June, and marginally increased to $42.9billion at end July 2007.
Briefing newsmen yesterday in Abuja at the end the Monetary Policy Committee Meeting, CBN Governor, Prof. Chukwuma Soludo, said the committee was already fashioning out the most transparent way to manage the ECA into which excess revenue from the sale of the nation’s crude oil are kept.
He declined to disclose the composition of the committee but THISDAY gathered that the presidential committee was composed of representatives from the three tiers of government.
Soludo said the current level of reserves, could cover approximately 19 months of current foreign exchange disbursement or 25 months of imports.
The CBN governor, who said the increase in the prices of petroleum products and the upward review of the value added tax (VAT) from five per cent to 10 per cent, which was later reversed, had pushed up inflation, however stressed that inflation had remained a single digit while there has been stability in the foreign exchange market and price mechanism.
According to him, “Inflation stayed within single digit in the first half of 2007. The Committee noted the rise in year-on-year (headline) inflation to 6.4 per cent in June 2007 from 4.6 per cent in May, 2007 reflecting the combined effects of the increase in food, transport and energy price indexes. Staff estimates, however, show that the year-on-year inflation would remain within single digit for the rest of the year, despite current pressures.”
Looking ahead the rest of the year, he said, the MPC predicted that “year-on-year headline inflation would continue to remain single digit in the third quarter of 2007, but may not return to the April level of 4.2 per cent, the lowest recorded in the first half of 2007. Overall, a combination of stable food prices and a restrictive monetary policy stance are expected to help sustain the headline inflation within single digit.”
The CBN governor also disclosed that MPC noted the actual and potential effects of the rising private foreign exchange inflows on the Naira exchange rate.
The inflows, he pointed out, comprised of mainly foreign direct investment and portfolio investment, which averaged $674.6 million in the second quarter of 2007, compared with $500 million in the first quarter.
Soludo however added that “growth in aggregate domestic credit declined by about 9.12 per cent at the end of May and by 37.18 per cent in June 2007 relative to its level at the end of December 2006.”
He attributed the fall in aggregate credit to “the decline in credit to government which fell by about 50.6 per cent at the end of May and by 50.5 per cent at the end of June.”
He also said “credit to the private sector grew by about 24.8 per cent in June which on annualised basis comes to 49.6 per cent, compared to the target growth of 30 per cent for the year.”
Meanwhile, the governor said the monetary policy committee had decided to retain the Monetary Policy Rate (MPR) at eight per cent.
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