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States ask for extra $2 billion amid revenue crunch

19 November 2014, 16:05

Lagos - Nigeria's state governments have requested an extra $2 billion in federal money to cover shortfalls caused by falling global oil prices, an official said Wednesday, highlighting the severity of the country's revenue crunch.

A panel of finance commissioners representing all 36 states has asked that the money be dispersed by mid-December, saying that without the funds governments may fail to pay salaries and meet contract obligations.

Fully funding security measures before general elections in February next year could also be jeopardised, said Timothy Odaah, the chairman of the States' Commissioners of Finance Forum.

"This amount of money is needed for state governments to complete their expected obligations," he told AFP.

"It is a request that we wish Mr President (Goodluck Jonathan) will accomplish," he added, saying that all state government unanimously agreed on the need.

The panel asked that the funds be released from the oil savings account, which experts say has been depleted over years due to persistent budget shortfalls caused by widespread graft.

Also read: Nigeria facing 'serious challenges' amid oil price collapse

Finance Minister Ngozi Okonjo-Iweala said at the weekend that Nigeria was facing "serious challenges" because of the oil price slide and announced special measures to help cope with the falling government revenues.

They include a cutback on foreign travel for government workers and new taxes on luxury items.

The US boom in oil extracted from shale rock has helped create a global supply glut and lower prices.

Nigeria's main crude product has been trading at $79 per barrel, down from above $100 just two months ago, with oil exports accounting for 70 percent of government revenue.

Odaah echoed a call from analysts for Nigeria to aggressively diversify its economy to make the country less vulnerable to market shocks.

"It is a clarion call for us to reduce our dependence on oil," he said and argued that state government programmes must be prioritised because they are most effective in targeting job creating sectors such as agriculture.

A cash crunch before general elections was also dangerous, Odaah added, because "political activity engenders some insecurity" and states need funds now to make preparations.

Nigeria has a complex and fiercely debated system of sharing federal money, including oil revenue, among its states, which is driven by population and other factors.

Odaah said that if approved, the extra $2 billion (1.6 billion euros) will be distributed using that model.



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