Financial experts on Wednesday described as timely the Federal Government’s decision to withdraw $150 million from the Sovereign Wealth Fund (SWF) for distribution to the three tiers of government.
The financial experts were speaking against the backdrop of the announcement by Mrs Zainab Ahmed, the Minister of Finance, Budget and National Planning, on Monday that President Muhammadu Buhari had given approval for the amount to be withdrawn from the fund for distribution to the three tiers of government.
The financial experts said in Lagos that the decision was timely and important as it would enable state governments to relieve the people of the effect of the coronavirus in view of the dwindling allocation from the Federation Account Allocation Committee (FAAC).
Since January, revenue inflow into the federation account has been on a decline – a situation that has affected the amount distributed to the three tiers of government by FAAC.
Prof. Sheriffdeen Tella, a professor of Economics at the Olabisi Onabanjo University, Ago-Iwoye, Ogun State, said “The withdrawal of $150 million to meet some expenses in this regard is welcome, though the money is rather small given that it will be spent on imported goods to meet demand for equipment.”
He noted that the development would make politicians see the need for the country to save and the implications of its insufficiency.
According to him, the current economic realities will make politicians to “support the building of strong buffers for a rainy day”.
Uche Uwaleke, a professor of Finance and Capital Market at the Nasarawa State University Keffi said that state governments needed special support at the moment in view of dwindling allocation from FAAC occasioned by the crash in crude oil prices.
“To this end, the plan to augment the allocation from the stabilisation fund account of the Sovereign Wealth Fund is laudable.
“Equally commendable is the disclosure that the Ministry of Finance will work out a moratorium arrangement to suspend deductions of interest and capital sums from FAAC allocations to states with respect to Federal Government and Central Bank of Nigeria-funded loans.
“This will give a lot of fiscal room to state governments and put them in a stronger position to also provide relief materials to vulnerable groups,” Uwaleke stated.
Also speaking, Mr Ambrose Omordion, the Chief Operating Officer, Invest Data Ltd., said the decision by the Federal Government to withdraw $150 million from the SWF was a pointer to the critical challenge being face by the Nigerian economy.
Omordion explained that the withdrawal was necessary as government needed to manage the economy, which is being threatened by low oil prices.
He called for the reactivation of other sources of income to avoid reliance on crude oil revenue.
He wondered for how long government would continue to draw from the SWF to support FAAC allocations to the three tiers of government.