Nigeria borrows to pay salaries as oil price plunges

A CASH shortage caused by low oil prices has forced Nigeria to borrow heavily through the early part of this year, with the government struggling to pay public workers, officials said yesterday.

“Things have been tough since the beginning of the year and are likely to remain till the end of the year,” Finance Minister Ngozi Okonjo-Iweala said.

Nigeria has been hammered by the 50% fall in oil prices, with crude sales accounting for more than 70% of government revenue.

“Most states of the federation have not been able to pay salaries and even the federal government has not paid [April] salary,” Imo state governor Rochas Okorocha said.

Okonjo-Iweala said the federal government had a projected borrowing allowance for 2015 of 882-billion naira (R53-billion).

But 473-billion naira (R28-billion) had already been used up to meet recurrent expenditures, including public worker salaries.

“We have front-loaded the borrowing programme to manage the cash crunch,” the minister said.

While Okonjo-Iweala said the severity of Nigeria’s cash crunch required daily management, the problem will almost certainly be off her desk soon.

President-elect Muhammadu Buhari will be sworn in on May 29 and is not expected to retain any of the key ministers appointed by outgoing president Goodluck Jonathan.

Government critics claim that Nigeria’s revenue crisis was compounded by excessive political spending during last month’s general elections.

Leaders of Buhari’s All Progressives Congress (APC) party warned that the incoming administration would have serious economic problems.

Okonjo-Iweala said Nigeria was still projected to grow at 4.8% this year. But observers will likely note his administration’s failure to save for a rainy day.

Nigeria typically sets its benchmark crude price between $75 and $80, and is supposed to deposit excess revenue in a savings account.

But even when crude was selling above $100 last year, Jonathan’s administration struggled to build savings. – AFP