Abuja — The National Assembly and the African Institute for Applied Economics (AIAE) have called for the setting up of a national stabilization fund to further protect the country from global oil price instability.
The call, which is contained in a communiqu» issued by the bodies at the end of a national symposium on policy analysis, research and project in Abuja also observed that the global economic crisis and its negative consequences on the Nigerian economy has made it an urgent need for the country to diversify away from oil.
The communiqu» disclosed that global economic crisis has clearly manifested in the Nigerian economy, as Nigeria faces an underlying economic crisis characterized by structural imbalances, market distortions, poor infrastructure and weak public institutions.
It stated that the transmission channel to the Nigerian economy is generally two-fold, to include the contagion effects and second-round effects, explaining that through the contagion effect, the Nigerian Stock Market lost large volumes of foreign portfolio investment.
While the second-round effects is manifested through the sharp drop in the international price of crude oil, the losses of foreign direct investment, trade credit, remittances and other financial flows including foreign aid.
The communiqu» which is singed by the Executive Director AIAE, Eric Oboh, stated that as a result it has become necessary that market discipline is enforced through regulatory controls to curb excessive greed and risks taking by market competitors.
Adding that such discipline would also ensure sound market regulation, he said there should be proper oversight of regulatory institutions devoid of political interference, just as regulatory agencies, themselves, should be held accountable for undiluted professional standards.
Despite the phenomenal growth of the Nigerian financial sector in recent years, he urged that the character and progression of the financial system should be closely guarded to avoid past and potential pitfalls.
He said, "It is important to constantly build the technical and institutional capabilities of financial system regulatory agencies, to make them more reliable, credible and effective.
Revealing the evident volatility of the international oil market and its distortive consequences for fiscal stability and public expenditure, the communiqu» argued that oil revenue management should be based on the establishment of National Stabilization Fund that is managed in a more systematical and transparent manner.
"In addition, better fiscal coordination between the federal, state and local governments is necessary for overall macroeconomic stability, hence
Inter-governmental organs involved in the coordination of fiscal policy and public expenditures should be strengthened," it added.