Leadership (Abuja)
Justus Nduwugwe
16 November 2009
Abuja — The Federal Government on Friday begged deposit money banks to resume lending to the critical sectors of the economy, especially now that it is making efforts to increase liquidity in the system.
The Minister of State for Finance, Mr. Remi Babalola, threw the challenge during the meeting of the Federation Account Allocation Committee (FAAC) in Abuja.
He stated that with the improvement in the oil production level and higher prices of $79 per barrel, "the major risk and binding constraint to our economic buoyancy in the short run is the contraction of the credit squeeze".
"We therefore call on our deposit money banks to resume prudent lending immediately as their pivotal role in bolstering the economy cannot be overemphasised", he stressed.
According to him, "The automatic fiscal policy inherent in our budgetary system and discretionary fiscal stimulus from excess crude releases cannot replace financial intermediation. It is only lending activities to small and medium enterprises that can engender growth for the real sector in the long run and not an unsustainable fiscal stimulant".
The minister's position came against the backdrop of the withdrawal of N121.228 billion from the excess crude proceeds account to augment the amount recommended for distribution among the three tiers of government, namely, federal, state and local governments, for the month of October, 2009.
According to a communiqué signed by the Accountant-General of the Federation, Alhaji Ibrahim Dankwambo, the distributable statutory revenue for the month was N165.623 billion, based on budgeted exchange rate of N125/$1, which showed a decrease of N69.498 billion or 29.56 per cent compared to that of September, 2009.
The communiqué added, "The decrease was attributed to decline in oil production as a result of shut-down of facilities earlier repaired at Escravos and Forcados terminals following the discovery of more sabotate points, as well as force majeure in Amenam, Bonny and Forcados terminals."
The AGF said the sum of N121.228 billion was proposed for distribution from the excess crude proceeds account to augment the shortfall in budgeted revenue for the month of October, 2009.
Furthermore, the sum of N27.673 billion was recommended for distribution being exchange gain for the month.
"The total revenue distributable for the month, including VAT, was N354.302 billion. This shows an increase of N3.581 bilion or 1.02 per cent compared to the amount distributed in September, 2009", it also stated.
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