The World Bank has urged the federal government of Nigeria to halt the depletion of its foreign reserves and excess crude account, saying such spending is capable of destabilising the entire economy.
Onnoh Ruhl, World Bank’s country director warned that Nigeria should not be debating how to spend its funds now but to actually be accumulating them.  Foreign Reserves fell from $64 billion in 2008 to $33.9 billion in 2010, while the excess crude account has also declined from $20 billion in January 2009 to $1.16 billion. Nigeria’s oil production has increased to 2.6 million barrel per day and international oil prices have equally risen to about $85 per barrel, signifying more revenues from oil. “If you look at why Nigeria is losing reserves, the answer is because government is spending too much and that is the problem,” Ruhl said. “We are concerned that the excess crude account is depleting and you are slowly and steadily losing the foreign reserves. In actual fact, oil production is high and the oil price is also reasonably high. So, one would expect Nigeria to accumulate reserves than to lose them.
“One of the features of countries running elections is the tendency for government to spend a lot of money under the pressure of elections and that can destabilise the economy. Our own view is that the economy is not yet destabilised, but this is the time for the policy makers to be conscious about not spending as much as they are doing because losing reserves steadily in a situation where oil prices are high is not a situation that would happen in a major oil producing economy like Nigeria.”
He advised that instead of spending the monies, government should save them to be able to fulfil its import needs, “which is important because Nigeria unfortunately imports most of its goods. It would be dangerous not to have money to pay for that.” According to him, the reserves serves as a buffer when income fluctuates stressing the need for the reserves to be very robust at every time.
Ruhl said Nigeria should be accumulating reserves pending when the oil price is low or production is low. He noted that the  issue for “Nigeria is not how to spend the money but this is the time to save again, because the time for spending is over since the situation that justified the spending is no longer there.”