joseph o sanusi : a central bank look at fiscal policy management in nigeria keynote address by dr joseph o sanusi, governor of the central bank of nigeria, at the seminar of the nigerian economic society on “ fiscal policy management in nigeria ”, lagos, 22 may 2003. * * * his excellency, the executive governor of lagos state, asiwaju bola ahmed tinubu, the president, nigerian economic society ( nes ), council members of the nes, mr. chairman, distinguished speaker and guests, ladies and gentlemen : i feel highly honoured to be invited as a guest of honour at this year ’ s seminar of the nigerian economic society on “ fiscal policy management in nigeria ” and for an opportunity to present this keynote address. the theme of the seminar could not have come at a more opportune time, as the outcome is expected to assist the government in policy fine - tuning and implementation in the context of its economic agenda under the next dispensation. this is in recognition of the fact that fiscal policy is a major dimension of an adjustment programme to ensure a stable macroeconomic environment and improved growth performance. suffice to say that sound fiscal policy management, predicted on consistency, sustainability, efficiency, accountability and transparency, is essential for accelerating the pace of economic recovery. since the 1970s, the government has been overly dependent on the oil sector as the most important source of revenue accounting for four - fifths of the total. consequently, fiscal operations have been influenced by the uncertainties of the international oil market. to minimize the destabilising influence of the volatility in the price of crude oil on government budgetary operations, efforts have been intensified since the 1980s to broaden government revenue base and enhance the contribution from non - oil sources. federal government expenditure has closely followed developments in the revenue flow, which has given rise to a boom / bust pattern. the rapid acceleration in government spending between 1973 and 1976 was so strong that the increased revenue earnings from oil over the period was more than absorbed, resulting in substantial deficits. it has been difficult to scale down expenditure whenever there was a significant deterioration in the oil market. the result was that government resorted to borrowing from the banking system, especially from the central bank, to finance the deficits, with adverse implications for domestic prices and the exchange rate. like most of the other oil exporting countries, nigeria experienced a sharp bust of inflation in mid - 1970s as public expenditure rose. it

full responsibility for government debt management, thereby relieving the cbn of such role. thirdly, there is a need to meet the west african monetary zone ( wamz ) convergence criterion, limiting central bank financing of government to 10 per cent of estimated current revenue. fourthly, the enactment of the fiscal responsibility act should be rigorously pursued. your excellency, distinguished ladies and gentlemen, there is no doubt in my mind that the issue of fiscal policy management is very critical to the successful implementation of our economic programmes. in this connection, i hope the seminar will find time to ponder on the following issues : ( i ) the need to establish a stabilization fund which will address the problem of revenue / expenditure volatility ; ( ii ) formulate viable fiscal rules which are consistent with our fiscal federalism, and ( iii ) propose the way forward in addressing the problems of inter - generational equity argument arising from debt overhang. i am convinced that the array of eminent professionals gathered here today will come up with concrete proposals that will enhance our fiscal policy in the medium to long - term. i thank you for your attention.