* Ngozi Okonjo-Iweala trying to improve fiscal discipline
* Cost of recurrent expenditure inching down
* Fuel subsidy checks save billions of naira
(Adds details, analyst reaction)
By Tim Cocks
ABUJA, Dec 3 Cost-cutting has helped restore
Nigeria's Excess Crude Account (ECA) to some $9 billion in oil
savings, or more than double what it was a year ago, Finance
Minister Ngozi Okonjo-Iweala said on Monday.
Okonjo-Iweala was addressing delegates in Abuja at the
annual Nigerian Economic Summit, whose themes include reducing
the high cost of governance in Africa's top oil producer.
Nigeria is Africa's second biggest economy and its sovereign
debt is closely watched by foreign investors, especially since
JP Morgan included it in its emerging market index in October.
Flush with oil cash, the country has been seen as a
relatively safe destination for frontier debt investors, but
poor fiscal management has dogged it for decades - something
Okonjo-Iweala has made her top priority to fix.
"Before you can even look at the centres of the economy and
trying to change them and create jobs, you must have
macro-economic stability," Okonjo-Iweala said. "We have
introduced a measure of fiscal discipline."
"The fact that (forex) reserves are climbing now is not a
miracle. It happened because of proper fiscal management. We
have about $9 billion in the excess crude account. Last year it
was $4 billion, so it's more than doubled," she added.
The figure is still lower than the $20 billion it had in it
in 2007, but this was reduced to $3 billion when Jonathan took
office in early 2011, despite a year of record high oil prices.
And some of it would have to be used to pay for the latest
round of Nigeria's costly fuel import subsidies, she said.
Economists have cautiously welcomed Nigeria's improved
savings level, but caution that there is nothing in place to
stop it being reversed, as in the past.
"There's been some modest accumulation of fiscal savings,
but put it in context: even $9.6 billion, as we estimate it, is
only 3.7 percent of GDP," said Standard Bank's Samir Gadio.
"Compared it with UAE (Emirates) or Saudi Arabia, where it's
65 percent. It may be improving but it's well behind the curve."
The Sovereign Wealth Fund (SWF) launched this year would in
theory help Nigeria better manage its oft squandered oil funds,
by putting them out of the reach of its political elites, but
powerful state governors who want more money to spend are
blocking attempts to transfer the ECA into the fund.
"Without the SWF there's no sustainable basis for savings.
The risk is that as we approach elections in 2015, the ECA could
be depleted quite rapidly," said Gadio.
The finance minister also faces a showdown in parliament
over the government's latest budget, with some lawmakers saying
too much money is being set aside as oil savings when the
country needs more spending on things like infrastructure.
President Goodluck Jonathan's 4.93 trillion naira ($31.35
billion) budget plan for 2013 assumes oil prices at $75 a barrel
oil prices, but many legislators want this inflated - especially
with prices now hovering around $112 a barrel.
Oil earnings over the benchmark price get deposited into the
ECA, which is used to save for future generations.
Critics say running Nigeria's government still saps too much
of the budget - Okonjo-Iweala said the share of such recurrent
expenditure had been reduced to 68.8 percent in next year's
budget, from its current 71.47 percent in this year's.
Investors and rating agencies have welcomed Okonjo-Iweala's
austerity drive, with Standard & Poor's the latest to upgrade
Nigeria's debt to BB-, with a stable outlook.
One major fiscal headache remains the motor fuel subsidy.
Jonathan attempted to scrap it in January, but a week of
strikes and protests forced him to partially reinstate it.
Since then, a parliamentary inquiry has uncovered
multi-billion dollar fraud in the subsidy's administration, and
the government has exposed subsidy claims to stronger checks.
Okonjo-Iweala said that 232.2 billion naira of claims had
been rejected so far. There is speculation Jonathan will try to
remove the subsidy - which many Nigerians see as the only
benefit they get from living in an oil-rich state - next year.
Speaking at a panel in the economic summit, Vice President
Namidi Sambo said it would depend on what Nigerians thought.
"We're a democracy. Our economic policies, however well
designed, have to be accepted by the public," he said. "I
believe Nigerians will come to see that deregulation is right."
($1 = 157.3500 naira)
(Additional reporting by Camillus Eboh; editing by Ron Askew)