Nigeria’s plan to release $4 billion of its oil savings to the federal and state governments between now and June is unconstitutional and the payment must be in naira, the presidency said on Friday.
The central bank and the finance ministry had said it was important that the release would be in dollars rather than the local currency as this would help manage liquidity and limit the inflationary impact of the disbursement.
“After much argument, the consensus was that the position of the law is against dollar payment and it was so ruled by the president,” said Olusegun Adeniyi, spokesman for President Umaru Yar’Adua.
He said the decision was taken two days ago after a long meeting at which the central bank governor and finance minister were present, as well as the attorney general and the accountant general of the federation.
Adeniyi said Yar’Adua was fully aware of the inflationary implications of the huge disbursement and a new mechanism would have to be found to moderate the impact.
“There is a commitment to make the payment, but the central bank will have to study how they are going to do it in terms of controlling inflation,” he said.
It is not yet clear whether the naira equivalent of $4 billion will be released according to the previously announced timetable — in three tranches between now and June — or whether the modalities will change.