Nigeria Dips Into Oil Funds As Jonathan Takes Charge

PHOTO: NIGERIAN ACTING PRESIDENT GOODLUCK JONATHAN.

Nigeria's acting president approved the release of $2 billion in windfall oil savings to government on Friday, a further sign the country is emerging from paralysis caused by the absence of its ailing leader.

The decision to release the money comes three days after Vice President Goodluck Jonathan assumed executive powers to fill a vacuum left by President Umaru Yar'Adua, who has been in hospital in Saudi Arabia since late November.

The United States and Britain commended Nigeria, which endured several decades of military rule until elections in 1999, for maintaining democratic principles with the handover.

But Nigerians see Jonathan as a caretaker leader and expect uncertainty to continue as rival political factions jockey for position ahead of presidential elections due in 2011.

The $2 billion of oil savings will be shared by the three tiers of government -- including the powerful governors of 36 states who publicly backed the handover of powers to Jonathan.

"It is a stabilisation move that you need to do to keep the states and government from getting restless," said Bismarck Rewane, head of Lagos-based consultancy Financial Derivatives.

"Once the money has flowed through there will be a semblance of stability as against the atmosphere of high instability which prevailed before," he told Reuters.

But the step also shows that while Jonathan may be able to exert authority over the cabinet as acting leader, he has less power in the face of the state governors, who will play a key role in picking presidential nominees for next year's polls.

The OPEC member's excess crude account, where it saves any oil revenue above a benchmark price, was a pillar of IMF-backed reforms meant to help hedge sub-Saharan Africa's second-biggest economy against volatile world energy prices.

But under Yar'Adua Nigeria regularly dipped into the savings, leading some analysts to warn economic reforms were at risk unless the cash-hungry governors could be kept at bay.

Minister of State for Finance Remi Babalola said recently the account had dwindled from over $20 billion in 2007, the year Yar'Adua took office, to around $6.2 billion on spending to counter the impact of a global downturn.

That was before the latest distribution of funds.

OILING THE ECONOMY

Oil accounts for more than 90 percent of Nigeria's foreign earnings, meaning investors are watching to see whether Jonathan can prevent a slide back to violence in the Niger Delta.

There have been no major attacks on oil facilities for more than six months, after thousands of gunmen laid down weapons last year under an amnesty programme led by Yar'Adua.

Jonathan is the first person from the Niger Delta to lead Africa's most populous nation but he does not enjoy universal support in his home region.

The main militant group, the Movement for the Emancipation of the Niger Delta (MEND), said it was waiting to be invited by Jonathan to resume negotiations before it decided whether to reinstate a ceasefire in the region.

"It is still too early to form an impression of the man with his new office ... The ceasefire is still off and we are yet to be invited to resume talks which will be the basis to weigh the intentions of this government," it said in an email to Reuters.

MEND said last month it was ending a three-month old ceasefire and threatened renewed attacks amid delays to the amnesty programme caused partly by Yar'Adua's absence.

The United States become the first major foreign power to publicly comment on Jonathan's assumption of duties as acting president, said it believed the "principles of democracy" had been well served.

Former colonial power Britain also congratulated Jonathan on Friday and commended parliament and the cabinet for helping Nigeria through a period of political uncertainty. 

REUTERS.