My attention was drawn to comments made by opposition aligned folks about the amended withdrawal rules of the Natural Resource Fund (NRF) pursuant to the Fiscal Enactments (Amendment) Act No.2 of 2024. The opposition finance spokesperson (s) intimated that this new withdrawal formula will deplete the NRF, signaling reckless spending and / or depletion of the Fund at a reckless rate. However, an application of the withdrawal rules, the old versus the new, based on the forecasted deposits into the NRF, disproves this notion.

Before I proceed to demonstrate the calculations hereunder, I wish to stop short to say that it is the very opposition that have always argued that the Government should not be borrowing to finance the budget given the proceeds from the NRF. Yet, the very critics have contradicted themselves when the Government is now prudently moving in that direction, to, in a measured way, increase the withdrawal ceiling of the NRF, which in turn would allow for minimized borrowing. Notwithstanding, this is not the first occasion wherein the opposition has contradicted themselves owing to the lack of a studied position on these matters. It now appears that the degree of numerical and fiscal contradictions have become an invariably collective norm, morphing itself into an infectious, intellectual paralysis by which they are helplessly plagued.

I now turn to my calculable demonstration:

Exhibit (a)

As shown in exhibit (a) above, under the old NRF withdrawal formula, on a balance of US$6 billion, the maximum withdrawal ceiling is capped at US$1.4 billion, or an effective withdrawal rate of 23%. Whereas, under the amended withdrawal formula, on a balance of US$6 billion, the maximum withdrawal ceiling is capped at US$4.3 billion or an effective rate of 71.7%.

In exhibit (b) below, under the old NRF withdrawal formula, on a balance of US$12 billion, the maximum withdrawal ceiling is capped at US$1.6 billion, or an effective withdrawal rate of 13%. Whereas, under the amended withdrawal formula, on a balance of US$12 billion, the maximum withdrawal ceiling is capped at US$4.9 billion or 40.8%.

Exhibit (b)

Editor, effectively, these illustrations have disproved the notion that the amended withdrawal rule is designed to deplete the NRF. Rather, the amended withdrawal formula is designed, more so, to sustainably increase the withdrawal ceiling relative to the projected growth of the Fund’s size.

In so doing, the amended withdrawal formula can be premised upon two (2) primary factors: (1) It is aimed at minimizing the level of debt financing of the budget, thus maintaining the current low-level of debt-to-GDP ratio of under 30%; and (2) the current production level of oil has already increased nearly six-fold since first oil five-years ago, which is poised to increase more than ten- fold by 2030. This means that the annual deposits into the NRF is projected to increase by at least four-fold, all things being equal.

In summary, the analysis herein has demonstrated that the amended withdrawal rule of the NRF is designed to ensure that the effective rate of withdrawal is kept under 80%, based on the projected growth in the Fund’s size, which was obtained under the old withdrawal rule, all things being equal. In other words, the maximum effective rate of withdrawal under the new formula pursuant to the Fiscal Enactments (Amendment) Act No.2 of 2024, has practically remained the same as it was under the old withdrawal formula, based on the projected growth in the Fund’s size.