- Economy to contract by 3.4%
… Oil climbs to $30.28pb
In reaction to falling oil prices in the global market, the Federal Government has again slashed the crude benchmark for 2020 budget to $20/barrel from $30.
The figure shows a $37/barrel cut from the initial $57/barrel which the 2020 budget was benchmarked on in the original appropriation bill.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, who made the disclosure on Tuesday in a web conference to deliberate on the impacts of COVID-19 on the economy and how the government was tackling it said Nigeria has had its fair share of the COVID-19 trauma, noting the economy may contract by up to 3.4 per cent this year.
With Nigerian oil vessels stranded on international waters in search of buyers, the Minister said all pending oil and gas projects will be “delivered much later than originally planned” due to upstream budget cuts.
She added: “We are in the process of an amendment to reduce the revenue indicator to $20 per barrel”.
On Nigeria debt service obligations, she said talks were at advanced stages to push it to 2021 and beyond.
“It’s not debt forgiveness, it’s just rescheduling of our obligations,” she noted. With scant details on talks with the lenders, the Minister reiterated that the Federal Government was channeling between 58 per cent and 60 per cent of its revenues to debt servicing. But as recession bell tolls for the nation, economic experts said it was time for Nigeria to diversify its economy or perish in the aftermath of COVID-19.
According to them the only way to avoid a collapsed nation was to urgently end government’s culture of profligacy in order to diversify the economy, especially now that quarantines and lockdowns have put the global economy on ventilators..
Eze Onyekpere, Lead Director, Centre for Social Justice said; “We need to be looking inwards for strategies to grow our economy by boosting local production and service deliveries that increase employment, corporate tax and reduces the pressure on the Naira. We must enforce the “Buy-Nigeria” policy. It should no longer be an option”.
Meanwhile, Nigeria’s 2020 budget implementation prospects brightened further yesterday as Brent crude, the international oil benchmark hit $30.28 (5.0pm) yesterday.
The $30.28 oil price is 28cents higher that Nigeria’s amended $30 per barrel oil price benchmark for the 2020 budget.
The international oil market witnessed one of its worst setback in over one month with crude selling for less than $30. Worst hit was the West Texas Intermediate (WTI) which recorded -$0 last April. The current rise in oil price was a fallout of the April 12, 2020, agreement by the Organisation of Oil Exporting Countries (OPEC) to cut members’ production by about 4.9 million barrels per day (bpd) in a bid to shore up falling oil prices. The 4.9 million bpd oil output cut which took effect last Friday(May 1, 2020) will see Nigeria cut about 400,000 bpd.
Nigeria’s economy which accounts for about 80 per cent of its revenue from oil has been largely battered in recent months with Government forced to review its budget estimates downward in order to cope with market realities.
