Last December, President Muhammadu Buhari signed a N10.50 trillion national budget for the year 2020. Oil production was pegged at 2.18 million barrels per day, with a price benchmark of $57 per barrel.
However, with oil prices falling amid concerns over a price war between Russia and Saudi Arabia, and the coronavirus outbreak obliterating stock markets, Africa’s largest economy is in a fragile position.
Oil prices extended losses on Monday, slumping by more than $1 a barrel, as an emergency rate cut by the U.S. Federal Reserve failed to soothe global financial markets panicked by the rapid spread of the coronavirus and mounting economic disruptions.
Brent crude fell $1.83 to $32.02 a barrel by Monday, 12.31 am Nigerian local time, extending a plunge of over 20% last week. The front-month price opened at a high of $35.84 but slipped a low of $31.63.
Crude oil price dropping to $32 per barrel today against the oil price benchmark for 2020 budget at $57 per barrel, brings a sharp drop in revenue that could cause significant dislocations in the 2020 budget and in the economy, especially for a country already grappling with challenges of weak revenue performance and complete erosion of fiscal buffers.
Nigeria’s economy continues to feel the strain in balancing its budget as the sudden crash in crude oil prices is set to wipe about $8.63 billion from the expected earnings accruable to the country in six months.
Already, the nation has lost over $335.7 million in the last one week after the crude oil price plunged last week, hovering between $30 to $35 per barrel.
With economic growth around 2%, it’s noted Nigeria is still struggling to shake off the effects of the 2016 recession, which was caused by the oil price collapse of 2014.
If nothing significant is done to shore up the revenue in supporting the budget, following the current crash in crude oil prices, another fiscal crisis is definitely imminent.
However, Ben Akabueze, Director General of Budget, Budget Office, noted that there was no need for Nigerians to panic in the midst of the challenge.
Speaking on a Channels Television program, Mr Akabueze admitted that the effect of the virus on oil prices calls for concern but should not drive Nigerians into apprehension as measures would be put in place to address the concerns.
He also affirmed the government’s claim that the 2020 budget would be reviewed in tune with prevailing economic realities and falling oil prices.