Nigeria: 2020 Budget - Govt Retains $55 Benchmark Despite Oil Price Spike

17 September 2019

The federal government yesterday ruled out revising upward the $55 per barrel oil price benchmark adopted for the 2020 budget despite a spike in value of the commodity in the global market in the aftermath of Saturday's drone attacks on Saudi Arabia oil facility that wiped out about five per cent of global supplies.

Oil prices yesterday continued on the upward swing in the wake of the attacks launched against Saudi Arabia facility by Iran-backed Houth is movement in Yemen; rallying at about $72 a barrel.

At $72 per barrel, crude oil posted its biggest intra-day percentage gain since the Gulf War in 1991, after the attack on Saturday shut more than five million barrels per day (bpd) of output, or over five per cent of global supply. Oil prices had hit a six-month high of $71. 95 a barrel by Sunday, a day after the attack.

Meanwhile, President Muhammadu Buhari has deplored the attacks on Saudi oil refinery and pledged Nigeria's solidarity with its co-member in the Organisation of Petroleum Exporting Countries (OPEC).

OPEC has also begun an assessment of the impact of the drone assaults on market in a bid to fashion out its response.

But the federal government said it would adopt a cautious approach to the situation, fearing that the oil price surge might not be sustainable on the long run.

It also expressed concern that the attacks on the Saudi oil facility, despite the sophisticated security system of the Middle-East nation, showed that the Nigerian oil sector might be vulnerable.

Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, yesterday said the federal government was not in a hurry to embark on an upward adjustment in the benchmark price of oil for the proposed 2020 budget following the attacks on Saudi Arabia's oil facility.

Ahmed, while responding to questions from journalists at a media briefing on the forthcoming Nigeria Economic Summit (NES) in Abuja, described the attacks on the Saudi Arabian oil facility as disturbing.

She expressed apprehension that if a country like Saudi Arabia with such sophisticated security system could suffer such attacks, then Nigeria might be vulnerable.

According to her, the federal government will continue to monitor the situation in the global oil market and respond appropriately should the need arises.

"We shouldn't be rejoicing over the misfortune of others. If Saudi Arabia that has a sophisticated security system is affected in this manner, it means we are also vulnerable.

"So, let us not be in a hurry to celebrate. And as the minister of state has said, we should also not be in a hurry to adjust the revenues," she said.

The Minister of State for Budget and National Planning, Clem Agba, who also reacted to the situation, said the government would not tinker with the 2020 budget now as the increase in oil price might not be sustainable.

"Considering the recent event that happened in the Middle-East and the soaring oil prices; like you know, for now it's a one-off event and so we will be monitoring the situation.

"If it becomes sustainable, then there might be need to adjust. But for now, we will maintain the benchmark rate that we have established as the budget proposal for 2020," he stated.

On the NES billed for next month in Abuja, Ahmed said the summit had over the years helped to shape many of the reform policies underpinning the evolution of economic growth and development.

With the summit themed, "Nigeria 2050: Shifting gears," the government, she noted, would be able to address issues of good governance as a path to sustainable human and economic development, adding that the two-day event would also provide a timely opportunity for a national economic review and create a consensus on the need to ensure that Nigerians take advantage of the opportunities that exist to increase productivity and create jobs.

"Shifting gears emphasise the imperatives for the country to move to a more robust competitive private sector economy while discussing the implication of the projected population of the country hitting over 400 million by 2050 with 65 per cent of the population under the age of 35.

"This figure we know will put an unimaginable pressure on our educational institutions, structures, resources and manpower.

"In this regard, it is only a competitive private sector led economy that will drive this process and ensure economic prosperity for all Nigerians," Ahmed said.

Buhari Deplores Attacks on Saudi Oil Refinery

Also yesterday, Buhari pledged Nigeria's solidarity with Saudi Arabia over the attacks on its refinery plants at Khurais and Abqaiq.

Buhari, in a statement by one of his spokesmen, Mallam Garba Shehu, said: "We in Nigeria once experienced attacks on our own oil facilities. Those who sought, by doing so, to undermine governments of the day did not succeed then - nor at any time.

"The identities of those who sent the drones to attack the Saudi refineries, and from where, may not yet be known. Still, these attacks similarly represent economic warfare aimed at damaging a government, but, in reality, always and only damaging innocent citizens' livelihoods: those with no place, nor cause, to be harmed.

"The attackers of Saudi Arabia will win no friends in the international community for their actions - whoever they may be, and however certain they be in their cause."

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