Nigeria: Low Oil Prices Threatening Nigeria's Spending Projections

(file photo).
12 March 2020

It would be recalled that President Muhammadu Buhari had last October, while laying the N10.33trn Appropriation Bill before the joint session of the National Assembly, projected amongst other key assumptions, that 2.18 million barrels of crude oil per day will be produced at $57 dollars per barrel to finance the 2020 budget.

With just about 10 weeks into the fiscal year and about eight weeks after the increasingly ravaging coronavirus broke out, the huge dependence of oil as the primary source of generating the foreign exchange to finance the budget is threatening all the key assumptions and put the Nigerian government in dire fiscal strait.

Before yesterday's Roundtable event, economic analysts and organised private sector groups had raised concerns about the impact of the coronavirus on the economy.

On Monday, the Lagos Chamber of Commerce and Industry (LCCI) described the coronavirus as a major threat to Nigeria's economy requiring proactive measures by the government to deal with.

It noted that with crude oil price falling to all time low of $45.27 per barrel last Friday, against the oil price benchmark for 2020 budget at $57 per barrel, the sharp drop in revenue 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 a complete erosion of fiscal buffers.

The Director General of the OPS group, Mr. Muda Yusuf, in a statement that represents the position of the chamber on the virus' scourge, maintained that the coronavirus portends serious danger to government's revenue projections, 2020 capital budget performance and the nation's foreign reserves.

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