The Federal Government’s budget 2020, yesterday, came under major threat with a loss of N494 billion in the projected oil revenue following the global crash in crude oil price, which saw the price of nation’s, Bonny light tumbling to $46 per barrel, 10.67 percent lower than the budget benchmark of $57 per barrel.
The N10.4 trillion budget 2020 is based on oil revenue projection of N2.64 trillion predicated on crude oil price of $57 per barrel and oil production of 2.18 million per day.
But the likelihood of achieving these projections became remote yesterday following the OPEC-Russia oil price war that prompted the biggest decline in crude oil price, with international benchmark Brent crude and U.S. West Texas Intermediate crude plunging to their lowest since 1991.
Brent crude was down $8.49, or 18.8 percent, to trade at $36.76 per barrel, while WTI plunged 17 percent, or $6.97, to trade at $34.24 per barrel.
On its part, Nigeria’s Bonny Light crude fell to $46.33 per barrel, representing 23 percent decline from a peak of $6041 per barrel on February 20th 2020.
The $46.33 per barrel represents 10.67 percent lower than the budget benchmark of $57 per barrel and N494 billion shortfalls in the projected oil revenue of N2.64 trillion.
With the crash in crude oil expected to persist, the revenue shortfall may worsen and hence further undermine successful implementation of the 2020 budget.
The fall in oil price is said to have caused panic within the Nigerian polity. The Minister of Finance Zainab Ahmed, called for a review of the budget.
Already, experts fear Nigeria could slide into a recession if the price of crude continues to slide.
Reacting to the development, a financial analyst, Tope Fasua, said Nigeria is not prepared for the economic eventuality. According to him, if the oil price gets to $30 per barrel, it may mean a recession for Nigeria because the oil sector is a major part of the economy. “All these other countries are prepared, they have enough reserves. Saudi Arabia has trillions of dollars in its reserve shelving it for it sovereign wealth fund, Russia equally has quite a bit of reserve and sovereign wealth fund. “Already Nigerian economy is in trouble, I think that’s why they intended to borrow $22.7 billion loans because the loan is for every other budget item,” he said.
Also speaking, the Chairman, Petroleum Technology Association of Nigeria, PETAN, Bank-Anthony Okoroafor, said: “Brent and Bonny light are same in price, this is a very bad situation for us as a nation. “Our budget is based on oil price of $57 per barrel and our foreign reserves are depleting. Most projects cannot move forward. We are a mono product economy and most of our foreign exchange comes from oil.”
The immediate past president of Nigerian Association for Energy Economics, NAEE, Professor Wumi Iledare, calls for review of the budget. “It is not unexpected for the drop in price because of drastic shift downward in demand due to lower economic growth projections in Asia subsequent to the coronavirus 19 in China. Government debt is already high and additional borrowing may lead to rising out private investors at a high cost of capital.”