- Adjusts 2020 Budget Oil Benchmark to $20pb
- Oil revenues expected to fall by more than 80% –Akabueze
By Babajide Okeowo
As global economies continue to wobble, the Federal Government of Nigeria has projected that the country’s economy will contract by 3.4 percent this year as a consequence of the outbreak of the pandemic.
This is even as the government for the second time has cut budget plans to assume a lower petroleum price of $20 per barrel subject to the approval of the National Assembly.
Minister of Finance, Budget, and National Planning Zainab Ahmed made these disclosures at a virtual session tagged Citizens dialogue session on government fiscal policy decisions in response to the fall in oil prices and the COVID-19 pandemic that the benchmark would again have to be revised down.
In her words, “we are in the process of an amendment that is bringing down the revenue indicator to $20 per barrel” she said.
She, however, cautioned that “budget revisions would need to be approved by lawmakers before being signed into law by the President.”
She also disclosed that the country’s oil and gas projects will be “delivered much later than originally planned” due to upstream budget cuts.
With regards to Nigeria’s debt servicing obligations, the finance minister said, Nigeria is in talks to defer debt service obligations to “2021 and beyond”.
This is coming a week after the country swapped plans to borrow 850 billion naira ($2.36 billion) from the domestic market instead of borrowing from the international markets to finance the budget.
According to her, “it’s not debt forgiveness, it’s just rescheduling of our obligations,” said Ahmed, with regards to talks with lenders.
She did not provide details of the lenders with whom talks were held. While lamenting that Nigeria was spending around 58% to 60% of revenues to service debt, Ahmed lamented that explained that that was why Nigeria approached the lenders.
On his part, the Director-General of the Budget Office of the Federation, Ben Akabueze also at the session disclosed that oil revenues were expected to fall by more than 80%, even as he revealed that debt servicing costs were expected to rise by 200 billion naira in 2020.
He said the government had revised its projections and expected the economy to contract by 3.4% this year compared with its previous expectation that it would grow by 2.9%.
Speaking on projected contraction, Ben Akabueze stated that “Nigeria would speed up marginal field licensing and oil mining license renewals to try to raise revenues.”
Recall that Africa’s top oil exporter relies on crude sales for around 90% of foreign exchange earnings and more than half of government revenue and the economy has been battered by low oil prices following a dispute between Russia and Saudi Arabia, as well as the impact of the novel coronavirus pandemic.
