Indeed, oil prices are trading below the Federal Government’s benchmark at $57/barrel for the 2020 budget, thus posing a threat to the 2020 budget, which was signed by the President Muhammadu Buhari in December, on the assumption of oil production of 2.18 million barrels per day .
Brent oil price yesterday, dropped to $53.80 at about 3:41 pm GMT, while Nigeria’s Bonny Light stood at $56.15. “As global oil prices trend lower at $57/ per barrel as of mid-February, the subsistence of the coronavirus will continue to dampen appetite, which will put a lid on oil prices well into March.
“All these were contributing factors to the Nigeria recession in 2016. It will be of no surprise if the Chinese CONVID’19 oil price shake leads to another recession, due to the over-reliance on proceeds from the oil sector as the biggest foreign exchange earner,” SBM Intelligence analysts note. “This partly explains why two global credit agencies – Moody and Fitch, recently downgraded our economic outlook from stable to negative on the back of slow fiscal growth and increasing vulnerability to exogenous shocks. We, therefore, urge the government, as a matter of urgency to intensify diversification efforts and embrace structural reforms to attract private investment in stimulating economic growth.
Yusuf said these shocks would remain as long as Nigeria remained critically dependent on crude oil both for revenue and foreign exchange earnings.
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