Nigeria’s Minister of Finance, Budget, and National Planning, Mrs. Zainab Ahmed, on Wednesday said that the worldwide outbreak of Coronavirus (COVID-19) which had led to a huge drop in crude oil prices would surely negatively affect the country’s economy as it it putting severe strain on the Federal Government’s budget.
Echoing the songs of Nigerian leaders for decades, Mrs. Ahmed said that with the attendant effects of the spread of the virus, the time had come for Nigeria to begin to live a life without oil.
Speaking at a consultative roundtable with the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, the Finance Minister stated that the current economic challenges as a result of drop in crude oil prices is a shock to the government.
But she said that this is not the time for Nigerians to panic.
According to Mrs. Ahmed, “the sudden and unexpected drop in crude prices to just over $30 comes as a shock and great surprise. These strong headwinds would reinforce the wake-up call to life without oil. But that should not spread panic and speculation in our economy. We need to put our hands together to weather the storm. We need to work together to take the opportunities provided by this very harsh reality.
“We are working as a government to strengthen our macroeconomic fundamentals. Today, we are far stronger and more robust than in 2014-2016. There is no doubt that the combination of crude oil price crash and coronavirus will put a severe strain on our budget, revenue, forex, and many sectors.”
The dwindling price of crude oil has set alarm on the danger the Nigerian economy is likely to face as it has cut the nation’s oil benchmark almost to half, putting fears on sustainability of funding the 2020 budget.
Mr. Lukman Otunuga, Senior Research Analyst at FXTM, says that “the staggering depreciation in Oil prices could not have come at a more disruptive and critical time for the Nigerian economy. At this point in time it is difficult to pinpoint where the floor is on Oil which has depreciated over 43% since the start of 2020, and this is bad news for many emerging market energy producers including Nigeria.
“The country’s export earnings and government revenues will take a direct hit from the steep decline in Oil prices. This will hit foreign exchange earnings, the Central Bank of Nigeria’s ability to defend the Naira, and may even result in rising inflationary pressures. Questions will be raised over Nigeria’s ability to effectively implement the 2020 budget which has set the benchmark for Oil at $57 – with an Oil revenue goal of N2.64 trillion (N366=$1)
“If severely depressed Oil prices hit export earnings, reduce government revenues, weaken the Naira and stoke inflationary pressures, Nigeria’s economy will be under threat in 2020.”