Budget: FG To Retain $30 Benchmark Despite Oil Price Drop
The Federal Government is not considering tinkering with the $30 per barrel oil price benchmark for the 2020 budget despite the drop in crude oil price, investigations have revealed.
Crude oil prices had dropped from about $46.64 per barrel in February to less than $20 per barrel.
The Federal Government had in the 2020 budget proposal revised downward the revenue projection for the 2020 fiscal period by N3.3tn from the initial approved amount of N8.41tn to N5.08tn.
The reduction in revenue projection was due to the negative impact of the coronavirus pandemic.
The pandemic has so far led to unprecedented drop in global crude oil prices.
The outbreak of the deadly virus in Nigeria had resulted in the lockdown of many states in Nigeria, a development that has paralysed economic activities.
Based on the revenue parameters upon which the revised proposal was made, the Federal Government has reduced downwards the oil price benchmark from $57 per barrel to $30 per barrel.
Similarly, the oil production volume was cut from the initial 2.18 million barrels per day to 1.7 million barrels per day.
Before the revision, the Federal Government had projected to generate about N8.42tn revenue to fund the budget, while debt service was estimated to gulp about N2.45tn.
The drop in crude oil price to about $21 per barrel as of Friday is below the revised $30 per barrel budget benchmark price and has heightened fears that the Executive may tinker with the budget parameters.
But sources in the Budget Office told our correspondent on Friday that the government was not considering any further adjustment in the benchmark oil price.
One of the officials who spoke on condition of anonymity as he was not officially permitted to speak on the matter said intense pressure on oil price in recent weeks had led to a careful reconsideration of the initial proposal based on alternative scenarios.
He said some key adjustments were made in the light of current realities including a reduction of N2.38tn in oil revenue from the initial approved amount of N2.63tn to N254.25bn.
The source said, “Nigeria is part of the global economy and therefore susceptible to developments in the rest of the world economy.
“The challenge is how we respond to the economic crisis caused by the outbreak of the coronavirus pandemic.
“The proposed 2020 budget will clearly be affected by the oil price decline in the form of lower oil revenue.
“But the executive has made necessary adjustments including the reduction in oil price budget benchmark from $57 per barrel to $30 per barrel.
“We feel the $30 per barrel is realistic because there are predictions that oil price would rebound. There is no need to start tinkering with the budget benchmark price of $30 because it’s a sustainable parameter.”
When contacted if the Federal Government would reduce the oil price benchmark from that current $30 per barrel, the Media Adviser to the Finance Minister, Yunusa Abdullahi said, “No comments.”