The Minister for Finance, Budget and National Planning, Zainab Ahmed has revealed that for the second time this year, the Federal Government has cut the 2020 budget oil benchmark, as COVID-19 outbreak continues to negatively impact the economy and oil market.
Ahmed said the new revised 2020 budget oil benchmark will now be trimmed to $20 per barrel. She made this known during a webinar conference on Citizens dialogue session on government fiscal policy decisions, which focused on the impact of low oil prices on Nigeria’s economy.
The downward review was in response to the fall in oil prices caused by the Covid-19 pandemic and the oil price war between Saudi Arabia and Russia. The cut is significant considering Nigeria had pegged its 2020 budget oil benchmark on $50.
But the before downward review to $20 per barrel, FG had cut it to $30 per barrel, followed by a cut in production output, from approximately 2.1 million barrels per day to 1.7 million per day. However, as oil price continues to crash and market sentiment becomes negative, the $30 per barrel became ineffective.
Speaking at the webinar conference, Ahmed said, ‘’We are in the process of an amendment that is bringing down the revenue indicator to $20 per barrel’’. This decision is not surprising as Nigeria's economy has been badly impacted by the COVID-19 outbreak, low demand for oil due to restriction of movement.
The economy has been on partial lockdown, with production shutdown, while other businesses were forced to conduct skeleton operation for over a month. The country has, however, been phasing out the lockdown gradually, allowing business to reopening for a certain period.
Ahmed also stated that ongoing oil and gas projects within the country will not be concluded on initial planned date. She said the various projects will not be completed until a much later date, citing budget cuts and the oil market crisis globally.
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