Coronavirus: Panic in Aso Rock as Buhari raises the alarm on 2020 budget

There are palpable fears within the presidency that the 2020 national budget may have run into a hitch on the heels of the ravaging effects of the contagious coronavirus pandemic.

The first major impact of the coronavirus on global economy was the plunge in the prices of crude oil with analysts hinting that the worse is yet to come. Global oil price went down its lowest line on Monday when it recorded its lowest drop in about three decades. Nigeria’s 2020 budget which was predicated on $57 per barrel is said to no longer be realistic with oil prices likely to grind to as low as $30 per barrel.

U.S. stock index futures continue to go down after Saudi Arabia launched an oil price war with Russia, sending crude tumbling 25 per cent and intensifying fears about a global recession.

The Dow Jones Industrials index on the New York stock exchange  had on Monday went down  to over 1,300 points at the open, with Chevron Corp  and Exxon Mobil Corp slumping about 12% in premarket trading. All 30 blue-chip components were in the red.

Futures contracts for all three main Wall Street indexes hit a 5% daily down limit overnight.

Crude prices logged their worst day in almost three decades as Saudi Arabia slashed its official selling price after Russia refused to cut output to match lower demand on the back of the coronavirus outbreak.

The health crisis, which has now infected more than 110,000 people globally, has crippled supply chains and prompted cuts to global growth forecasts for 2020.

This have indeed challenged Nigeria’s economic managers into working out mitigating strategies in the event of the worst case scenario against the backdrop of Nigeria’s economic fortunes depending almost entirely on the fortunes of the global oil market.

Not wanting to be caught napping, Muhammadu Buhari Monday set up a five-man committee to review downwards, the oil benchmark of $57 per barrel as well as the overall 2020 budget size.

Minister of Finance, Budget and National Planning, Zainab Ahmed, who disclosed this after a meeting with the President at the Presidential Villa, Abuja is to  head the committee.

Other members of the panel are Minister of State (Petroleum) Timipre Sylva; Governor of Central Bank of Nigeria (CBN), Godwin Emefiele; Group General Manager of Nigeria National Petroleum Corporation (NNPC), Mele Kyari and the Minister of State (Budget and National Planning), Clement Agba.

According to Ahmed, the committee’s mandate is to do a quick examination of the impact of the coronavirus on the economy with respect to its effects on the crude oil price.

She said all things considered, it would be imperative to reduce the oil benchmark of $57 per barrel, adding that the overall size of the budget would also be necessarily cut down as revenue flow would be affected.

She said: “We just met with the President to discuss the matter of the impact of the Coronavirus on our economy and Mr President has formed us into a committee, with the Minister of State, Petroleum Resources, the Central Bank Governor, the GMD NNPC and myself as members.

“Our mandate is to make a quick assessment of the impact of this Coronavirus on the economy, especially as it affects the crude oil price. We will be writing a report and brief Mr. President tomorrow or Wednesday morning and after that we’ll also have more substantial information for the press.

“But it is very clear that we will have to revisit the crude oil benchmark price that we have of $57 per barrel, we have to revisit it and lower the price. Where it will be lowered to is the subject of the work of this Committee.

“What the impact will be on that is that there will be reduced revenue to the budget and it will mean cutting the size of the budget. The quantum of the cut is what we are supposed to assess as a committee.

“This is just an initial update to inform you on the directives that we have and subsequently we will be sending a report to the President, after which we will be briefing the press on the actions that government will be taking.”

On suggestions that Nigeria was in talks with Russia and Saudi Arabia with a view to persuading them to cut down on oil production so as to force the prices up, Sylva said such an engagement was beyond the country as an individual member of OPEC.

Sylva said: “On the issue of engaging Russia, we as a member of OPEC are not in a position to take that engagement on our own unilaterally. There was a disagreement between OPEC and OPEC+, it’s not just Russia, but the biggest producers within OPEC and OPEC+ are Saudi Arabia and Russia.

“We believe that in the coming days when all of us would have begun to see effect of the reduction of prices, OPEC and OPEC+ might need to meet again and reconsider our positions.

“Meanwhile, we expect also that a lot of discussions are going on at the level of Saudi Arabia and Russia, but as Nigeria, we are not in a position to begin to engage members on this matter.”

The Federal Government had hinted last week after the weekly Federal Executive Council (FEC) meeting that it was considering a review of the budget in view of the falling oil prices at the International market which is a direct fallout of the coronavirus spread.

Nigeria had on Monday announced another case of coronavirus detection, bringing the cases to two, even as a whopping N984 million has so far been released to fight the scourge.

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