Economists differ on rejig of 2020 budget
By Chris Ndibe
Financial economists have expressed divergent views over plans by the Federal Government to further rework the 2020 budget to reflect an oil benchmark of $20 per barrel.
The experts commended government’s plan but some believed periodic review of the situation was very critical while others warned against it.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, made the announcement on May 5, during a web conference about the impact of low oil prices on Nigeria’s economy
Ahmed said the amendment process would bring down the revenue indicator to $20 per barrel.
She said that a further downward revision would mean that the Federal Government has now dropped the benchmark from an initial $57 per barrel to $30.
However, Prof. Ndubisi Nwokoma, the Director, Centre for Economic Policy Analysis and Research, University of Lagos, Akoka, described government’s decision ”as a case of coming to terms with reality.”
“The market for crude oil is still in a bad shape with a predominance of excess supply.
“However, with the loosening of the lockdown in many countries, the global economy will likely begin to pick up with a consequent increase in the demand for oil and thus increase in oil price.
“For Nigeria, planning the budget on $20 per barrel benchmark implies a drastic reduction in revenue for government.
“Of course, expenditure will reduce as there is little room for more borrowing.
“Tough times may be ahead both for capital and even recurrent expenditures.
” So, a periodic review of the situation is very critical,” Nwokoma said.
In the same vein, a political economist, Chief Martin Onovo, agreed that the oil benchmark should be adjusted to the current reality.
“The 2020 Nigeria budget oil benchmark price has to be reviewed given the contemporary realities of the international market.
“The outlook for oil price in the international market is presently not bright.
” COVID 19 disruptions and the Russia versus Saudi market-share war are the immediate causes of the current low crude prices.
“We have always insisted on conservative price benchmarks to shield Nigeria from this kind of shocks,” he said.
Dr Boniface Chizea, the Managing Director of BIC Consulting Services, did not support any further review of oil benchmark at this time.
“My only concern is that we must avoid too frequent reviews of critical indices. As I observed elsewhere, the situation is still fluid.
“My preference would have been that we suspend any review at this time and allow some time to monitor the trajectory of things.
“There is currently a weak marginal rebound of the oil price as demand increases as gradually unlocking effect gathers momentum.
“If the situation does not worsen across board to lead to further wide spread shutdown, the price of oil will rally, signalling the commencement of recovery.
” So my recommendation is that we tarry awhile so that we can make better measured move,” he said.