FG to Further Cut Oil Benchmark to $20 for 2020 Budget

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By Modupe Gbadeyanka

For the second time, the federal government is considering reducing the benchmark for crude oil in the 2020 budget.

Some weeks ago, Nigeria slashed the crude oil benchmark to $30 per barrel from the initial $57 per barrel as a result of crash in the global price of the commodity.

At the downward review of the spendings for this fiscal year done in March, government announced that the N10.59 trillion 2020 budget would be cut by 15 percent.

The country relies heavily on the sales of crude oil sales for foreign earnings and since the global health crisis caused by the coronavirus pandemic started last December in China, Nigeria has been struggling.

Worried that crude oil has hovered around $20 to $28 per barrel in the past weeks, the federal government is looking at bringing down the threshold price to $20 per barrel for the 2020 Appropriation Bill signed into law last December by President Muhammadu Buhari.

Addressing a web conference on the impact of low oil prices on Nigeria’s economy on Tuesday, Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, said federal government was considering the move.

“We are in the process of an amendment that is bringing down the revenue indicator to $20 per barrel,” a report by Reuters said.

She also said at the moment, investments in the oil and gas sector, especially projects, would be halted until the economy return to normal.

According to a deal signed by the Organisation of the Petroleum Exporting Countries and their allies known as OPEC+, Nigeria will have to reduce its crude oil production in May and June 2020 to 1.4 million barrels per day.

In the 2020 budget, the country had projected to supply about 2.1 million barrels per day to the global market. But the falling prices of the crude oil forced oil producers to cut global production by 10 percent or 9.7 million barrels per day to lift prices.

Also, Nigeria is mulling having its debts restructured as a result of the harsh impact of the COVID-19 on the economy.

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