BREAKING: Brent Crude Price Decline By Approximately 4%
Nigeria had set an estimate for the price of crude oil in her 2020 budget at $57. This budget is currently threatened owing to the outbreak and rapid spread of the Coronavirus.
Brent Crude, the international benchmark for crude traded at $45.88 per barrel — a price not seen since Jan. 2019.
According to the International Energy Agency (IEA), global oil demand will witness its first reduction in price because the Corona Virus outbreak has led to a partial shutdown of the Chinese economy.
For a nation that is almost totally dependent on crude oil for its export earnings and government revenue, this does not give a great impression. Also, the supply of raw materials for businesses are been delayed, conferences are either cancelled or rescheduled.
FXTM Research Analyst, Lukman Otunuga has said that recession will continue to hang over the Nigerian economy for as long as crude oil remains the primary source of revenue. He went on to say that, failing oil presents negative consequences for the economy, especially when considering how roughly 90 percent of export earnings and over 50 percent of government revenues are from crude exports.”
“What is even more alarming is Nigeria’s 2020 budget which has set the benchmark for oil at $57. With Brent and Crude both depreciating over 15% since the start of 2020, it raises tough questions whether Nigeria will meet its oil revenue goal of N2.64 trillion.
“The woes do not end here. Foreign exchange reserves are poised to decline on lower oil which not only complicates the Central Bank of Nigeria’s (CBN) efforts to defend the Naira but raises the risk of inflation running rampant.
“The toxic combination of lower government revenues, rising consumer prices and weakening local currency is more than enough to threaten Nigeria’s fragile economic recovery.”
The question then is, where does this leave the Nigerian economy?