FG proposes 2020 budget cut

The Federal Government, yesterday, announced plans to cut its 2020 budget due to the volatility of oil prices at the international market.

However, oil prices had plumped by over 25 percent, forcing future to its lowest in years, as WTI fell from $40.45 to $32.97, while Brent crude benchmark plumped from $45 a barrel to $36.32.

The Nigerian Minister of Finance, Zainab Ahmed, while speaking in Abuja after a meeting with Buhari, said that the size of the budget cut would be decided by a four-man committee, including herself, the Minister of State for Petroleum Resources, the Group Managing Director (GMD) of the NNPC and the Central Bank governor noting that the committee will revisit the benchmark crude oil price of $57 a barrel used to calculate the budget.

Recall that President Muhammadu Buhari, in December, signed a N10.59 trillion 2020 budget, on the assumption of oil production of 2.18 million barrels per day with an oil price benchmark of $57 per barrel.

Reacting to this, the Lagos Chamber of Commerce and Industry (LCCI), through its Director-General, Muda Yusuf, noted that a fall in oil price has implications for the level of fiscal deficit in the budget, as its implementation would be constrained; infrastructure financing affected; borrowing might increase, and the capacity to fund capital project would be severely constricted.

Goldman Sachs' projections yesterday, showed that the oil market is heading into a whole different era now that Saudi Arabia and Russia are squaring off in an all-out oil price war following Friday’s failed OPEC+ agreement, thus making $20 Brent Crude a real possibility.