The Nigerian Federal Executive Council has given approval for the review of the 2020 budget and the Medium Term Expenditure Framework for 2020-2022 by the ministry of finance, budget and planning.
The Minister in charge of Finance, Budget and Planning Zainab Ahmed briefed State House correspondents after the FEC meeting on Wednesday.
As earlier proposed by the Ministry, the 2020 budget crude oil benchmark is now $25 per barrel as against $57 per barrel earlier contained in the 2020 budget. Daily production target of 1.94 million now replaces the initial 2.18 million barrels.
The reviewed budget is now N10.5 trillion, a difference of about N71.5 billion from the initial budget of N10.59 trillion earlier signed into law by President Buhari.
The exchange rate was, however, increased from N305 to N360 to a dollar. This is based on the devaluation of the naira by the Central Bank of Nigeria
The minister said that the federal government will fund the budget by N5.158 trillion. The deficit of N5.365 trillion will be financed by both domestic and foreign borrowing
“The borrowing, the multilateral loans drawdown coming from special accounts and coming from the privatisation will fund the fiscal deficit of N5.365 trillion that we have in the proposed amendment of the 2020 budget,” she said.
The downward review of the 2020 budget became absolutely necessary following the global economic realities.
The outbreak of coronavirus pandemic crashed global oil demand as world economic activities came to a standstill. Oil demand slumped by more than 50% as industrial and aviation sectors was grounded.
As at today, Bonny Light, the Nigerian oil, sold for $25.23 per barrel, while Brent Crude by July Contract sold for $30.26 per barrel.
Bismack Rewane said Wednesday evening on Channels TV that benchmark of 25 is the wise way to deal with the situation on ground. He said that the projection is that oil price float around 30 2020, therefore it is wise to adopt a benchmark that allow allowance.
There is however optimism that as more economies ease lockdown, global demand will rally and prices will rebound.