| Budget and Plans |    1103 VIEWS  |
| Budget and Plans | |
| 1103 VIEWS | |
 |
Friday,
March 20, 2020 / 09:55 AM / By FDC Ltd / Header Image Credit: Channels TV
On
December 17, 2019, the president assented to the appropriation bill of N10.59
trillion for the 2020 fiscal year. The benchmark price on which the oil
revenues was based was $57pb. However, the unexpected Covid-19 pandemic has
precipated a global economic crisis of output, markets and liquidity.
Oil
prices have plunged owing partly to a cartel war of price leadership between
Saudi Arabia and Russia. The oil price has plunged over 50% in 2 months with
catastrophic consequences.
The
2020 budget is made up of recurrent expenditure of N4.84trillion, capital
expenditure of N2.46trillion and a debt servicing of about N2.7trillion.
The
plunge in oil prices has forced a downward revision to its 2020 budget by
N1.5trn to N9.09trn, a 14.16% cut. The benchmark oil price assumption has also
been cut by 47.37% to $30pb from $57pb. The finance minister stated that
recurrent spending would be slashed by 25% while the capital component of the
budget would drop by 20%.
The FGN
response to the oil price slump is a step in the right direction. However,
lower oil price means that Nigeria's risk premium will rise, and so will the
cost of issuing new debt instruments - domestic and foreign. This will alter
Nigeria's debt profile negatively as the debt to revenue ratio will spike.
However,
the new ratio will still be within acceptable standards. The downward revision
of the economic outlook from stable to negative will make the cost of
additional borrowing steep and expensive.
Related News
Signup with Facebook
Signup with Twitter
