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Friday, June 19,
2020 / 05:20 AM / by Proshare Content/ Header Image
Credit: EcoGraphics
The restrictions in the movement have negatively
affected the demand for oil and have caused uncertainty in the global oil
market. During the crisis period, the WTI traded as low as negative $37.63 per
barrel in April while the Brent crude oil price fell remarkable too as low as
$15.98 per barrel.
To meet its current economic realities and to avoid
any further shocks that can occur as a result of volatility in oil price, the
Nigerian budget, as well as the oil
price, was revised downwards.
The budget benchmark for oil was revised to $30 per
barrel from $57 per barrel while it was announced by
the budget minister that the capital expenditure will be cut by 20% and
recurrent expenditure will be reduced by as much as 25% in the revised 2020 budget.
Table 18: Nigeria's 2020 Budget Summary and Adjustments-Rethinking
Reality
Some of the consequences of the reduction in the
Nigerian budget include the reduction in revenue and expenditure which could
lead to an increase in borrowing, decline in GDP growth rate and eventually a
recession in the economy.
Illustration 15:
Nigeria's Budget 2020-Recessionary Troubles Ahead
The Nigerian economy is on the verge of a macroeconomic crisis which may eventually lead to a recession. The fall in oil prices will affect the overall outlook for the economy in both 2020 and Q1 2021 (see illustration 15 above).
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