Thread by @BudgITng

THREAD: With the ongoing #COVID19 global pandemic coupled with the Saudi Arabia - Russia oil price "war", global crude oil prices have taken a major hit and Nigeria might be faced with harsh economic realities in terms of revenue and budget financing.

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With Nigeria's Bonny Light currently trading below $30pb, this huge decline amounts to about 60% fall in the previously benchmarked price in the 2020 approved budget. At $57pb, the government’s revenue target was about N2.64tn, a projection that is now impossible to achieve.

Inspite of the Federal Government's reviewed benchmark of $30 at 1.7million barrels per day, the resultant cut in revenue will no doubt have adverse effects on not just the economy, but also on the standard of living of Nigerians.

These imminent realities will invariably affect core pillars of the economy. There will be devaluation of the Naira and the government will have to borrow more to cushion revenue slump and finance budget deficit. Currently, Nigeria's total debt profile stands at N26.2trillion

To contract government spending, capital expenditures and key projects will also take a huge cut, especially if the government wants to maintain its financing of personnel and overhead costs. As a result, the rise in underemployment / unemployment is inevitable

As fuel subsidy removal is being formalized as announced by @NNPCgroup, the government needs to put into good use revenue otherwise meant for fuel subsidy knowing that over 70% of Nigerians still live below the poverty line.

As far as the states are concerned, many might not be able to pay salaries as a result of high dependence on federal allocations. Recall that this was the case in 2016 when Nigeria experienced a drastic decline in oil prices to about $28 per barrel.

It would be almost impossible for the government to save or make deposits into the already depleted Excess Crude Oil Account (ECA) which is expected to shield the Nigerian Economy from external shocks and vulnerability.

There is no doubt that these implications might force Nigeria into another recession and expose the country again. It has now become imperative for the Federal Government to effectively manage this impact by adopting necessary fiscal measures.

#Fixtheeconomy