Revenue worries for Nigeria as coronavirus drives oil near $47/bbl

With the impact of the coronavirus taking a toll on oil demand and the economy in general, the fear of another recession appears to be imminent as oil price dropped to $53.71 per barrel, amidst falling external reserves and excess crude account (ECA).

Indeed, oil prices are trading below the federal government’s benchmark at $57/barrel for the 2020 budget, thus posing a threat to the 2020 budget, which was signed by the President Muhammadu Buhari in December, on the assumption of oil production of 2.18 million barrels per day (bpd).

Similarly, Nigeria’s latest excess crude account balance, according to a statement from the Office of Accountant General of the Federation, was put at $71.81million, while movement in reserves showed that the country’s reserves stood at $36.46billion, down by $2.07billion from $38.53billion in which it opened the year.

With an earlier projection by Citigroup that Brent Crude may slide to as low as $47/barrel in the wake of the coronavirus that is yet to be contained.

The federal government has been exploring various means of generating revenue to buffer the effect of unstable oil prices through increment in value-added tax (VAT) review of extant legislation among others.

Brent oil price yesterday, dropped to $53.80 at about 3:41 pm GMT, while Nigeria’s Bonny Light stood at $56.15.
Members of the Organised Private sector (OPS) equally expressed concerns about growing insecurity in the country, saying an unsafe environment poses a major risk to investment, even as Nigeria recorded no improvement in the global security perception.

Yesterday also, analysts at SBM Intelligence said the Nigerian economy is at risk of a recession, as the outbreak has resulted in a drop in crude oil prices.

In a report titled, “The potential effects of coronavirus on the Nigerian economy,” the research company said Nigeria’s trade with China would also be affected.

“As global oil prices trend lower at $57/ per barrel as of mid-February, the subsistence of the coronavirus will continue to dampen appetite, which will put a lid on oil prices well into March.

“If oil demand continues to fall with no OPEC intervention in the form of production cuts, tightening supply, a country like Nigeria will be negatively impacted by the downward price trend.

“The country risks another recession if the oil price continues to fall and other production and sales activities between China and Nigeria remain weak.