Economists differ on plan to rework 2020 Budget oil benchmark

Some economists have expressed divergent views on plans by the Federal Government to further rework the 2020 Budget to reflect an oil benchmark of $20 per barrel.

In interviews with our reporter in Lagos, some of them said that periodic review of the situation was very critical while others cautioned against it.

It was reported that the Minister of Finance, Budget and National Planning, Zainab Ahmed, had announcement the plan on May 5 during a web conference on the impact of low oil prices on Nigeria’s economy.

Ahmed said the amendment process would bring down the revenue indicator to $20 per barrel.

Prof. Ndubisi Nwokoma, the Director, Centre for Economic Policy Analysis and Research, University of Lagos, Akoka, described the plan as being realistic.

“The market for crude oil is still in bad shape with a predominance of excess supply.

“However, with the loosening of the lockdown in many countries, global economy will likely begin to pick up with a consequent increase in the demand for oil; thus, increasing oil price.

“For Nigeria, planning the budget on $20 per barrel benchmark implies a drastic reduction in revenue for government.

“Of course, expenditure will reduce as there is little room for more borrowing.

“Tough times may be ahead both for capital and even recurrent expenditures; so, a periodic review of the situation is very critical,” Nwokoma said.

In the same vein, a political economist, Chief Martin Onovo, said that the oil benchmark should be adjusted to reflect current reality.

“The 2020 Budget oil benchmark price has to be reviewed to reflect contemporary realities of the international market.”

“The outlook for oil price in the international market is presently not bright.”

“COVID 19 disruptions and the Russia versus Saudi market-share war are the immediate causes of the current low crude prices.”

“We have always insisted on conservative price benchmarks to shield Nigeria from this kind of shocks,” he said.

However, Dr Boniface Chizea, the Managing Director of BIC Consulting Services, did not support any further review of oil benchmark at this time.

“We must avoid too frequent reviews of critical indices. As I observed, elsewhere, the situation is still fluid.

“My preference would have been that we suspend any review at this time and allow some time to monitor the trajectory of things.

“There is currently a weak marginal rebound of the oil price as demand increases as gradual unlocking effect gathers momentum,” he told our reporter.

Chizea said that if the situation would not worsen across board to lead to further wide spread shutdown, oil price would rally, signalling beginning of recovery.

“My recommendation is that we tarry a while so we can make better measured move,” he said.