The downtrend in the oil market reached a new nightmarish height Thursday as the Brent (against which Nigeria’s Bonny Light is benchmarked) tumbled to $51 a barrel, the lowest in thirteen months.
Global oil prices have been at the mercy of the Coronavirus since the plague broke out last month, causing the Brent to shed close to $20 in a little over one month.
Latest count says COVID-19 has claimed roughly 2800 lives already.
The defiant plague has stirred up jitters across global financial markets and its fiscal implication for the Nigerian economy is worrisomely huge given that the 2020 budget has been benchmarked at $57 per barrel.
China imports one fourth of world’s oil and oil-reliant economies are taking a bashing from the formidable rage of the epidemic, whose reign has confounded medical experts.
Oil accounts for about 65% of Nigeria’s revenue.
There are fears that the crisis may deepen further in the short term, extending till March and April even if the Organisation of the Petroleum Exporting Country (OPEC) chooses to further cut production by as much as 600,000 barrels per day.
Nigeria is probably approaching its darkest moment in budget implementation in years not just on the account of the glut in the oil market but also because a wider budget deficit may likely result.
Before the epidemic reared up its ugly head, government had already proposed a shortfall of N2.8 trillion for 2020 and it is probable that that estimate could be widened by lower oil receipts.
Government’s fiscal ambition seeks to generate N2.64 trillion revenue from oil, leaving N1.8 trillion to be earned from non-oil income sources.