Prune down 2020 budget to augment oil price shortfalls, economist advises FG

Budget

By Folasade Akpan

Abuja, March 16, 2019 (NAN) Dr Aminu Usman, Dean, Faculty of Social Sciences, Kaduna State University has advised the Federal Government to initiate the process of pruning down the 2020 budget to augment oil price shortfalls.

He made the call in Abuja in an interview with News Agency of Nigeria (NAN).

Usman also said that internal revenue drive generation initiatives should be intensified at all levels.

NAN reports that the price of crude oil, which is Nigeria’s economic mainstay, took a downturn recently in the wake of the COVID-19 (Coronavirus) pandemic which is ravaging many countries of the world.

Usman said efforts should be formalised to begin serious diversification programmes to move the economy away from depending on oil for foreign exchange.

“Government should also take drastic measures to insulate the country from the scourge of the virus which will further compound our economic problems.’’

According to him, Coronavirus took the world by surprise and its economic effects can be worse than the financial meltdown of 2007/2008.

He said that the drastic measures taken by countries had affected markets and caused massive drop in commodity prices in the world market including crude oil.

“Close down of factories in China and many other developed countries caused a sharp fall in the price of crude oil.

“There is also a case of product over supply with over 50 vessels stranded without buyers according to NNPC Chief Executive and the combined effects of all these on the Nigerian economy is monumental.’’

Usman said though the 2020 budget was benchmarked on 57 dollars per barrel of crude oil, it was now being sold at average of 33 dollars per barrel which meant that there would be revenue shortfall of more than 40 per cent.

He said that the revenue shortfall would lead to a short supply of foreign exchange needed for critical imports and other needs.

“The President has already setup a committee to review the 2020 budget in the face of the challenges thrown by the Coronavirus pandemic.

“The review means that many non-critical and even critical projects have to be cancelled or scaled down and ongoing projects may have to be suspended in the face of massive drop in revenues.

“This will affect businesses and possibly lead to shut downs and lay off of workers.

“In short, it could lead to recession and or depression if nothing drastic is done locally and internationally.’’

He also said that banks would be hard hit because businesses were likely to default in loan/advances repayments.

This, he said would cause the government to continue borrowing heavily to finance recurrent expenditure including salaries. (NAN)

FOF/BOLA/EEE

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Edited by Bola Akingbehin/Ese E. Ekama