Posted: 9 March 2020

UPDATE 2-Nigeria to scale down budget in face of oil price crash

ABUJA, March 9 (Reuters) – Nigeria, Africa’s top oil producer, will cut the size of its record 10.6 trillion naira ($34.6 billion) budget for 2020 because of a sharp decline in the price of crude, the finance minister said on Monday.

Global oil demand is set to contract this year for the first time in more than a decade as the coronavirus outbreak causes economic activity to stall, the International Energy Agency said on Monday. The downward revision came as oil prices dropped as much as a third after Saudi Arabia launched a bid for market share following the collapse of an output pact with Russia.

Crude oil sales make up around 90% of foreign exchange earnings in Nigeria. The 2020 budget, passed in December, was calculated assuming crude production

…Mathias Hindar, a sub-Saharan Africa analyst at consultancy Assynt, said persistently low oil prices would put pressure on the country’s “rapidly diminishing” foreign currency reserves and restrict funds for capital projects.

“We could see the government’s ability to protect the naira diminish, which could subsequently cause significant rises to inflation rates,” he said.

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