COVID-19: Nigeria’s Total Oil Revenue to Fall By 80% – Renowned Economist Predicts

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…Oil exports volume to fall to 1.3mbpd

…Total external debt to hit $36bn

…Debt service already in excess of 96%

…Export prices down by 60%,

…External reserves to drop to $33bn

Renowned economist and member of President Muhammadu Buhari’s Economic Advisory Council, Mr. Bismark Rewane, has predicted that Nigeria’s oil revenue would decline by between $15 billion and $17 billion, or between 70 and 80 per cent by the end of 2020.

In a report the economist presented at the weekend during the monthly Lagos Business School executive breakfast meeting for the month of May titled: “Making Hay While the Sun Has Set,” he opined that oil contributes 90 per cent of Nigeria’s exports, 30 per cent of bank credits and 50 per cent of fiscal revenues.

According to him, while the world would suffer a “lockdown fatigue,” the economic fallout of the pandemic may turn out more devastating than the medical casualties in some economies including Nigeria.

He said there will be a continent-wide recession in 2020 as real GDP growth will slide into negative territory (-1.6%) in 2020, before recovering in 2021 on the success of efforts to contain the virus.

Riwane who is the chief executive officer of Financial Derivatives Company Limited, and reputed voice in the Central Bank of Nigeria (CBN) Monetary Policy Committee commentaries monitored globally, said that regrettably, Nigeria’s other domestic revenue sources have equally been negatively affected by COVID-19.

“Oil dependent economies like Nigeria and Angola will be badly hit by the twin shocks of COVID-19 and dwindling oil prices. The region will experience weak labour markets in 2020 as a structural and cyclical unemployment spike. The informal sector will be the worst hit,” he added.

He noted the need for structural reforms by economies in the continent to boost GDP growth.

The Nigeria National Petroleum Corporation (NNPC) recorded show that crude oil and gas export sales revenue in January 2020 amounted to $434.85 million.

Rewane noted that ever since, government revenues have been under intense pressure. “The federal government is struggling with the reduction and elimination of subsidies without sparking social unrest. Tax collection, mobilisation and prudent management of tax revenues will be topmost priorities.

“Total external debt has risen to $31 billion and will climb further with more lending from multi-laterals to $36 billion. Debt service burden is already in excess of 96 per cent of independent revenues and terms of trade to deteriorate sharply in 2020,” Rewane said.

He noted further that export prices have been down by 60 per cent, import prices are down by 15 per cent, while oil export volume was estimated to fall to 1.3 million barrels per day. The economist estimated that Nigeria’s external reserves would drop to $33 billion before increasing to $36.5 billion, due to the inflow of the International Monetary Fund (IMF) loan. Furthermore, he pointed out that the country’s buffers remain low with high vulnerabilities.

“The economy was brought to a screeching halt. All sectors affected and businesses shut down. There was panic buying and supply chain disruptions saw consumer prices skyrocketing. The forex market and money markets were paralysed for a few days.

“The Purchasing Managers’ Index in April crashed to 45.8points as output sub-index fell to 40.50 points, lowest since 2017. This reflects the effects of the lockdown and poor access to raw materials,” he explained.

He listed some of the calamities awaiting post-COVID-19 Nigeria to include high corporate mortality, high unemployment, defaulting bank debtors, and a rise in toxic assets. He stressed that poor countries would be hardest hit through a decline in commodity prices, trade, investment, and remittances.

He pointed out that a Marshall Plan, modeled after post-World War 2 US aid package to European countries, could be needed at this time. “As signs of a possible second wave of COVID-19 sapped risk appetite, the second wave of COVID-19 could trigger more stringent lockdown measures and delay economic recovery.

Chibisi Ohakah, Abuja

1 Comment
  1. Blessing says

    Economists already saw this coming. Nigeria likes to wait for catastrophe before bothering to act

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