As Crude Oil Price Slumps, FG Slashes Budget By N1.5trillion, Review Oil Benchmark To $30

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The Federal Government has on Wednesday revealed that it has concluded plan to slash the 2020 budget by N1.5 trillion as part of measure to flow with the tide in the oil market as coronavirus throw the oil market off-balance.


Chunk part of the N1.5 trillion was the N457bn government spend on fuel importation subsidy, referred to as under-recovery.

The recommendation was made by a panel set up by the government to assess the impact of the deadly coronavirus on the economy, with the approval already granted by President Buhari.

Recall that President Buhari inaugurated the committee last week on the assignment.

The Minister of Finance, Budget and National Planning, Zainab Ahmed chaired the committee together with some members like Timipre Sylva, Minister for Petroleum, the Governor of Central Bank, Godwin Emifele and the Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Mr Mele Kyari.

The Minister of Finance while addressing newsmen shortly after the National Executive Council (NEC) meeting at the statehouse Abuja, expressed hope that the move would stabilise the economy.

In her statement, “the recurrent expenditure would be cut by 25 per cent across all the Federal Government’s agencies, while the capital budget would drop by 20 per cent”.

“What we have done is that we have written every ministry and given them guidelines on how these adjustments will be made to enable us to have detailed input from the ministries.

Ahmed further explained that the budget cut is about N1.5 trillion: the reduction in the size of the budget including the N457 from the PMS subsidy (under-recovery).

While explaining how the slash would affect the federally funded upstream project; the minister revealed it would be about 25% cut, while the exact amount would be looked into when input from the Ministries, Departments and Agencies flow in, she added.

President Buhari signed a budget of N10.59 trillion for the year 2020 budget out of which, N56.4 billion for statutory transfers; debt servicing, N2.7 trillion; recurrent expenditure, N4.84tr; and capital expenditure put at N2.46tr.

In responding to the crude oil crash, the federal government had to review the benchmark to $30 instead of earlier $57.

Other measures are the suspension of the funding of upstream projects by the Nigerian National Petroleum Corporation; the reduction in the revenue projection of the Nigeria Customs Service by N1.5tn; and the suspension of all ongoing recruitment by the MDAs.