THE Federal Government is prepared for the worst, following further crash in the global price of crude oil, it was learnt on Tuesday.
All economic agents of the government are said to be collaborating as Nigeria braces for the challenges from the prevailing global economic realities, a source at the Ministry of Finance told The Nation on Tuesday.
According to the source, “from all the conversations we have heard, Nigeria is prepared for the worst and I think the government and the central bank are in it together.”
On the fiscal front, the source disclosed that the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed “in one of our conversations said that the price of crude oil might go as low as what we are even expecting.”
The general idea is that plans are being made, the honourable minister in one of her interaction said “if the price of crude oil goes lower than what we are even expecting, the plan is being made and we are prepared for it.”
The source said the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele recently “mentioned at a meeting that we are planning for the worst. So, for now that is the situation and hopefully things might change.”
The source hinted that part of the plan will be hinged on “looking at the whole idea of insisting on diversification.
“What this means is that there will be determined push on the part of government for a diversified economy more than before, with less dependence on proceeds from crude oil.
Advising Nigerians to cut their expenditures to the things needed to survive this period, the source said: “it has gone beyond politics. We don’t have a choice. We are even lucky the borders were closed earlier, if not by now we would have been in deep trouble. I think that period allowed farmers and people who produce things locally to give a push at least and this will encourage them the more. Now that every country is keeping what its producing what would we have done now?”
Following the global lockdown which has kept people inside, demand for crude oil has reduced, resulting in the price of the United States (U.S.) oil to fall below $0 on Monday for the first time in history.
Oil firms have been renting tank farms to store up surplus.
A BBC report said: “That means oil producers are paying buyers to take the commodity off their hands over fears that storage capacity could run out in May.
“The severe drop on Monday was driven in part by a technicality of the global oil market. Oil is traded on its future price and May futures contracts are due to expire on Tuesday. Traders were keen to offload those holdings to avoid having to take delivery of the oil and incur storage costs.”
Brent Crude – the benchmark used by Nigeria, Europe and the rest of the world, also fell by 8.9 per cent at less than $26 a barrel.
The production of a barrel of crude oil in Nigeria cost about $30.
“If the price fall persists”, the source stated, the executive and the legislature will have to tinker with the 2020 budget again to accommodate these changes”.
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