OBY Ezekwesili, former Minister of Education says she was not surprised at the crash of oil prices to $30 per barrel at the international market due to the outbreak of COVID-19.
Ezekwesili while reacting to lamentations by other Nigerians over the fall in the oil prices and how it would affect the country’s economy, said she knew the tide would turn as it has done since China, the second largest economy and second largest consumer of crude oil was bugged down by the novel virus.
She however wondered why the National Assembly did not ask for how the outbreak of coronavirus would affect the country’s economy before proceeding on recess.
The crash in oil price by 47 per cent is reportedly the crude’s biggest one-day fall since the early 1990s Gulf War, caused by a global crude price war launched by Saudi Arabia against onetime ally Russia.
Reacting to the development, Joe Abah a public analyst said the impending doom of the country’s economy was a wake-up call for the Economy Advisory Council (EAC) to conceptualize ideas, thereby taking tough decisions to avert the doom.
“With oil prices plummeting and public debt soaring, now is the time for the Economic Advisory Council to earn it’s stripes,’ Abah wrote on Monday.
Now is the time for President Buhari to listen and take tough decisions on cost of governance. Now is the time for EAC members to walk away if he doesn’t.”
Another Twitter user who goes by the name Engineer Chuks noted that the cost of governance is ridiculously high and there was need to cut down its cost.
In the same vein, Omasoro Ali Ovie @OvieAli said the best decision president Buhari can make for Nigeria now is to cut the subsidy for oil, allow Discos charge cost-reflective charges.
“Just these two austerity measures will reduce the strain on our finance and free up funds, but will also send 100s of millions into poverty and hardship,” Ovie wrote/
On his part, Abubakar Nikau, @NikauAbubakar said the essence of government is to make sure it citizens are not put into untold hardship and for that, “the government should opt for our reserve in the world bank to stabilize the economy before an agreement is achieved and oil price shut up again.”
Tope Fasua, a financial analyst said in a report by Premium Times that “Nigeria is not prepared for the economic eventuality because a fall in the oil price to $30 per barrel, may mean a recession for Nigeria because the oil sector is a major part of the economy.”
“All these other countries are prepared, they have enough reserves Saudi Arabia has trillions of dollars in its reserve shelving it for it sovereign wealth fund, Russia equally has quite a bit of reserve and sovereign wealth fund.
“Already Nigerian economy is in trouble, I think that’s why they intended to borrow $22.7 billion loans because the loan is for every other budget item,” he said.
According to Business Day, the current global oil price crisis started when Saudi Arabia wanted to lead the Organisation of Petroleum Exporting Countries (OPEC) and Russia in making deeper cuts to oil production to support crude prices in the face of the coronavirus outbreak, which has disrupted global economic activity.
With the benchmark for Nigeria’s 2020 budget at $57pb in view, terrible economic crisis and unfair exchange rate looms, as “it could lead to a sharp devaluation in the naira, reduce federal allocations to states and local governments as well as hinder the full implementation of the 2020 budget,” the Business Day said in a report.
The international oil benchmark, Brent crude, since the outbreak of Covid-19 in Wuhan has been on a downward trend, facing a fall by $3.84 to $46.15 per barrel as of 8:10 pm Nigerian time on Friday.
Yet, the Russian government declined in the negotiation which led to a rise in production by the Saudi Arabia government, offering its crude at steep discounts. A move, analysts said was an “attempt to punish Russia for abandoning the so-called OPEC + alliance”.
However, the Russia government said it wanted to see the full impact of the coronavirus on oil demand before taking action.
Monday’s report on the oil price poses a threat to the Nigeria’s fickle economy as similar cases from 2014–2016, showed the fall in oil prices from about $112 per barrel in 2014 to below $50 dollars per barrel in 2016, slipped Nigeria into a recession.