Nigeria’s oil revenue target fell by N125.52 billion in the first quarter (Q1, 2020) to N940.91 billion, according to figures released yesterday by Minister of Finance, Mrs. Zainab Ahmed.
The shortfall, attributed to the double whammy of the headwind caused by the COVID-19 pandemic and the slump in oil price due to a sharp drop in demand and price war between two powerful producers, Russia and Saudi Arabia, representing a 31 per cent of the prorated oil revenue target.
Data from the National Bureau of Statistics (NBS) also showed inflation hitting a two-year high at 12.34 per cent.
But it has proposed a relief package of $1.5 billion to keep the 36 states of the federation, threatened by a fiscal crisis, afloat.
Ahmed, who briefed reporters at the end of the National Economic Council (NEC) meeting, presided over by Vice President Yemi Osinbajo in the State House yesterday, expressed concern over the effect of the revenue shortfall on the federal government’s efforts at fighting poverty.
According to her, Nigeria’s poverty rate, put at 40 per cent, may increase with the drastic reduction in revenue.
She added that the economic situation would be worsened with the gross domestic product (GDP) growth expected to contract by -8.94 per cent this year.
However, she said if the measures being put in place to grow the economy works, the contraction might be only by -4.4 per cent without fiscal stimulus.
The minister explained that with effective fiscal stimulus in place, the situation might bring the contraction down to as low as 0.5 per cent.
She said with the activities of different presidential committees set up by President Muhammadu Buhari to evolve measures aimed at cushioning the effects of the pandemic on the economy, the federal government had resolved to support states by suspending various deductions of debts they owe the federal government.
She explained: “On the economy, COVID-19 has resulted in the collapse of oil prices. This will impact negatively, and the impact has already started showing on the federation’s revenues and on the foreign exchange earnings. Net oil and gas revenue and influx to the Federation Account in the first quarter of 2020 amounted to N940.91 billion.
“This represented a shortfall of N125. 52 billion or 31 per cent of the prorated amount that was supposed to have been realised by the end of that first quarter. Forty per cent of the population in Nigeria, today, are classified as poor. The crisis will only multiply this misery.
“The economic growth in Nigeria, that is the GDP, could in the worst-case scenario, contract by as much as –8.94 per cent in 2020. But in the best case, which is the case we are working on, it could be a contraction of –4.4 per cent if there is no fiscal stimulus. But with the fiscal stimulus plan that we are working on, this contraction can be mitigated and we might end up with a negative –0.59 per cent.
“As a result of that, the president set up the Presidential Economic Sustainability Committee in addition to the COVID-19 Response Committee that has been set up, the presidential task force that is chaired by the SGF as well as the Crisis Management Committee that I chair.
“The federal government is committed to supporting the financial viability of states, including the suspension of payments in respect of commitments, debts that have been secured with ISPOs by the states at the federal levels. So, we have already implemented suspension of deductions of a number of loans that have been taken by the states from April and also in May.”
Ahmed noted that some of the measures proposed to stimulate the economy so far include the approval of N500 billion to support healthcare facilities as well as the proposed relief to taxpayers and incentives meant to encourage employers to retain and recruit staff during the lockdown.