The outbreak of coronavirus has become a major threat to Nigeria’s economy, President Muhammadu Buhari has warned.
He also identified bad harvests, conflicts in global locations and tariff changes in major world economies, as other factors negatively impacting the economy.
The President’s fears are heightened by the dip in the price of oil below the $57 2020 budget benchmark.
Although the Federal Government is working hard at diversifying the nation’s economy, oil remains its mainstay.
Yesterday, Brent-crude futures, the global oil benchmark, sold at $55.28 a barrel. West Texas Intermediate, the main United States (U.S.) price, went for $50.75 a barrel.
Because of the outbreak of coronavirus, China, world’s biggest importer of crude oil, has cut consumption by 20 per cent.
China usually consumes about 14 million barrels a day, using oil to power machinery, fuel vehicles, and keep the lights on.
Speaking during a meeting with the Economic Advisory Council (EAC) at Aso Villa, the President said: “The economy is the most delicate and sensitive of all aspects of national life. A little change in the matrix can lead to major disruptions in the national economy. For example, international changes in oil prices, bad harvests, conflicts in strategic global locations, a major epidemic or pandemic like the current coronavirus, tariff changes in major world economies, to mention only a few examples that readily come to mind, can significantly affect our plans.”
Reacting to the macroeconomic report and the council’s views and recommendations, President Buhari decried “the lack of synergy between ministries and agencies”, saying it would no longer be accepted. He explained: “We are working for the country, not for personal interests. We have the same objective of service to the people and we will resolve this.”
The President said he was impressed with the preliminary report submitted by the council.
“I am highly pleased based on what I have read in your Executive Summary with the painstaking thoroughness of your preliminary report. I have noted the salient points of your report and these will be incorporated in government economic policies”.
President Buhari directed that the EAC should now brief him more frequently, at least once every six weeks, instead of once every quarter.
In the report presented by its chairman Prof. Doyin Salami, the Council raised concerns that the rate of the growth of the economy is slower than the rate the country’s population is growing; the need to strengthen national statistical agencies; reform procurement processes; improved education; and the need for job planning in training offered by academic institutions.
The Council also brought to the government their views on borrowing, macroeconomic stability and the need to provide a friendly climate for foreign investment.
“We need an environment that will attract investment. People will come only when they feel confident and when they come, their exit will not be challenging,” said Prof. Salami.
The council called for a focus on legacy projects by the administration before 2023.
Other members of the EAC are Vice Chairman Dr Mohammed Sagagi, Prof. Ode Ojowu, Dr Shehu Yahaya, Dr Iyabo Masha, Prof. Chukwuma Soludo, Dr Bismack Rewane and Dr Mohammed Adaya Salisu.
The two ministers in the Ministry of Finance also serve as co-opted members.
The coronavirus outbreak has particularly a huge impact on demand for jet fuel as airlines around the world suspend flights to China, and travel restrictions within the country mean far fewer flights.
In response, Asia’s largest oil refiner Sinopec, which is owned by the Chinese government, has cut the crude it is processing by about 600,000 barrels per day, or 12per cent, It is the biggest cut in more than a decade.
The scale of the fall has shocked the energy industry, according to Chicago-based oil analyst Phil Flynn: “We have not seen a demand destruction event of this scale that moves this quickly.”
To shore up prices, OPEC is considering further cuts in production but Russia appeared not to be favourably disposed to this move.
“The recommendation is for a cut of 600,000 bpd. Russia has asked for more time for consultations,” a source told Reuters.
Bloomberg cited participants in the meeting as saying that Russia remained opposed to deeper cuts although it was not against the extension of current ones. Russia has consistently budgeted for lower oil prices than the actual ones since the 2014 price collapse, and as a result is much more resilient to price drops than Saudi Arabia. It has also signaled repeatedly it is making a compromise with its oil industry in supporting the cuts as they are.
The meeting in Vienna, Austria was called as an emergency response move after oil prices took a nosedive following the outbreak of the coronavirus in China.