Oil price shortfall: Economic crisis looms – Experts warn

By Adekola Afolabi & Saheed Ibrahim
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Economic experts have advised Nigerians to brace up for a lean time  over the backlash of  the outbreak of coronavirus, warning that the nation’s economy may continue to be in bad shape if it continued to base her budget on oil price .

They made the remarks following the slide in crude oil prices occasioned by the effects of the deadly coronavirus that have ravaged many countries of the world and its attendant toll on Nigeria’s economy,

The economic experts;  a political and economic scientist, Dr. Bayo Fasuwon,  a Chartered Accountant, Chartered Banker and  Chairman Ondo State Internal Revenue Services; Mr Tolu Adegbie,  Elder Fessy Olabode, Olaoluwa Bankole and Dr. Adeola Alonge, who stated this in separate interviews with The Hope added  that  urgent improvement in  Internally Generated Revenue (IGR) of governments and diversification of the nation’s economy, to cushion the effect of the drop in oil price,  are the ways out of the looming quagmire.

Mr Tolu Adegbie said: “It is obvious we will take a hit like everybody else. Oil price at $30 per barrel and benchmark of oil price at $57 per barrel for 2020 budget, there is a gap of $27 per barrel. There is no magic. The money from oil will drop. FAC will drop. The allocation for everybody will drop. Not only for Ondo state. Lean times are coming, he warned.

Adegbie, further recommended that the Federal Government should dip its hand into foreign reserve in order to cushion the negative effects of the oil shortfall.

A political and economic scientist, Dr Bayo Fasuwon in his view, stated that the major cause of Nigeria’s current economic problem is that the country based her budget on crude oil. He posited that beside the outbreaks of Coronavirus, the global replacement of crude oil with electricity would definitely cause global oil price crash.

He particularly called on government at all levels to look inward and diversify the economy from the present mono-economy and over reliance on oil to save the future of the country.

Fasuwon specifically advised the federal government to cut cost by reducing the monthly take home of political office holders, block leakages and encourage local manufacturing and agric.

He believed that the 2020 budget which was predicted on 57 dollars per barrel is under serious threat because of the reduction in the price of oil to 30 dollars per barrel.

In his view, a Resource Management Consultant and economic expert, Elder Fessy Olabode, said the whole scenario is telling us to look inwards and diversify the economy from the present mono economy and over reliance on oil.

He explained that the deadly coronavirus would definitely have adverse affect on the nation’s economy and planning, adding that if government could look inward, block leakages and improve on the Internally Generated Revenue (IGR), the effects would be minimal.

Another economist cum legal practitioner, Mr. Olaoluwa Bankole, who explained that the cycle of boom and burst is always there in the commodity market, noted that government must always devise strategies to combat the burst whenever it comes.

According to him, “The benchmark for 2020 national budget is 57 dollar per barrel, but the price of crude oil per barrel has dropped to 30  dollar. This means that the revenue we are expecting from oil, which is the mainstay of our economy, is less 20 percent, and the implication is that we would not be able to fund the national budget.

“And if we are unable to fund our budget, it has implication on all of us. You know Nigeria depends highly on petroleum resources, and because of that, whenever there is crisis in the sector, the whole country will catch cold.

“But as a country, we don’t need to spread panic, but see the situation as an opportunity to look inward, cut wastages, block leakages and diversify the economy from the present mono economy”.

He called on the federal government to focus on agriculture, Information and Communication Technology (ICT), and the education system and build on them for a virile economy.

On his part, Dr Adeola Alonge, noted that Coronavirus has become a worldwide health issue which has negatively affected international trade and foreign earnings

According to him, many companies across the world could no longer produce as a result of Coronavirus, which may lead to increase in price of goods and services especially when the demand is higher than supply.

He stated that, “The current situation can lead to hyper inflation and galloping inflation because people are afraid of bringing their goods, people are afraid of having contact and people are afraid of traveling abroad. It will lead to reduced savings and increased spendings, and if care is not taken it may crash the economy. The effects are so enormous”.