Falling oil prices in addition to weak export demand are putting pressure on federal and state governments’ finances, a report has revealed.
The report also predicted that revenue projections in the revised 2020 budget would be unmet, thereby constraining government’s ability to meet obligation such as payment of salaries and financing critical social and infrastructure projects in the year.
The report known as Nigeria Economic Summit Group’s (NESG) ‘Impact Assessment and Optimal Policy Response,’ stated that Nigeria being a major player in the oil market faces a dual challenge of dwindling windfall from oil and economic constriction due to the pandemic.
It explained that while the fragility of the economy persists, the oil market impacts the Nigeria economy through its dominant contributions to export earnings, foreign exchange inflows, movement in external reserves and government revenue.
“The combined impact of economic shocks from COVID-19 is expected to disrupt general sectoral activities. While the impact is transmitted to the economic sectors through changes in aggregate demand, constrained capacity utilisation and falling capital accumulation, government’s responses will play a significant role in dampening these impacts.”