FDC ECONOMIC MONTHLY PUBLICATION – DECEMBER 10, 2019

Dear Subscriber,

Cycle of delayed budget broken, 2020 Budget passed!

Nigeria seems to have put an end to its delayed budget cycle, as the Senate and the House of Representatives passed the 2020 Appropriation Bill that was presented by President Buhari on October 8. Notably, the National Assembly raised the total estimates by 2.52% to N10.59 trillion from the proposed N10.33 trillion. More importantly is how the budget and the projects included would be funded. The revenue estimates of N8.16trn are hinged on an oil price benchmark of $57pb and a production output of 2.18mbpd. With the bearish outlook for oil prices in 2020 ($63pb) and the possibility of Nigeria’s OPEC quota being adjusted downwards, there might be a need for a supplementary budget to fund and implement the expenditure plan. The last time Nigeria had a supplementary budget was in 2018, which was an additional sum of N228.9bn.

OPEC+ agrees to deeper oil production cut

At its just concluded bi-annual meeting in Vienna, OPEC and its allies agreed to deepen production cuts by 500,000 barrels per day, effective January 1 2020, until March 2020. This brings the total output cut to 1.7 million barrels per day. Nigeria’s 2020 budget is benchmarked on an oil price of $57pb and oil production of 2.13mbpd. The immediate impact of an extended OPEC production cut would force Nigeria to adhere to its current quota. This could also increase oil prices and keep them above $60pb. Nigeria is more sensitive to changes in oil production than to changes in prices. The shortfall in revenue and forex earnings could trigger fiscal and monetary crisis.

Corporate focus: Presco PLC

Presco Plc recorded a marginal decline in its turnover in the first nine months of 2019 (9M’19). The drop of 5.17% to N15.40 billion in the company’s revenue could be partly attributed to the decline of 1.94% in global palm oil prices.

In this edition of the FDC monthly publication, the FDC Think-Tank analyzes these issues and their implications on businesses and the economy at large.

Enjoy your read!