Taiwo-Obalonye, Abuja

The fast spreading Coronavirus spreading acros the globe from China is threatening Nigeria’s main source of revenue, oil.

Consequently, the Federal Government is considering a review of its N10.59 trillion 2020 budget passed by the National Assembly on December 5 and signed into law on December 17, 2019 by President Muhammadu Buhari. The 2020 budget was predicated on crude oil bench of $57 per barrel and daily production output of 2.1 million barrels per day.

The Minister Finance, Budget and National Planning, Zainab Ahmed, made this disclosure while briefing State House Correspondents at the end of the Federal Executive Council (FEC) meeting, presided over by President Buhari.

Responding to a question on the drop in price of crude oil due to coronavirus and its threat to the national budget,  Ahmed said: “We are concerned because it does have an impact on revenue and at the current crude oil price of $53  per barrel is below the budget bench mark. What we are doing is that we are studying the situation and when the budget was passed we committed to do a midterm review. We will do the midterm review and if the revenues are so significantly affected, we will have to do some revisions in the budget by way of budget adjustment.

“I will want to inform that the crude production is now at 2 million barrels per day and on some days it has moved up to  2.1 million barrels per day, so that in itself will be a cushion. All the same we are not taking any measures now until we have a reasonable period we make a review and then we may need to make an adjustment of budget through working together with the National Assembly.”

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The Minister said that the Council approved the memo for the issuance of Sovereign guarantee for the Ajaokuta- Kaduna- Kano has pipeline.

She said the memo was jointly presented by her ministry and that of petroleum resources.

She said: “Councils approval for the issuance of sovereign guarantee to the tune of 85 per cent of the engineering, procurement and construction, or EPC, contract for Ajaokuta-Kaduna-Kano project. This is not a new contract. It was previously approved in 2017 in the sum of $2.89 billion

“But the memo we took today is at a revised cost of $2.59 billion equivalent to a 10 per cent discount of the original sum.” Recall that government had awarded previous contract on a contractor financing model.

Ahmed said the contract that has been approved today is an EPC lump sum contract with the NNPC required to pay 15 percent of the contract amount while the 85 percent would be provided by Sinopet of China in the form of a loan facility with a sovereign guarantee.

“This is a facility that has an interest rate of Nibor plus 3.7 per cent with a 12 year repayment period and a 3 year moratorium.  “We have done an extensive review of this project and we are satisfied that the cash flows from the Ajaokuta-Kaduna-Kano gas pipeline will be sufficient to repay the facility.