The Minister of Finance, Budget and National Planning, Zainab Ahmed, says the outbreak of Coronavirus has negatively impacted Nigeria’s oil revenue, saying a mid-term review of the 2020 budget will be carried to reflect the realities on the ground.
The minister stated this when she fielded questions from State House correspondents at the end of the meeting of the Federal Executive Council (FEC), which was presided over by President Muhammadu Buhari at the State House, Abuja, on Wednesday.
According to him, the international oil price has dropped to 52dollars below the budget benchmark of 57dollars per barrel, impacting negatively on the nation’s estimated revenue for the fiscal year.
The minister, however, revealed that the oil nation’s oil production had increased between two million barrels and 2.1 million barrels per day.
“We are concerned about the current drop in oil price because it’s now below our budget.
“I am glad to inform you that our oil production as of today is two million barrels per day and at times slightly higher. That in its self will be a cushioning effect for us in the current oil price.
“We will do a mid-term review, and if the impact is so much, we will need to do an adjustment in the budget working together with the National Assembly.”
The minister revealed that the Council approved the issuance of a sovereign guarantee to the tune of 85 per cent of the Engineering Procurement and Construction (EPC) contract for the Ajaokuta-Kaduna-Kano gas project.
She said: “This is not a new contract; it was previously approved by the council in 2017 in the sum of $2.89 billion. The memo of today is at a revised cost of 2.571 billion dollars, equivalent to a 10 percent discount of the original sum.
“The previous contract was a contractor financing model, the contract that has been approved today is an EPC lump sum contract with the NNPC required to pay 15 per cent of the contract amount while the 85 per cent will be provided by Cynosure of China in the form of loan facility with a sovereign guarantee.
According to the minister, the facility has an interest of 3.7 per cent with a 12-year repayment period and three years moratorium period.
“We have done an extensive review of this project and we are satisfied that the cash flows from the Ajaokuta-Kaduna-Kano gas pipeline project is sufficient to pay the facility itself.
“This project is one of the cardinal policies of this administration and it is very strategic to national development,’’ she added.
Ahmed explained that the project has a lot of positive impact on the national economy, saying it would spur industrialisation and industrial growth as gas-based industries and power generating companies would be the key beneficiaries.
She also expressed the hope that the project would create employment opportunities, increase government revenue, encourage export and enhance the nation’s foreign reserves by reducing dependencies on imports.
“It will be environmentally friendly as it will eliminate gas flaring; It will also improve the health of the communities of the oil-producing areas where gas flaring currently takes place.
“It will also reduce the carbon footprint and comply with the climate control treaties that Nigeria has committed to,’’ she said.