The implementation of the 2019 budget presented recently to the National Assembly by President Muhammadu Buhari has continued to face increasing threats as oil prices dropped further yesterday, nearing their lowest level this year.
The global stock markets also declined after they came under pressure from concern about a United States government shutdown and a worsening world economy.
The price of oil has already fallen by more than 30 per cent so far this quarter to its lowest since the third quarter of 2017.
Reuters reported that investors have grown increasingly wary of the impact to global growth, and crude demand, from an escalating trade dispute between the US and China.
The US Senate has been unable to break an impasse over President Donald Trump’s demand for more funds for a wall on the border with Mexico, and a senior official said the shutdown could continue until January 3, 2019.
As investors flocked to perceived safe-haven assets such as gold and government debt, at the expense of crude oil and stocks, Brent crude futures were down 58 cents at $53.24 per barrel.
Also, the US crude futures fell 90 cents to trade at $44.69.
Brent fell 11 per cent last week and hit its lowest since September 2017, while US futures slid to their lowest since July 2017, bringing the decline in the two contracts to 35 per cent so far this quarter.
The macroeconomic picture and its impact on oil demand continue to pressure prices.
Global equities have fallen nearly 9.5 per cent so far in December, their biggest one-month slide since September 2011, when the euro zone debt crisis was unfolding.
The trade dispute between the United States and China and the prospect of a rapid rise in US interest rates have brought global stocks down from this year’s record highs and ignited concern that oil demand will be insufficient to soak up any excess supply.
Global benchmark crude had hit this year’s high of $86 per barrel in October before it slumped to $53 yesterday.
With oil at $53 per barrel, the implementation of Nigeria’s 2018 budget is under threat as the N8.8trillion budget was predicated on oil price of $60 per barrel.
The Economic Recovery Growth Plan (ERGP) had proposed $50 for the 2019 budget but this was ignored as oil price hovered around $80 during the budget preparation.
The federal government also predicated the budget on the 2.3 million barrels per day even though the current output is still around two million barrels per day.
In order to drain the excess crude oil at the international market and boost prices, the Organisation of the Petroleum Exporting Countries (OPEC) and other oil producers, including Russia agreed this month to curb output by 1.2 million barrels per day (bpd).
But the cuts will not happen until next month, and production has been at or near record highs in the US, Russia and Saudi Arabia.
However, should that fail to balance the market, OPEC and its allies will hold an extraordinary meeting, United Arab Emirates Energy Minister Suhail al-Mazrouei said on Sunday.