Nigeria may devalue naira before the end of the year if the weakness in oil price persists - CardinalStone Research

CardinalStone Research sees the possibility of a devaluation of naira if the weakness in oil prices persists.
The research firm says the sharp decline in oil prices could lead to weaker dollar earnings for the government and expand the fiscal deficit of the government leading to more borrowing plans.
Global oil price (Brent) drops by 8% to $36 per barrel on Monday as OPEC and non-OPEC members talk on productions failed.

Analysts at CardinalStone Research said there is the possibility of a devaluation of the Nigerian currency (Naira) if the weakness in oil prices persists.

They made this known on Monday, March 9th, 2020, as global oil price (Brent) dropped 8% to $36 per barrel, about 38.3% lower than Nigeria’s budget benchmark crude price of $57.00/barrel. The Texas light sweet (WTI) also dropped to $33 per barrel.

Fall in oil price continues ece-auto-gen

According to CardinalStone, the impact of COVID-19 on-demand outlook and fresh oil price wars (stoked by the failed OPEC+ resolution on production cut) have also led to material reviews of oil price projections. The two most recent reviews have forecasted oil prices to trade between $30/barrel and $35/barrel in Q2’20 and Q3’20 estimates.

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Looking at the impact, the research firm said the sharp decline in oil prices could lead to weaker dollar earnings for the government and expand the fiscal deficit of the government leading to more borrowing plans.

President Muhammadu Buhari at the African Union Summit in Addis Ababa, Ethiopia. [Twitter/@GeoffreyOnyeama] Pulse Nigeria

“We believe the CBN is likely to be slow in responding to these weaknesses and could resort to more unorthodox administrative measures.

“This delayed response, amid deteriorating currency-related fundamentals, could drive panic in the black market for foreign exchange. “Ultimately, we see a greater possibility for a devaluation before the end of the year if the weakness in oil price persists.”

Buhari set up a committee to review the impact of dwindling oil prices on Nigerias 2020 budget

On Monday, Nigerian President, Muhammadu Buhari summoned an emergency meeting over the falling crude oil price.

President Muhammadu Buhari and the CBN Governor, Mr. Godwin Emefiele ece-auto-gen

At the end of the meeting, the government set up a committee to review the 2020 budget crude oil benchmark.

Godwin Emefiele, Central Bank of Nigeria (CBN) governor, Zainab Ahmed, Nigeria's minister of finance, budget and national planning, Timipre Sylva, minister of state for petroleum, Mele Kyari, the group managing director of the Nigerian National Petroleum Corporation (NNPC), and Clement Agba, the minister of state for budget and national planning attended the meeting. They are also members of the committee to be headed by Nigeria's finance minister.

They are expected to submit a report to the federal executive council on Wednesday, March 11th, 2020.

Check it out here!

Nigeria may devalue naira before the end of the year if the weakness in oil price persists - CardinalStone Research

Buhari set up a committee to review the impact of dwindling oil prices on Nigerias 2020 budget

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