By Mathew Dadiya, Abuja

In a prompt effort to curtail the impact of the COVID-19 otherwise known as Coronavirus on the Nigerian economy with the plunge in the global oil prices from $53 last week to $35, President Muhammadu Buhari has constituted an economic committee to review the oil benchmark in the 2020 budget.

The committee which is chaired by the Minister of Finance, Budget and National Planning, Mrs Ahmed had the Minister of State, Petroleum Resources, Timipre Sylva, Minister of State, Budget and National Planning, Prince Clement Agba, Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele and the Group Managing Director of Nigeria National Petroleum Corporation (NNPC), Mela Kyari as members.

Speaking with State House correspondents on Monday, after meeting with President Buhari at the President Villa, Abuja, the Minister of Finance, Budget and National Planning disclosed that the committee would review the $57 crude oil price benchmark in the budget and might reduce the 2020 budget. 

She said: “Mr. President has formed us into a committee with the minister of State, Petroleum Resources, the Central Bank governor, GMD NNPC and myself as members.

“Our mandate is to make a very quick  assessment of the impact of this coronavirus on the economy especially as it effects the crude oil price.

“We will be writing a report and brief Mr. President tomorrow (Tuesday) or Wednesday morning. After that we will also have more substantial information for the press.

“It is very clear that we will have to revisit crude oil benchmark price that we have of $57 per barrel. We have to revisit it and lower the price. Where it will be lowered is the subject of this committee. What the impact will be on that is that there will be reduce revenue to the budget at it will cut the size of the budget. The quantum of the cut is what we are supposed to assess as a committee.”

Asked if Nigeria intends to dialogue with Russia and other OPEC+ members to cutdown oil output, the Minister of State Petroleum, Timipre Sylva, said, “we as a member of OPEC are not in a position to take that engagement on our own unilaterally. There was a disagreement between OPEC and OPEC+, it’s not just Russia, but the biggest producers within OPEC and OPEC+ which are Saudi Arabia and Russia.

“We believe that in the coming days when all of us would have begun to see effect of the reduction of prices, OPEC and OPEC+ might need to meet again and reconsider our positions.

Meanwhile, Sylva said that they expected also that a lot of discussions were going on at the level of Saudi Arabia and Russia, but as Nigeria, “we are not in a position to begin to engage members on this matter.”

Oil prices suffered their biggest fall since the day in 1991 when American forces launched air strikes on Iraqi troops following their invasion of Kuwait.

Monday’s crash spooked markets crash that were already freaking out about the impact of the coronavirus pandemic on the global economy and demand for oil. Brent crude futures, the global oil benchmark, were down 22%, last trading at $35.45 per barrel. US oil is trading at $33.15 per barrel, a decline of nearly 20%

Here are five things you need to know:

Why are oil prices crashing?

Saudi Arabia, the world’s top exporter, launched a price war over the weekend. The move followed the imposition of an alliance between the OPEC cartel, led by Saudi Arabia, and Russia.

The kingdom and Russia came together to form the so-called OPEC+ alliance in 2016 after oil prices plunged to $30 a barrel. Since then, the two leading exporters have orchestrated supply cuts of 2.1 million barrels per day. Saudi Arabia wanted to increase that number to 3.6 million barrels through 2020 to take account of weaker consumption.

But Russian President Vladimir Putin, worried about ceding too much ground to American oil producers, refused to go along with the plan and his energy minister, Alexander Novak on Friday signaled a fierce battle to come for market share when he said countries could produce as much as they please from April 1.

Why did Saudi launch a price war?

Simmering differences over how best to manage global oil markets spilled into the open at a meeting between OPEC and Russia in Vienna on Friday. 

CNN Business quoted sources as saying that after Russia said it was ditching the alliance, Saudi Arabia warned it would live to regret the decision.

Moscow had become tired of cutting production to stabilize prices and felt that the policy of supply restraint gave more room for US shale companies to grow. Mikhail Leontiev, a spokesperson for Russian state oil company Rosneft, described the OPEC+ deal as “masochism.”

“By yielding our own markets, we remove cheap Arab and Russian oil to clear a place for expensive US shale oil and ensure the effectiveness of its production,” he told Russian state media on Sunday.

America has become the number one oil producer in the world and is expected to pump about 13 million barrels a day in the first quarter of this year.

Over the weekend, Saudi Arabia decided to fight for greater market share by slashing the prices its preferred customers pay by between $4-$7 a barrel. The kingdom is also reportedly planning to lift production to over 10 million barrels a day.

What does coronavirus have to do with all of this?

The coronavirus has undermined energy demand worldwide, but especially in China, which is now the number one importer of crude oil, guzzling roughly 10 million barrels a day.