The Nigerian Government has explained why it settled for N800 to the dollar exchange rate in the 2024 Budget after considering the performance of past Appropriation Acts.
The government said it avoided basing the foreign exchange benchmark in the 2024 budget on a spot rate, to avoid eventualities and uncertainties.
The Minister of Budget and National Planning, Atiku Bagudu, told State House correspondents that the Bola Tinubu-led government had earlier chosen the projected exchange rate of N750 to the dollar in the 2024 budget which the National Assembly raised to N800 to the dollar,
Bagudu said, “For budgeting purposes, you don’t use the spot rate of anything. Oil prices can go to 120 today, maybe there is a shortage, or maybe there is a collision between two ships that will block a channel.
“It would be foolish to use that as a reference price, I should take a period of maybe six months to one year and say let me observe this average behaviour, so you don’t use spot prices. So even with the exchange rate, it is like that.”
He explained further, “Much as we are hoping that it would soon come below, but at the time you are doing the budget, you will take a view on average performance. And that’s what we took.
“We took an average performance of N750 on the executive side and we proposed it to the National Assembly.”
The minister also said that President Tinubu regarded the National Assembly’s decision to raise the rate further considering his respect for institutions and democracy.
“So, he respected democracy that even though it was higher than what he submitted, but the institution that says so has the authority to say so and even at the time they say 100 because it’s not an official rate it’s tidal because, with the deregulated market, you no longer have an official rate, it is much lower than even the way the markets are bidding,” the minister said.
The minister noted that the FG is positive that its current measures would soon yield a significant increase in the supply of foreign exchange in the economy.
The former Governor of Nigeria’s Kebbi State also spoke on the level of borrowing to fund the deficit in the 2024 budget, saying there is a significant difference between 2024 borrowing compared to last year’s.
“In 2023, the budget anticipated a borrowing of close to N14tn. This year’s budget is N9.1 trillion. So we think that is significant.
“Because it’s 2023 took us to about 6.11 percent of our GDP as borrowing. This one is 3.8 percent. So the quantum had decreased,” Bagudu added.
Bagudu said the government will operate strictly within the dictates of fiscal responsibility law in the new year. The law provides for the Central Bank of Nigeria to lend to the government through its Ways and Means window, only 5 percent of the total budget.
He explained, “We will not go outside the law and borrow from ways and means, what is outside the law. So the fiscal responsibility law says, that every year, the central bank can lend the government up to 5 percent of its budget for the year.
“So if you go out of that, you’re going outside the lawful limit, and that’s what the minister of Finance and Coordinating Minister of the Economy was very clear we are not going to do. We are not going to resort to borrowing outside the law.
“And secondly, as much as possible, we will even borrow away from the central bank because sometimes it’s even cheaper to borrow. So, those are the two elements. So the quantum has decreased, then we will go by the book.”
The 2024 Budget proposal to the Country’s National Assembly titled “Budget of Renewed Hope” shows a proposed expenditure of NGN27.5 trillion and an estimated revenue of NGN18.32 trillion for the 2024 fiscal year.