In a bid to ensure stability in the face of currency fluctuations, the Federal Government of Nigeria has settled for an exchange rate of N800 to the dollar in the 2024 Appropriation Act. The decision was made after careful consideration of the average performance of the naira and a deliberate effort to avoid uncertainties associated with spot rates.
The Minister of Budget and National Planning, Atiku Bagudu, addressed State House correspondents, revealing that the government initially proposed a projected exchange rate of N750 to the dollar in the 2024 budget. However, the National Assembly raised it to N800, a decision Bagudu attributes to a cautious approach in the volatile foreign exchange market.
“For budgeting purposes, you don’t use the spot rate of anything,” Bagudu stated, emphasizing the need to observe average behavior over a period of six months to one year. This strategic approach aims to prevent potential disruptions caused by sudden changes in spot rates, providing a more reliable basis for budget planning.
Bagudu expressed confidence in the decision, stating, “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.”
He also highlighted the respect for democratic processes, noting that despite the National Assembly’s decision to raise the exchange rate further, former Lagos State Governor Bola Tinubu accepted the authority of the institution.
On the topic of borrowing, Bagudu stressed the significant difference between the 2024 borrowing plan and the previous year. He mentioned that the 2023 budget anticipated borrowing close to N14 trillion, while the current budget stands at N9.1 trillion, translating to a decreased borrowing quantum of 3.8 percent of the GDP, compared to 6.11 percent in 2023.
Looking ahead, Bagudu assured that the Federal Government would adhere to fiscal responsibility laws, restricting borrowing from the Central Bank of Nigeria to the Ways and Means window to a maximum of 5 percent of the total budget. He affirmed the government’s commitment to operate within legal limits and explore cost-effective borrowing options.