In a recent announcement, the Federal Government clarified its decision to adopt a N800 to the dollar exchange rate for the 2024 Appropriation Act. The Minister of Budget and National Planning, Atiku Bagudu, shared insights into the reasoning behind this choice, emphasizing the consideration of the naira’s average performance.
Bagudu revealed that the government opted for an average performance approach instead of relying on a spot rate to mitigate potential uncertainties and unforeseen events. Initially proposing a projected exchange rate of N750 to the dollar, the National Assembly later revised it to N800.
Highlighting the complexity of budgeting, Bagudu explained, “For budgeting purposes, you don’t use the spot rate of anything.” He stressed the importance of observing average behavior over a period to avoid the influence of sudden market fluctuations.
Addressing the decision-making process, Bagudu stated, “We took an average performance of N750 on the executive side and proposed it to the National Assembly.” Despite the increase by the National Assembly, Bagudu acknowledged the democratic process and Tinubu’s respect for institutions.
Speaking on borrowing to fund the budget deficit, Bagudu noted a significant reduction in the quantum compared to the previous year. The 2024 budget anticipates borrowing of N9.1 trillion, down from close to N14 trillion in 2023. Bagudu emphasized adherence to the fiscal responsibility law, limiting Central Bank lending to the government to 5% of the total budget.
“We will not go outside the law and borrow from ways and means, what is outside the law,” Bagudu asserted. He also highlighted the government’s commitment to responsible borrowing practices, striving to borrow away from the Central Bank when possible.
In conclusion, Bagudu expressed optimism that the government’s measures would lead to an increase in the supply of foreign exchange in the economy, while emphasizing a commitment to fiscal responsibility in the new year.
