Breaking Down The 2024 Budget: Government Explains The Logic Behind The N800 To Dollar Exchange Rate Choice

Breaking Down The 2024 Budget: Government Explains The Logic Behind The N800 To Dollar Exchange Rate Choice....KINDLY READ THE FULL STORY HERE▶

To mitigate potential uncertainties and unforeseen events, the Federal Government has emphasized the strategic and thoughtful decision to avoid anchoring the foreign exchange benchmark in the 2024 budget on a spot rate. Minister of Budget and Economic Planning, Atiku Bagudu, revealed this stance after a meeting with President Bola Tinubu…….CONTINUE READING

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Bagudu clarified that for budgeting purposes, relying on a spot rate is imprudent. Factors such as oil price fluctuations and unforeseen events could significantly impact the spot rate. Instead, the government, in its assessment, opted for a comprehensive analysis of the average performance of the naira over a period of six months to one year. The proposed exchange rate of N750 to the dollar was later increased to N800 by the National Assembly.

Highlighting the democratic nature of the decision-making process, Bagudu acknowledged President Tinubu’s respect for institutional separation of power. Despite the rate exceeding the initial submission, the President honored the National Assembly’s authority in determining the exchange rate.

Regarding borrowing to fund the deficit in the 2024 budget, Bagudu stressed a significant reduction compared to the previous year. The 2023 budget anticipated borrowing close to N14 trillion, while the current budget is N9.1 trillion, representing a decrease in borrowing as a percentage of GDP from 6.11% to 3.8%.

Bagudu assured that the government aims to adhere strictly to the fiscal responsibility law, limiting Central Bank lending to five percent of the overall budget through the Ways and Means window. The minister emphasized the commitment to staying within legal limits, borrowing judiciously, and avoiding resorting to borrowing outside the law.

Furthermore, Bagudu expressed confidence in the government’s revenue projections, citing ongoing reforms and security gains. The administration aims to achieve a production level of at least 1.8 million barrels per day, leveraging increased security measures and the active involvement of governors in addressing crude oil theft. The combination of these measures, along with budget efficiency and discipline, instills optimism that additional borrowing may be unnecessary.

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