Why FG agreed to N800-dollar exchange rate for 2024 budget

The Federal Government agreed for N800 to dollar exchange rate in the 2024 Appropriation Act on Thursday after assessing the naira’s average performance.

The 2024 budget’s foreign exchange benchmark was not based on a spot rate to prevent uncertainties.

The Minister of Budget and National Planning, Atiku Bagudu, told State House correspondents that the FG had chosen N750 to the dollar in the 2024 budget, which the National Assembly boosted to N800.

Bagudu stated, “You don’t use spot rates for budgeting. Today, oil prices could reach 120 due to a shortage or a ship collision that blocks a waterway.

“It would be foolish to use that as a reference price. I should observe this average behavior for six to twelve months—not spot prices. Even with the currency rate.”

He added, “We hope it will drop quickly, but when you prepare the budget, you will include average performance. We took it.

“We proposed a N750 executive average performance to the National Assembly.”

The minister said Tinubu approved of the National Assembly’s rate increase because he values democracy and institutions.

“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’s much lower than even the way the markets are bidding,” the

The minister stated that the FG is confident that its present efforts will boost foreign exchange supply quickly.

In 2024, the budget borrows significantly less to pay the deficit than last year, Bagudu said.

Nearly N14tn was expected to be borrowed in 2023. N9.1 trillion is this year’s budget. That seems significant.

In 2023, we borrowed 6.11 percent of our GDP. The percentage is 3.8%. So the quantity fell, Bagudu said.

In the new year, the former Kebbi State Governor said the FG will follow fiscal responsibility law, which allows the Central Bank of Nigeria to lend the government only 5% of the budget through its Ways and Means window.

We would not borrow from ways and means outside the law, he said. According to the fiscal responsibility statute, the central bank can lend the government up to 5% of its budget annually.

If you go beyond that, you’re outside the lawful limit, and the Finance Minister and Coordinating Minister of the Economy made it clear we won’t. We won’t borrow outside the law.

“Secondly, we will borrow from the central bank whenever possible because it is cheaper. The two elements are those. As the quantum has dropped, we shall follow the book.”