2024 budget: How we settled for N800 to dollar exchange rate – FG

The federal government, Thursday, said it was conscious and strategic never to base the foreign exchange benchmark in the 2024 budget on a spot rate, to avoid eventualities and uncertainties.

Minister of Budget and National Planning, Atiku Bagudu, who disclosed this while speaking to State House correspondents, explained that before arriving at the projected exchange rate of N750 to the dollar in the 2024 budget, which the National Assembly raised to N800 to the dollar, the government considered and viewed critically, the average performance of the naira.

“For budgeting purposes, you don’t use spot rate of anything. Oil price can go to 120 today, maybe there is a shortage; 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,” the minister noted. He explained that, “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.

“In fact we took an average performance of 750 on the executive side and we proposed it to the National Assembly and the National Assembly in its wisdom, and mind you this is democracy, and President Tinubu is one who is a lifelong advocate of institutional separation of power,” Bagudu added.

The minister also said that President Tinubu respected the National Assembly in allowing them to further raise the exchange rate, considering his high 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 federal government was sure that with the measures it is currently taking, there would soon be significant increase in the supply of foreign exchange into the economy. The budget minister, who also spoke on the level of borrowing to fund the deficit in the 2024 budget, said that difference between this year’s borrowing amount compared to 2023 remained significant.

“In 2023, the budget anticipated a borrowing of close to N14 trillion. This year’s budget is N9.1trillion. So we think that is significant. Because it’s 2023 took us to about 6.11% of our GDP as borrowing. This one is 3.8%. So the quantum had decreased,” Bagudu added.