The Federal Government said yesterday 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.
The 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.
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He said: “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, maybe six months to one year, and say let me observe this average behaviour, so you don’t use spot prices.
“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 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 powers.,” Bagudu said.
He also said President Tinubu respected the National Assembly in allowing it raise further the exchange rate, considering his high regard for institutions and democracy.
Bagudu said further: “So, he respected democracy, 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.
”With deregulated market, you no longer have an official rate, it is much lower than even the way the markets are bidding,” the minister said.
He noted that the federal government was sure that with the measures it was currently taking, there would soon be significant increase in the supply of foreign exchange into the economy.
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The budget minister, who also spoke on the level of borrowing to fund the deficit in the 2024 budget, said the difference between this year’s borrowing, 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.
The minister explained that the federal government, within the 2024 fiscal year, intended to operate strictly within the dictates of fiscal responsibility law, which provides for the Central Bank of Nigeria, CBN, to lend to the government through its Ways and Means window, only five per cent of total budget.
“We will not go outside the law and borrow from ways and means, what is outside the law. So the fiscal responsibility law says in every one year, the central bank can lend the government up to 5% of its budget for the year.
”So if you go out of that, you’re going outside the lawful limit, and that is what the minister of finance and coordinating minister of the economy was very clear we are not going to do. We are not going to resort to borrowing outside the law.
“Secondly, as much as possible, we will even borrow away from the central bank because sometimes it’s even cheaper to borrow. So, those are the two elements.
”This is a country that had once produce more than 2 million barrels a day. So why are we behaving as if we can’t achieve that again? The first thing is to task people and ensure that they begin to run around to earn their job, the President said as much.
”That’s the basis of confidence and optimism, that combination of those measures on the borrowing and then the emphasis that we must collect.”
