The Federal Government of Nigeria has explained that it settled for an exchange rate of N800 to the dollar in the 2024 Appropriation Act, considering the average performance of the naira.
The decision was made to avoid potential eventualities and uncertainties that might arise if the foreign exchange benchmark were based on a spot rate.
Atiku Bagudu, the Minister of Budget and National Planning, clarified that the government initially proposed a projected exchange rate of N750 to the dollar, but the National Assembly raised it to N800.
Bagudu emphasized the cautious approach to budgeting, stating that using spot rates for oil prices or exchange rates could lead to complications due to unforeseen circumstances.
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He mentioned that for budgeting purposes, an average performance over a certain period, typically six months to one year, is observed to avoid the volatility of spot prices.
Regarding the decision to raise the exchange rate from N750 to N800 by the National Assembly, Bagudu highlighted that it was done with respect for democracy and institutions.
He noted that even though the rate exceeded what was initially submitted, the institution had the authority to make such decisions.
The minister also discussed the government’s borrowing plans, stating that the borrowing for the 2024 budget is significantly less compared to the previous year.
In 2023, the budget anticipated borrowing close to N14 trillion, while this year’s budget is N9.1 trillion, representing a decrease in the borrowing quantum.
Bagudu assured that the government would adhere to the fiscal responsibility law, limiting borrowing from the Central Bank of Nigeria’s Ways and Means window to 5% of the total budget, as stipulated by the law.
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