2024 Budget: why dollar was capped at N800 – Minister

By Ukpono Ukpong

The Minister of Budget and National Planning, Atiku Bagudu, has disclosed that the Federal Government was conscious and strategic in not basing the foreign exchange benchmark in the 2024 budget on a spot rate, to avoid eventualities and uncertainties.

Bagudu told State House correspondents 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 critically considered the average performance of the naira.

“For budgeting purposes, you don’t use the spot rate of anything. The oil price can go to 120 today, maybe there is a shortage, or 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 observe this average behavior, so you don’t use spot prices.

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The same applies to the exchange rate,” the Minister noted. He explained, “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 did.”

“In fact, we took an average performance of 750 on the executive side and proposed it to the National Assembly. 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, raised it.”

The minister also said that President Tinubu respected the National Assembly’s decision to further raise the exchange rate, considering his high regard for institutions and democracy.

“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. Even at the time they said 100, because it’s not an official rate, it’s tidal. With the deregulated market, you no longer have an official rate, it is much lower than even what the markets are
bidding,” the minister said.

The minister noted that the Federal Government was confident that with the measures it is currently taking, there will soon be a 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 the difference between this year’s borrowing amount compared to 2023 remained significant.

“In 2023, the budget anticipated borrowing of close to N14 trillion. This year’s budget is N9.1 trillion. So we think that is significant. Because 2023 took us to about 6.11% of our GDP as borrowing. This one is 3.8%. So the quantum has decreased,” Bagudu added. The Budget Minister explained that the Federal Government, within the 2024 fiscal year, intends to operate strictly within the dictates of the Fiscal Responsibility Law, which allows the Central Bank of Nigeria (CBN) to lend to the government through its Ways and Means window, only 5 percent of the total budget.

“We will not go outside the law and borrow from ways and means beyond the lawful limit. 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 beyond that, you’re going outside the lawful limit, and that’s 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.

“And 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.

The quantum has decreased, then we will go by the book. “The President, in his steadfastness, has brought in a Central Bank Governor who will not even allow it, and we are also determined, the Coordinating Minister and I, so that’s a combination of two.

“And then three, our revenue projections are designed to ensure that everyone earns their job. This is a country that once produced more than 2 million barrels a day. So why are we behaving as if we can’t achieve that again? So the first thing is to task people and ensure that people begin to run around to earn their job, as the President said. So that’s the basis of confidence and optimism, that combination
of those measures on the borrowing and then the emphasis that we must collect.

“We have seen the reforms so far have been more revenue, but we are not stopping there. We believe that our objective to achieve at least 1.8 million production per day is something that has been done before.

And with security gains that are increasing and the mobilizing of all stakeholders.

“For example, just yesterday, maybe you will have seen even the governors have re-energized the National Economic Council Committee on Crude Oil Theft and Prevention. So that governors will say to the extent that it is happening in their state, they will take personal responsibility and lead.

“So if all governors can control their states, we assure that things can be done. So because of that, we are confident that the revenue projections are achievable and with budget efficiency and discipline we are putting in, we believe that we won’t recourse to additional borrowing, and maybe we will even borrow less,” Bagudu noted.