The Minister of Budget and National Planning, Alhaji Abubakar Atiku Bagudu, has disclosed that the Federal Government strategically avoided basing the foreign exchange benchmark in the 2024 budget on a spot rate to mitigate eventualities and uncertainties. Bagudu explained that using a spot rate for budgeting purposes would be imprudent, and instead, the government considered the average performance of the naira before arriving at the projected exchange rate of N750 to the dollar.
Bagudu clarified that the government did not use the spot rate and took a period of six months to one year to observe the average behavior of the naira. The National Assembly raised the projected exchange rate to N800 to the dollar. He emphasized the importance of considering the average performance and avoiding spot prices for budgeting, especially in the case of foreign exchange rates.
The minister noted that President Tinubu respected the National Assembly’s decision to raise the exchange rate further, demonstrating the president’s commitment to democracy and the institutional separation of powers. Bagudu assured that the government, through strategic measures, aimed to increase the supply of foreign exchange into the economy.
Regarding the level of borrowing to fund the deficit in the 2024 budget, Bagudu highlighted a significant decrease compared to 2023. He pointed out that the 2023 budget anticipated borrowing close to N14 trillion, while the 2024 budget is N9.1 trillion, reducing the borrowing-to-GDP ratio from 6.11% to 3.8%. Bagudu emphasized the government’s commitment to operating within the dictates of the fiscal responsibility law.
The minister explained that the government intended to strictly adhere to the fiscal responsibility law, limiting the Central Bank of Nigeria (CBN) to lend the government only five percent of the total budget through its Ways and Means window. Bagudu assured that the government would not borrow outside the law and would explore borrowing alternatives outside the central bank.
Bagudu expressed confidence and optimism in achieving revenue projections through increased production and security gains. He highlighted ongoing reforms and the commitment of stakeholders to combat crude oil theft and prevent additional borrowing. The minister emphasized the need for efficiency, discipline, and collaboration to achieve the government’s fiscal objectives.