The Minister of Budget and Economic Planning, Atiku Bagudu, elucidated that the choice to set the 2024 budget’s foreign exchange benchmark at N800 to a dollar was a deliberate and strategic decision made by the federal government.
Bagudu emphasized the need for a cautious approach, avoiding spot rates to mitigate potential market fluctuations influenced by global dynamics.
He maintained that the decision to adopt an exchange rate of N750 to the dollar in the budget was informed by a thorough analysis of the Naira average performance.
Addressing concerns about borrowing, Bagudu highlighted a significant reduction in borrowing compared to the previous year.
The 2024 budget, totaling N9.1 trillion, contrasts with the anticipated borrowing of nearly N14 trillion in 2023.
The minister underscored the government’s commitment to operating within the bounds of fiscal responsibility law, limiting Central Bank lending to five percent of the total budget through its Ways and Means window.
For budgeting purposes, you don’t use the 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. So, even the exchange rate is like 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,” Mr Bagudu said.
Bagudu expressed confidence that the measures implemented would enhance foreign exchange supply, contributing to the economy’s stability.
He outlined the government’s dedication to adhering to fiscal responsibility laws and ensuring that revenue projections for 2024 align with initiatives aimed at fostering a conducive investment environment.
The budget’s primary focus revolves around key sectors such as security, education, works, and housing, with an overarching goal of economic development and job creation.
The minister concluded by asserting the government’s optimism regarding revenue projections, citing ongoing reforms and increased security measures.
He emphasized the collaborative efforts of stakeholders, including governors, in addressing challenges like crude oil theft.
Bagudu expressed confidence that with budget efficiency and discipline, the government could potentially borrow less than anticipated.
“We have seen the reforms so far have brought in 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 with mobilising of all stakeholders.
“For example, just yesterday, maybe you will have seen even the governors re-energise the National Economic Council Committee on crude oil theft and preventio so that governors will say to the extent that is happening in their state, they will take personal responsibility and lead.
“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 have to resort to additional borrowing. Maybe we will even borrow less,” Mr Bagudu said.