FG Explains Choice of N800/Dollar Exchange Rate in 2024 Budget

In a press statement on Thursday, the Federal Government clarified its decision to set the Naira to dollar exchange rate at N800 in the 2024 Appropriation Act. Minister of Budget and National Planning, Atiku Bagudu, emphasized that the choice was based on a careful consideration of the naira’s average performance.

Bagudu revealed that the government avoided using a spot rate to prevent potential uncertainties, citing factors like oil price fluctuations and unforeseen events. Initially proposing N750 to the dollar, the National Assembly later adjusted it to N800, a decision Bagudu acknowledged with respect for democratic processes and institutional authority.

“For budgeting purposes, you don’t use the spot rate of anything. Oil prices can go to 120 today, maybe there is a shortage, or maybe there is a collision between two ships that will block a channel,” Bagudu explained, highlighting the need for a more stable, average performance benchmark.

Addressing concerns about borrowing, Bagudu assured that the 2024 budget’s deficit funding would differ significantly from the previous year. He pointed out that the anticipated borrowing for 2023 was close to N14tn, whereas the 2024 budget stands at N9.1 trillion, representing a notable decrease in the borrowing quantum as a percentage of GDP.

The minister stressed the commitment to operating within the confines of the fiscal responsibility law, emphasizing that the government would not exceed the 5% limit set by the law for borrowing from the Central Bank through its Ways and Means window. Bagudu emphasized the adherence to legal frameworks and the exploration of cost-effective borrowing options.

In conclusion, Bagudu expressed optimism that the government’s current measures would lead to a significant increase in the supply of foreign exchange in the economy.