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The Minister of Budget and National Planning, Atiku Bagudu, has said that the Federal Government was conscious and strategic never to base the foreign exchange benchmark in the 2024 budget on a spot rate in order to avoid eventualities and uncertainties.
The Minister made this clarification on Thursday in a chat with State House correspondents at the Presidential Villa.
According to him, before arriving at the projected exchange rate of N750 to the dollar in the 2024 budget, which the National Assembly raised to N800, the government considered and viewed critically, the average performance of the naira.
“For budgeting purposes, you don’t use 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. 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 with the exchange rate is like that,” the Minister noted.
He continued, “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.
“In fact, we took an average performance of 750 on the executive side and we proposed it to the National Assembly and the National Assembly, in its wisdom, and mind you this is a democracy, and President Tinubu is one who is a lifelong advocate of institutional separation of powers,” Bagudu added.
The minister also said that the President respected the National Assembly in allowing further rise of the exchange rate considering his high respect for institutions and democracy.
“So, he respected democracy that even though it was higher than what he submitted, but the institution that says so, has the authority to say so and even at the time they say 100, because it’s not an official rate it’s tidal because with the deregulated market, you no longer have an official rate, it is much lower than even the way the markets are bidding.,” the minister said.
Bagudu noted that the government was sure that with the measures it had taken, there would soon be a significant increase in the supply of foreign exchange into the economy.
The 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 and that of 2023 was significant.
In 2023, the budget anticipated a borrowing of close to N14 trillion. This year’s budget is N9.1 trillion. So we think that is significant. Because it’s 2023 took us to about 6.11% of our GDP as borrowing. This one is 3.8%. So the quantum had decreased,” Bagudu added.
He explained the government within the 2024 fiscal year intended to operate strictly within the dictates of fiscal responsibility law, which provides for the Central Bank of Nigeria (CBN), to lend to the government through its Ways and Means window, only 5 per cent of the total budget.
“We will not go outside the law and borrow from ways and means, that are outside the law. So the fiscal responsibility law says, that every one year, the central bank can lend the government up to 5% of its budget for the year.
So if you go out of 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. So the quantum has decreased, then we will go by the book.
“The President, in his steadfastness has brought a Central Bank governor who will not even allow and we also have determined coordinating minister and I. So, that’s a combination of the two.(www.naija247news.com)