In a recent revelation, Atiku Bagudu, Nigeria’s Minister of Budget and National Planning, unveiled the rationale behind the Nigerian government’s deliberate choice to set the foreign exchange benchmark at N800 to the dollar in the N28.7 trillion 2024 budget. This decision, he emphasized, was a conscious and strategic move to avert potential uncertainties.
Bagudu clarified that rather than relying on a spot rate, the government meticulously considered various potential scenarios and the average performance of the Naira. He highlighted the unpredictability in global oil prices and external factors that could profoundly impact the exchange rate, emphasizing the imprudence of using spot rates for budgeting purposes.
“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 behavior, so you don’t use spot prices,” stated Bagudu.
The Minister underscored the importance of not being swayed by fleeting spot prices and instead opting for a more stable and long-term approach. He elaborated on the government’s decision to peg the exchange rate at 750 on the executive side, which was subsequently raised to N800 to the dollar by the National Assembly.
Furthermore, Bagudu emphasized the collaborative nature of the decision-making process, acknowledging the wisdom of the National Assembly and the democratic principles underpinning the budgetary proceedings. Notably, President Bola Ahmed Tinubu, who signed the N28.7 trillion 2024 budget into law on January 1, 2024, has been a staunch advocate of institutional separation of power.
It is imperative to note that amidst these deliberations, the Naira closed at N874.79 per US dollar in the official exchange market on Thursday, reflecting the currency’s continued fluctuation since the Central Bank of Nigeria floated it at the forex market in June the previous year.
The government’s measured approach to setting the exchange rate in the 2024 budget reflects a proactive stance aimed at mitigating potential economic volatilities and uncertainties. By eschewing reliance on spot rates and embracing a long-term average performance perspective, the Nigerian government seeks to foster stability and prudence in its fiscal planning, thereby bolstering investor confidence and sustaining economic resilience.
