Bagudu: Why we adopted N800/$ as benchmark FX rate in 2024 budget

Atiku Bagudu, minister of budget and economic planning, says the decision to base the 2024 budget on a foreign exchange (FX) rate benchmark of N800 to a dollar was strategic and deliberate.

Although the federal government had proposed the 2024 budget FX rate to be based on N750 per dollar, the national assembly increased it to N800.

In an interview with journalists on Thursday in Abuja, Bagudu said budgets could not be based on a spot rate to avoid unforeseen events due to global dynamics.

He said before arriving at the projected FX rate of N750 in the 2024 budget, the government reviewed and analysed the naira’s average performance.

“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,” the minister said.

“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.

Bagudu said the federal government is optimistic that the steps implemented thus far will significantly improve the supply of forex into the economy.

The minister, speaking on the level of borrowing to pay the deficit in the 2024 budget, said that the gap between this year’s borrowing and that of 2023 remained 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,” he said.

According to the minister, “2023 took us to about 6.11 per cent of our GDP as borrowing. This one is 3.8 per cent. So, the quantum had decreased”.

‘WAYS AND MEANS BORROWING WILL BE WITHIN THE LAW’

Bagudu said the federal government, in the 2024 fiscal year, aims to operate strictly within the dictates of fiscal responsibility law.

“We will not go outside the law and borrow from ways and means, what is outside the law,” he said.

“So, the fiscal responsibility law says, in every one year, the Central Bank can lend the government up to 5 per cent 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.”

Bagudu said the revenue predictions for 2024 are intended to expand on the government’s various attempts to create a conducive environment for investment from both domestic and foreign firms.

He said the budget’s primary focus was on sectors such as security, education, work, and housing, to build the economy and provide jobs for Nigerians.

“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,” the minister said.

Bagudu said security gains are increasing with the mobilising of all stakeholders, noting that “the governors [recently] re-energise the National Economic Council Committee on crude oil theft and prevention”.

“So that governors will say to the extent that is happening in their state, they will take personal responsibility and lead,” he added.

He said the federal government is convinced that the revenue predictions are feasible, and that with the current budget efficiency and discipline, the country will not need to resort to extra borrowing.