Contrary to the argument that the 2020 budget for Nigeria is the largest since the restoration of democratic rule in 1999, the 2013 budget was actually the largest when calculated using the naira ‘s average official and parallel exchange rates to the dollar during the time.
Analysts at the Lagos-based research company, SBM Intelligence, placed the value of the country’s N10.8 trillion 2020 budget at $28 billion and $23.4 billion in terms of budget value, using the official and parallel exchange rates, respectively, in a study released last week.
The current official Naira-to-Dollar exchange rate is N361/$1 while the parallel market rate is about N430.5/$1.
The analysts stated that, in real value, the budget falls short of the 2019 is N10.33 trillion budget which they said was worth $33.6 billion and $28.7 billion when adjusted to the naira’s dollar exchange rates at the time, N306.8/$1 and N359.8/$1 respectively.
Using the same study, the firm reported that the 2013 N4.99 trillion was the highest budget for Nigeria in terms of its real value since 1999. The 2013 was worth $31.5 billion, adjusted by the official exchange rate of N158/$1 and the parallel exchange rate of N163/$1 adjusted by $30.6 billion, the report notes.
“At various times, Nigeria’s budgets have been feted as ‘the highest ever’. However, for some years we have been asking if such appellations are true. Nigeria maintains a peg for converting the naira to the dollar, which in relative terms represents true value. Starting from 1999, the date where budgets became easily accessible by law, we have compared the budget announced each year to its value in US dollars at the average rate of the year in which the budget was announced,” the report explained.
The steady decline of the naira value means the degeneration of the spending power of Nigerian families and businesses, which is increasingly dependent on imported foreign goods and services.
High inflation and the uncertainty created by exchange-rate duality means that the economy of the country will continue to flounder, experts say. The naira ‘s weak value also means the government will have to spend more on repaying its dollar-backed loans.
Economists have argued a single exchange rate would help roll back the naira value’s depreciation. The Economic Sustainability Committee (ESC) headed by Vice President Yemi Osinbajo has proposed a unified exchange rate to maximize foreign exchange inflow.
