Senate Advises FG Not To Adopt A Supplemental Budget
Senate recommends using extra savings from dollar depreciation and cautions FG against creating a supplemental budget.
The Executive branch of government has received a warning from the Senate not to increase the size of the budget by creating a supplemental budget.
However, it recommended that the government finance the shortfall with the extra cash that should be saved from the recent naira depreciation.
This occurred in the context of the naira's devaluation against the US dollar, which occurred after the Central Bank of Nigeria, or CBN, took a number of actions to harmonize the official and parallel market exchange rates of the naira, from N900 to over 1,500 per dollar.
President Bola Tinubu's N750 per dollar 2024 budget benchmark exchange rate was changed to N800 per dollar by the National Assembly in December 2023.
“The current price of the dollar at the black market is between N1200 and N1300, and in the Central Bank of Nigeria, it is between N950 and N1000. We have a budget which was pegged at N750, if you look at the gap, you'd realise that has covered a lot of gaps already,” stated Senator Solomon Adeola, the chairman of the Senate Committee on Appropriations, in response to questions about the rationale behind the decision at the time.
“Again, we did some external consultations, most especially in the area of oil benchmark and petroleum resources, if we had gone in that line, we'd have pegged it at N850/N900 to a dollar and we agree that we want to be conservative in our approach, so that nobody will think that we want to increase the budget for any ulterior motive, that was why we left it at N490 billion out of which N44 billion is for statutory transfer, so effectively, the increment is about N446 billion that is going into the Federal Government pocket as consolidated revenue.”
“So, you can see that what necessitated our action is the economic reality and what is obtainable in both the black and open markets.”
However, the Senate has cautioned the Federal Government against expanding the budget size, stating that the move will worsen the country's already high inflation rate. This is in response to the naira depreciating from N900 per dollar to above N1,500 per dollar.
Rather, it advised the executive to reduce the amount of loans it would otherwise seek to cover the budget shortfall.
The Federal government was also recommended not to increase the budget size by Tokunbo Abiru, the Chairman of the Senate Committee on Banking, Insurance, and Other Financial Institutions.
In his opinion, the budget's gains ought to go toward closing the deficit.
Abiru added that even with the naira's volatility, it was too soon to judge if the budget would be feasible.
He explained, “What you use in budgeting is average rate not spot rate. What you are seeing today in the forex market is still looking like a spot rate.
“And you can see all attempts, all efforts from the end of Central Bank of Nigeria and the federal government is to find a way to stabilize. I can't tell what the stabilized number would be.”
Abiru added, “So it will be too hasty to begin to judge from the current spot performance, not until when we have something close to our average or stable position. That's when you should not be thinking about any revision of the budget.”
Comparably, Senator Ali Ndume, the Deputy Chairman of the Senate Committee on Appropriations, stated that the nation will save more than N600 for each dollar in the 2024 budget.
Nigeria receives more than 60% of its revenue in dollars, according to Ndume, therefore the naira's decline vs the dollar has allowed the nation to save a significant amount of money.
“We should be talking about budget excess not deficit. We spend naira, our budget is in Naira and we are spending in naira.
“The crude oil is our major source of income and it is being sold in dollars. So, if we are to analyze things, then we are making more money than losing money. The Federal Government pegged it first at N750 but at the National Assembly we jerked it up to N800.”
Ndume added, “So, we are selling our crude at about N1400 instead of N800, so we are making about N600 budget excesses. So, we have more money to spend.
“The budget is a dolarised budget so to say, such that our income is in dollars and expenditure is in naira. We are spending naira and earning dollars.”
Regarding the increase in food costs, the lawmaker claimed that Nigerians were to blame for the price surge since they were profiting from the foreign exchange market's instability.
“The problem we have is in foreign exchange, but most of our foods are produced locally. So, the increment is on people who decide to take advantage of the foreign exchange.
“For instance, we don't import corn, beans and other foodstuff, so why are the prices of foodstuff going up?’
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