Contrary to the claim that Nigeria’s 2020 budget is the largest since the return of democratic rule in 1999, that of 2013 was actually the largest when adjusted using the average official and parallel exchange rates of the naira to the dollar within the period.
Analysts at Lagos-based research firm, SBM Intelligence, in a report released last week put the value of the country’s N10.8 trillion 2020 budget at $28 billion and $23.4 billion in terms of value of the budget, using the official and the parallel exchange rates respectively.
The current official exchange rate of the naira to the dollar is N361/$1 while the rate at the parallel market is about N430.5/$1.
The analysts stated that in real value, the budget falls short of the N10.33 trillion 2019 budget which they said is worth $33.6 billion and $28.7 billion when adjusted to the exchange rates of the naira to the dollar at the time, which was N306.8/$1 and N359.8/$1 respectively.
Nigeria’s largest budget
Using the same analysis, the firm stated that Nigeria’s largest budget in terms of its real value since 1999 was the N4.99 trillion 2013. According to the report, the 2013 was worth $31.5 billion adjusted by the official exchange rate of N158/$1 and $30.6 billion adjusted by the parallel exchange rate of N163/$1.
“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 fall of the value of the naira means degeneration of the spending power of Nigerians families and companies, which increasingly rely on imported foreign goods and services.
High inflation and the uncertainty engendered by the duality of the exchange rate means the country’s economy will continue to flounder, experts say. The weak value of the naira also means that the government will have to spend more in repaying its dollar-backed loans.
Economists have argued that a unified exchange rate will help roll back the corrosion of the value of the naira. Vice President Yemi Osinbajo-led Economic Sustainability Committee (ESC) has proposed a unified exchange rate to maximise foreign exchange inflow.