Single exchange rate will make better economic sense—-Censoj

Centre for Social Justice has said that the exchange rate of N305 to 1 USD is contentious as economic agents in Nigeria do not access foreign exchange at this rate. They access the dollar at about N360 to 1USD depending on the prevailing market rate. It would make better economic sense if the Central Bank of Nigeria (CBN) worked towards a harmonised rate that would merge both the official and parallel rates as this would also release more Naira to the three tiers of government who share from the Federation Account. 

According to Censoj “The expected income from crude oil amounts to, at the proposed exchange rate, N2.367 trillion. But if it is converted at N360=1USD, it will amount to N3.113trillion.  This will release an extra N475billion for the Federal Government to spend. The exchange rate differential in the sum of N125.479billion proposed in the 2020 estimates is without empirical foundation and there is no information on the exchange rate backgrounding the differential. It is arbitrary and contradicts the N305 to 1USD assumption. Multiple exchange rates impact on the economy negatively”.

According to the body Nigeria needs to sustain economic growth at not less than 8 per cent per annum over a period of about ten years, if it has to lift about 100 million persons out of poverty as projected by President Muhammadu Buhari. The growth has to be inclusive and people centred, attacking vulnerabilities, increasing the use of local content- building a Nigerian economy for Nigerians in Nigeria and in the Diaspora.  Therefore, the current projection lacks ambition and it is tepid. The projection should be higher provided it is backed by the right enabling policy frameworks to support inclusive people and job centred growth.  

it said that the deficit is in the sum of N2.175 trillion and it is to be financed mainly by new foreign and domestic borrowing, privatisation proceeds, signature bonuses and draw-downs on loans secured for specific purposes. This will further add to our already high debt profile of $81.274billion. The deficit is 21.10 per cent of the overall expenditure of N10.33 trillion. Also, the deficit is 26.7 per cent of the projected revenue of N8.155 trillion. When it is considered that by the end of June 2019, a deficit of N1.35trillion had been recorded in the 

implementation of the 2019 budget, representing 70 per cent of the budgeted deficit for the full year, and the deficit was recorded at a time not a single kobo has been spent of capital expenditure for the year, then the extent of the proposed deficit financing for 2020 raises very critical challenges. It is like sinking further into a slippery hole. But we need to take cognisance of the fact that in 2018, the ratio of debt repayment to retained revenue was 54.3 per cent. This is not sustainable either in the short, medium or long term as the capacity to repay is diminishing.