Despite the government’s increased revenue resulting from the harmonization of foreign exchange rates, six ministries, departments, and agencies are allocating N244 million in the proposed 2024 budget to offset potential foreign exchange losses, as revealed by data from the Budget Office of the Federation.
The Corporate Finance Institute explains that foreign exchange gains or losses occur when companies transact in foreign currencies, experiencing fluctuations relative to their home currency.
In the 2024 budget, Police Formations and Commands lead in allocating N137.1 million for forex losses, followed by the National Centre for Control of Small Arms and Light Weapons at N75.98 million and the National Intelligence Agency at N26.32 million.
Additional allocations include N3.75 million for the National Counter Terrorism Centre, N1.26 million for the Nigerian Airforce, and N454,198 for the Ministry of Communications and Digital Economy.
The Central Bank of Nigeria’s directive on June 14, 2023, instructed Deposit Money Banks to eliminate the rate cap on the naira at the official Investors and Exporters’ Window of the foreign exchange market, allowing it to freely float against the dollar and other global currencies.
Consequently, the naira’s value plummeted from 471/$ to 861.91/$ at the Investors & Exporters FX window by Friday, according to data from the FMDQ Exchange.
