The Nigerian government’s revenue has increased by over N1 trillion, thanks to the devaluation of the Nigerian currency
Data from FAAC shows that, in nine months, the federal government and the other three tiers benefited
Since the CBN embarked on the unification of the foreign exchange windows, the naira has been in a free fall
The federal government and the other tiers of government have collectively recorded N1.05 trillion in exchange rate gains in the nine months of 2023. This represents a 10,400% increase compared with the N10.35 billion income from exchange rate gains recorded in the corresponding period of 2022.
According to data from the Federation Account Allocation Committee (FAAC), the increase in exchange rate gain was triggered by a 71% naira depreciation during the period under review.
What is exchange rate gain?
In simple terms, exchange rate gain income is the extra money the government gets when the actual exchange rate in the official foreign exchange market is higher than expected in the year’s budget. The budget assumes a certain exchange rate to convert foreign currency income, like money from crude oil exports, foreign aids, and foreign loans, into the local currency (naira) for the Federation Account. If the actual exchange rate turns out to be higher than what was assumed in the budget, the Federation Account receives more money in naira for the foreign currency income.
How do the states make more money?
Vanguard reports that the approved budget 2023 was based on an exchange rate of N435 per dollar. However, during the nine months, the naira depreciated by 71.3% in the official forex market, where the exchange rate rose to N769.26 per dollar on September 30th, 2023, from N449.05 per dollar on December 31st, 2022. Consequently, the difference between the budget exchange rate and the prevailing exchange rate widened to N334.26 per dollar on September 30th, 2023, from N14.05 per dollar on December 31st, 2022. As a result, the income from exchange rate gains into the Federation Account rose to N1.05 trillion during the nine months, representing a 10,400% year-on-year increase from N10.35 billion in the corresponding period of 2022
Tinubu’s govt sets exchange rate target
Earlier, we reported that the federal government expressed optimism about the naira exchange rate in 2024. Ben Akabueze, the DG of the Budget Office, also said the exchange rate target of 2024 could be achieved. The naira in 2023 recorded its worst performance in the official and unofficial foreign exchange market.
