How the Federal Government is Making More Money from the Naira Depreciation, According to Ndume

He said that the budget is based on dollars for income and naira for expenditure, meaning that the government will have more naira to spend as the dollar value increases

Senator Ali Ndume, the Chief Whip of the Senate, has made a startling claim that the Federal Government is not losing but rather gaining from the naira depreciation against the dollar.

Ndume made this claim while explaining the reasons behind the continuous fall of the naira against the dollar in an interview with Channels Television on Wednesday.

He argued that the Federal Government is getting more revenue in naira to fund its 2024 budget, which was unveiled in November. He said that the budget is based on dollars for income and naira for expenditure, meaning that the government will have more naira to spend as the dollar value increases.

He pointed out that the main source of income for the government is crude oil exports, which are priced in dollars. He said that Nigeria's crude oil is still in high demand in the international market, and that the country stands to benefit from the current exchange rate between the dollar and the naira.

He said, “Don’t forget that this budget is a ‘dollarized’ budget, especially in terms of income. And when it comes to the terms of the expenditure, it’s in naira.

“So if we are getting our money in dollars and the value of the dollar is up, that means we will have more naira in terms of what we spend because we are not spending in dollars, we are spending in naira, while we are getting our revenue in dollars.

“Truly, the value of naira against the dollar has fallen but we are selling our major product that generates income in dollars. And that means any dollar we get now will also be valued at the current dollar-to-naira exchange rate.

“So if you do the analysis critically, it may mean if you balance it up, we may have more money to fund our budget. So technically, Nigeria is even benefiting from the dollar-to-naira hike.”

However, Ndume's claim has been met with skepticism and criticism by some experts and analysts, who have questioned the logic and implications of his argument.

They have pointed out that the naira depreciation has negative effects on the economy, such as inflation, reduced purchasing power, increased cost of production and imports, and reduced foreign investment.

They have also challenged the assumption that the government is getting more revenue from crude oil exports, given the volatility of the global oil market and the reduced oil production and inflows from abroad.

They have urged the government to address the root causes of the naira depreciation, such as the shortage of foreign exchange, the imbalance between supply and demand, the lack of diversification of the economy, and the poor management of the exchange rate regime.

According to data from FMDQ Securities, a platform overseeing forex trading in Nigeria, the naira reached a peak of 1,701/$ and a low of N1,100 in intraday trading before settling at N1,551/$ on Tuesday.

This represents a significant devaluation of the domestic currency, which was trading at around N400/$ in June 2023, when the Central Bank of Nigeria adopted a floating exchange rate system for the naira, unifying all forex market segments.

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