- The Lagos Chamber of Commerce and Industry (LCCI) has faulted the Federal Government’s exchange and inflation rate assumptions in the 2025 budget proposal
- The chamber urged the government to make policies that will enable businesses to thrive
- The continued volatility in the forex market and soaring inflation are clogs to the Federal Government’s 2025 budget assumptions
The Lagos Chamber of Commerce and Industry (LCCI) has noted that the assumptions of an N1,400 exchange rate and an inflation rate of 15.8 per cent, as proposed by the Federal Government in the 2025 budget proposal, is not feasible
The chamber, in a statement issued by its Director-General, Dr Chinyere Almona, on Monday, November 18, said such parameters as contained in the proposed budget are unattainable given the prevailing macroeconomic condition of the country.
It noted that the budget's assumption of an exchange rate at N1,400 is too fragile to work against the prevailing average of over N1,600/$ at both the official and parallel segments of the foreign exchange (forex) market.
The chamber also stated that while assuming a 15.8 per cent inflation rate in the proposed budget, the Federal Government did not consider the factors responsible for the soaring headline and food inflation.
With inflation soaring to 33.88 per cent in October 2024, LCCI said it would be foolhardy for the Federal Government to believe a possible 51 per cent decline in inflation within one year.
The LCCI also challenged the 91.2 per cent increase in debt services as proposed in the budget, describing it as unsustainable since the proposed increase of 91.2 per cent to N15.38 trillion is equivalent to 32.1 per cent of the total budget.
It said, “This appears to be unsustainable. The situation is further worsened with the projected deficit at N13.08 trillion and new borrowings of N9.22 trillion.
“With Federal Government debt already at about N134 trillion as of June 2024, inflation reaching a new high of 33.88 per cent as of October and businesses burdened with a high Monetary Policy Rate at 27.25 per cent, the Federal Government has a narrow bridge to navigate choices of policy options.”
‘Businesses need enabling environment not assumptions’
The LCCI further urged the federal government to focus more on creating an environment that will enable businesses in Nigeria to thrive rather than making unrealistic and unattainable assumptions.
The chamber noted that the projected Gross Domestic Product (GDP) growth rate in the 2025 budget estimates is attainable if there is clarity in policy direction, urging the government to be more proactive in addressing the challenges in the country.
It said, “Non-oil revenues, such as taxes, customs duties and surpluses from government agencies, are all subject to volatility in the economy. Current economic downturns, tense business environment, ongoing debates on tax policies and shifts in consumer behaviour can impact non-oil revenue performance.
“In the face of current realities, we urge the government at all levels to be more proactive in respect of nature-induced casualties, climate change impacts and damages caused by human activities. In recent months we have recorded massive destruction of lives and properties due to climate-related factors.”
Forex volatility and rising inflation are clogs to FG’s projections
The soaring rate of Nigeria’s inflation and the volatility recorded in the forex market are clogs to achieving the Federal Government’s assumptions in the 2025 budget proposal.
Inflation soared to a new 28-year high of 34.19 per cent in June 2024, a significant leap from the 22.4 per cent President Bola Tinubu’s administration met in May 2023. The rate, however, decelerated to 33.40 per cent in July after 19 months of upward trend, marking two consecutive months of decline in August at 32.15 per cent before increasing to 32.70 per cent in September 2024 and further increased to 33.88 per cent in October 2024.
The continued volatility in the forex market can be traced to the naira floating in June 2023, which allowed market forces to determine the currency’s value on a willing-buyer-willing-seller model. This policy also aimed to close the arbitrage between the parallel and official forex windows.
The naira floating has also put pressure on the naira as the currency has continued to depreciate. It lost 40 per cent of its value in the first half of 2024 and recently depreciated by 43 per cent and is one of the worst-performing currencies on the African continent.
The currency has seen exponential increases, jumping from the N769.25/$ it traded on June 20, 2023, at the Investors and Exporters (I&E) to N1,652.25/$ at the Nigerian Autonomous Foreign Exchange Market (NAFEM) window as of November 15, 2024.
On the other hand, at the parallel market, the currency moved from N770/$ in June 2023 to N1,750/$.
2025 budget to focus on actual needs of State House agencies, staff welfare, says Gbajabiamila
Meanwhile, TheRadar reported that the Presidency assured that the 2025 budget for State House agencies will be structured around a thorough needs assessment to ensure that the allocation of funds is rooted in actual requirements.
This was revealed by the Chief of Staff to the President, Honourable Femi Gbajabiamila, while speaking to journalists during a one-day fact-finding tour of government agencies managed by the State House on Wednesday, August 21.
