Nigeria’s Ministries allocate N244m for forex losses amid Naira fluctuation

By Sodiq Adelakun

In light of the recent unification of foreign exchange rates, six Nigerian Ministries, Departments, and Agencies have earmarked a total of N244 million to mitigate anticipated foreign exchange losses.

This financial strategy is detailed in the proposed 2024 budget, which is publicly accessible on the Budget Office of the Federation’s website.

The Corporate Finance Institute explains that foreign exchange gains or losses are a result of international transactions conducted in currencies other than the company’s home currency, which are subject to fluctuations in the foreign exchange market.

Within the 2024 budgetary provisions, the Police Formations and Commands have the largest contingency for forex losses, setting aside N137.1 million.

This is followed by the National Centre for Control of Small Arms and Light Weapons, which has allocated N75.98 million for the same purpose.

Other agencies that have made provisions for potential forex losses include the National Intelligence Agency with N26.32 million, the National Counter Terrorism Centre with N3.75 million, the Nigerian Airforce with N1.26 million, and the Ministry of Communications and Digital Economy with N454,198.

The Central Bank of Nigeria (CBN) took a significant step on June 14, 2023, instructing Deposit Money Banks to eliminate the rate cap on the naira at the official Investors and Exporters’ Window.

This move was intended to allow the naira to float freely against the dollar and other major global currencies. Following this directive, the value of the naira experienced a sharp decline, plummeting from 471/$ to 861.91/$ at the Investors & Exporters FX window, as reported by the FMDQ Exchange on the subsequent Friday.

The budgetary allocations for forex losses underscore the financial impact of currency volatility on government operations and highlight the ongoing challenges faced by the Nigerian economy in stabilizing the naira.