The House of Reps met Thursday voted to back an exchange rate of 198 naira to the dollar for the 2015 Budget currently set for harmonization with the Senate. This figure is in contrast to the Senate, who had earlier proposed 190 naira. The House also recommended $52 as budget oil benchmark compared to the $65 recommended by the Federal Government. Adopting a price of N198 to the dollar basically helps the government claw back some revenues despite oil price benchmark dropping to $52.
When the Minister of Finance earlier reduced the oil benchmark to $65, they had recommended an exchange rate of N165 and daily oil production of 2.2782 million barrels per day. That comes to about N24.4billion a day. However, with the exchange rate depreciated to N198 and oil benchmark dropped to $52 the result drops to about N23.4billion a day. Though below the previous estimate, the depreciation in the exchange rate helps bridge a huge part of the shortfall.
Whilst this to a large extent helps the government claw back revenues, the masses bear a huge chunk of the pain as naira assets have by default lost over 30% in value. The budget though for states and the federal government, hardly trickles down to the masses considering high recurrent expenditure embedded in it. Therefore, small businesses and the private sector will have to face up to a new reality that is possibly beyond their control.
