•As naira depreciation bloats foreign borrowing costThe apparent high cost of borrowing internationally, following the massive fall in the value of the naira, may have forced the federal government to reverse its borrowing plan to fund the N9.05trillion deficit budget from the domestic financial market as indicated in the Medium Term Expenditure Framework, MTEF, 2024-2026, released at the weekend.
In the MTEF 2024-2026, released at the weekend, the government indicated that over 66 percent or about N6.0 trillion of the total deficits amounting to N9.05 trillion in 2024 would be raised from the domestic market. Financial analysts said though the higher budget figure for 2024 may have been buoyed by the expected higher Naira revenue from foreign exchange sales, the gains would be lost to foreign debt servicing.
According to the analysts at CardinalStone Finance, “the government could profit from positive FX translation following the over 40.0% currency devaluation in 2023 and likely further weakness in 2024. “Also, we anticipate a further depreciation in the Naira, potentially below the assumed levels premised on the limited supply of FX”.
“On the other hand, the average inflation and exchange rate are estimated at 20.1% and N678.47/$ respectively.