FG Restricts MDAs from Foreign Currency Denominated Contracts
The Federal Government has directed all Ministries, Departments, and Agencies to desist from entering into contracts denominated in foreign currency, as part of new fiscal control measures outlined in the 2025 Appropriation Act Implementation Guideline.
According to the document, all MDAs are to ensure that their contracts are wholly denominated in Naira.
It states that no MDA is authorised to enter into any contract denominated in a foreign currency without the prior approval of the Minister of Finance and Coordinating Minister of the Economy.
“MDAs are to ensure that their contracts are wholly denominated in Nigerian Naira,” the guideline stated. “No MDA is authorised to enter a contract denominated in any foreign currency without the prior approval of the Honourable Minister of Finance and the Coordinating Minister of the Economy.”
The guideline, issued by the Budget Office of the Federation, also imposes new reporting obligations on MDAs.
It mandates the submission of monthly Budget Performance Reports to the Budget Office using a prescribed format not later than the 15th day of the following month.
The document warns that MDAs that fail to submit the reports will not be considered for subsequent capital or recurrent budget releases until they comply.
This measure, it noted, is aimed at ensuring that budget releases are tied to actual progress on project implementation.
The government also introduced new rules on the management of personnel costs.
The Budget Office said it would pursue greater efficiency by reducing the number of MDAs locked out of the Integrated Personnel and Payroll Information System.
It added that monthly and quarterly reviews of nominal rolls would be conducted to eliminate unjustified payroll entries and allowances.
MDAs have been directed to refrain from initiating payment for promotion or salary arrears on the IPPIS platform.
Instead, such requests must be forwarded to the Committee on Payment of Promotions and Salary Arrears, in line with a circular issued by the Ministry of Budget and Economic Planning on December 17, 2020.
Also, all MDAs will be required to submit monthly reconciliations of non-regular allowances received as part of personnel emoluments, indicating utilisation and any surplus funds.
The Auditor-General of the Federation is expected to monitor compliance as part of the audit programme.
Furthermore, no MDA is allowed to take any action that could result in increased personnel costs within the year—such as new recruitment, payment of unapproved allowances or replacement of exiting staff—without proper authorisation.
The new directive said sanctions would be applied to any chief executive or accounting officer who violates this directive.
The document also introduced a new recruitment policy to ensure compliance with the statutory ratio between academic and non-academic staff and the enforcement of the five per cent job provision for persons living with disabilities.
All future applications for establishment or financial clearance are expected to disclose the status of compliance with this policy.
On tax matters, the government warned that MDAs have no authority to grant tax exemptions to contracting parties.
“All exemptions must follow due process and be formally approved through the appropriate legal and fiscal channels,” it said.
The guideline further cautioned MDAs that frequently incur tax expenditures—whether through exemptions, waivers, or failure to enforce statutory obligations—to stay within the annual tax expenditure cap provided in the 2025 Appropriation Act.
In terms of support from development partners, the guideline stipulates that all requests must be routed through the International Cooperation Department in the Ministry of Budget and Economic Planning.
“Any support received in cash or kind must be documented and reported monthly to both the ICD and the Office of the Accountant-General of the Federation,” said, adding that the directive formed part of the Federal Government’s efforts to enforce discipline in budget execution and ensure alignment with fiscal targets set out in the 2025 budget.
Earlier the Federal Government mandated that all MDAs indicate the Global Positioning System coordinates for all capital projects valued at N150m and above in their 2025 expenditure submissions.
In May, President Bola Tinubu approved the Renewed Hope Nigeria First policy, which mandated all federal ministries, departments, and agencies to give absolute priority to Nigerian goods, services, and know-how when spending public funds.
The Minister of Information and National Orientation, Mohammed Idris, said the directive “puts Nigeria at the centre of every kobo the government spends,” adding that an Executive Order to give it full legal force was also underway.
According to him, the policy mirrors US President Donald Trump’s “America First” doctrine.
“Going forward, any business to be done by the government must place Nigerians first. If a local option exists, there is no reason whatsoever to import.
“Council has endorsed the President’s proposals, and the Attorney General has been directed to draft the Executive Order that will ‘make government invest in our people and our industries by changing how we spend, procure and build the economy,” he explained.
Experts back policy
Reacting to the directive, a Lagos-based economist, Adewale Abimbola, described it as a fiscal control measure aimed at curbing misuse of access to foreign currencies within government contracts.
“It’s essentially designed to minimise corrupt practices around procurement,” he said.
Abimbola added that the success of the policy would depend heavily on strict monitoring of MDAs’ procurement processes and the enforcement of punitive measures against defaulters.
Development economist, Dr Aliyu Ilias, welcomed the directive, describing it as a necessary step towards addressing Nigeria’s persistent foreign exchange challenges.
According to him, many of the country’s forex problems stem from a culture of denominating salaries, contracts, and transactions in foreign currencies.
“Most of our problems with forex are because we pay for too many things in dollars—including contracts and even salaries,” he said.
He called for a stricter approach, suggesting that the government should not merely require ministerial approval for dollar-denominated contracts but prohibit them outright.
“Even getting approval still creates demand pressure on forex,” he warned, adding that reducing such practices would help ease demand for dollars, strengthen the naira, and restore balance to the economy.
Ilias further urged private companies, NGOs, and diaspora-linked transactions to embrace the naira, arguing that increasing reliance on local currency would give the Nigerian economy the much-needed boost.
SOURCE: The PUNCH