The country plans to create a $25bn fund with public and private financing to modernise infrastructure and avoid a recession, Vice President Yemi Osinbajo has said.
The halving of oil prices since last year has forced Nigeria, Africa’s largest producer of crude, to slash its budget, and contributed to a weaker currency. Standard & Poor’s downgraded the country’s credit rating, while JPMorgan Chase & Co. removed Nigeria from its local-currency emerging market indexes.
“We think that the way out of this, what some have described as an impending recession, is actually to spend rather than to cut back in any way,” Osinbajo, said in an interview with Bloomberg on Tuesday in Abuja.
Economic growth slowed to 2.35 per cent in the second quarter of 2015, according to the National Bureau of Statistics, the lowest this decade, as falling income from crude exports and foreign exchange shortages hit businesses.
The nation relies on oil for about two-thirds of government spending and 90 per cent of its export income.
Osinbajo said the President Muhammadu Buhari administration planned to target investment toward improving a power supply system that leaves tens of millions of households without grid electricity for hours each day, as well as modernising roads, rail transport and agriculture.
The government, according to him, is looking to make the country self-sufficient in rice production in about 24 months, adding that boosting agricultural output in a fertile nation that has become one of the world’s biggest importers of rice would both save foreign exchange outlays and create jobs.
“A lot of those projects will be bankable projects, because we’re looking at projects that will interest private sector investors as well, but they are strategic for us,” Osinbajo said.
In the face of declining oil revenue, the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, has resisted pressure from investors and fellow policymakers to devalue the naira.
Instead, he imposed exchange rate controls in February that Osinbajo described as “largely successful” and “inevitable in the short term” in an effort to stem the outflow of reserves.
The reserves have dropped to about $30bn, down from almost $40bn a year ago, while the naira has weakened by about eight per cent against the dollar since the start of the year.
Osinbajo says he understands that portfolio investors are not pleased with the trading restrictions on the currency, which have led to a slowdown in capital market inflows.
“The government is mindful that we maintain foreign exchange reserves so at least that we are able to keep investor confidence high, especially direct investment,” he said.
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