Nigeria plans to create a $25 billion fund with public and private financing to modernize infrastructure and avoid a recession, Vice President Yemi Osinbajo 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 its 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, 58, said in an interview on Tuesday in the capital, Abuja.
Economic growth slowed to 2.35 percent in the second quarter of 2015, according to Nigeria’s national statistics agency, 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 percent of its export income.
Osinbajo was a lawyer in the commercial capital, Lagos, until his surprise inclusion as the running mate of former military ruler Muhammadu Buhari on the ticket of the opposition All Progressives Congress party. They took office in May after defeating the incumbent, Goodluck Jonathan, and his Peoples Democratic Party in the first democratic handover of power from one party to another in Africa’s most populous nation.
The Buhari administration plans 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 modernizing roads, rail transportation and agriculture, Osinbajo said.
Boosting agricultural output in a fertile nation that has become one of the world’s biggest importers of rice will both save foreign-exchange outlays and create jobs. The government is looking to make the West African country self-sufficient in rice production in about 24 months, he said.
“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, central bank Governor Godwin Emefiele has resisted pressure from investors and fellow policy makers 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.
Reserves have dropped to about $30 billion, down from almost $40 billion a year ago, while the naira has weakened about 8 percent against the dollar since the start of the year.
Osinbajo said he understands that portfolio investors aren’t pleased about 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.