Nigeria’s Minister of Finance, Mrs Kemi Adeosun, has said that the planned 1.8 Trillion Naira capital investment in 2016 by the Federal Government will drive economic growth.
Giving a breakdown of the current administration’s plans to reposition the economy at a Forum and Survey Launch in Lagos on Friday, Mrs Adeosun said a spending stimulus was needed to reflate the economy and avoid recession.
Diversified Economic Growth
The Minister, in her keynote address, told the participating Chief Financial Officers at the forum organised by the KPMG, that Nigeria’s GDP in 2015 was the lowest in the last 15 years and pointed out that even whilst oil prices were high, GDP had been falling.
According to a statement issued by the Special Adviser to the Finance Minister on Media Matters, Mr Festus Akanbi, the Minister recalled that a similar stimulus had actually been provided in the global downturn in 2008.
She pointed out that the stimulus now needed, would be strategically targeted at investments that would support a diversified economic growth.
The Finance Minister said the proposed 2016 budget would finance investments in key infrastructure particularly in transport, power, health, housing and education.
“These investments would create jobs with the various contractors that would execute the projects,” Mrs Adeosun further told the gathering.
She explained that public investments would attract further investments from the private sector and that investments in power and transport would increase the competitive position of Nigerian businesses.
The Minister cited the case of Ethiopia, which is now seen as a model for African economy which has diversified from a single product, coffee to a multi-product with exports of flowers providing US3.5bn Dollars of earnings as well as leather goods and other products.
Mrs Adeosun said that to attain that level of growth, the Ethiopian Government had invested up to 60 per cent of its budget in capital, pointing out that this threshold contrasted to the Nigerian situation, where In 2015, Nigeria’s capital expenditure was just 10 per cent of the total.
“No economy has ever grown by underinvesting in infrastructure,” the Minister stressed.
Sanitising The Payroll
Explaining the strategies that the government had adopted, the Minister said: “The ongoing “fiscal housekeeping”, which included sanitising the payroll, which to date, has unveiled over 23,000 possible ghost workers and the creation of the Efficiency Unit, are key strategies in managing recurrent expenditure.
“The focus on improving non-oil revenue collections is also an important strategic objective”.
According to the Minister, this is essential in ensuring that the planned borrowings were channelled to capital projects rather than being spent on recurrent items.
On the subject of the planned borrowing, the Minister explained that Government was seeking the lowest cost funds and was therefore, consulting with the multilateral agencies, which offered concessional rates of interest as low as 1.5 per cent before looking at the commercial Eurobond Market.
She said that the financing strategy was to restructure much of the existing debts, which had short maturity and aligned it with the investment plans of the government in line with its Medium Term Expenditure Framework.
The Minister assured Nigerians that the government was ensuring that projects to be undertaken, would create direct and indirect revenues, which would be used to repay the obligations.
Mrs Adeosun said that for the medium term, the outlook for the economy was strong.
“If the planned investments in capital are undertaken, the GDP growth projections show that Nigeria would become a leading global economy.
The government will work to ensure that consumption from our huge population would drive internal growth across a number of key sectors,” she stated.
The Minister, however, assured the audience that if the disciplined implementation of the plans could be attained, Nigeria would finally be able to diversify and end the situation where the entire nation focus on oil price.