The Minister of Finance, Mrs. Kemi Adeosun on Friday said the planned N1.8 Trillion capital investment in 2016 by the Federal Government was key to driving economic growth.
Speaking on the current administration’s plans to reposition the economy, Adeosun told participants at the KPMG in Nigeria’s CFO Forum and Survey Launch in Lagos that to reflate the economy and avoid recession, a spending stimulus was needed.
The Minister, in her keynote address told the participating chief financial officers that the 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, “To reflate the economy and avoid recession, a spending stimulus was needed,” the minister said.
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, pointing out however, that the stimulus now needed would be strategically targeted at investments that would support a diversified economic growth.
She said the proposed 2016 budget would finance investments in key infrastructure particularly in transport, power, health, housing and education. She said, “These investments would create jobs with the various contractors that would execute the projects.” She explained that that public investment would attract further investment 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 of earnings as well as leather goods and other products. She 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. The Minister said, “No economy has ever grown by underinvesting in infrastructure”
She said that 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 was a key strategy in managing recurrent expenditure, adding that the focus on improving non-oil revenue collections was an important strategic objective. According to her, this was 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 has short maturity and align it with the investment plans of the government in line with its Medium Term Expenditure Framework. She assured that government was ensuring that projects to be undertaken would create direct and indirect revenues, which would be used to repay the obligations.
The Minister said that for the medium term, the outlook for the economy was strong and that if the planned investments in capital were undertaken then the GDP growth projections showed that Nigeria would become a leading global economy. She said that government would work to ensure that consumption from our huge population would drive internal growth across a number of key sectors.
She assured the audience that if the disciplined implementation of the plans could be attained then Nigeria would finally be able to diversify and the situation where the entire nation is focussed on the oil price would end.
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