Nigeria banks on infrastructure spend to exit recession
Nigeria’s finance minister says the government’s plans to boost agricultural production and spend billions of dollars upgrading dilapidated infrastructure will help drag Africa’s top oil producer out of recession this year. Low oil prices plunged the West African nation into its worst economic crisis in 25 years with output contracting by 1.5 per cent last year.
The situation has been exacerbated by militant attacks on pipelines in the oil-rich Niger Delta and what business executives say have been poor policy decisions. Kemi Adeosun told the Financial Times that she expected growth to pick up to 1 per cent this year on the back of improved crude prices and government spending on power and rail projects, with $6.9bn earmarked for infrastructure projects. Abuja is also seeking approval from lawmakers to borrow nearly $6bn from the Export-Import Bank of China to upgrade the rail network linking Lagos, the commercial capital, and Kano, the largest city in the north.
The International Monetary Fund is forecasting growth of 0.8 per cent this year. “We’re confident this will be a year of recovery. Modest, slow recovery, but we hope we will get out of negative growth by the second quarter,” Ms Adeosun said. “The question of how much growth there’ll be will be a function of a number of things — number one, sustained oil production and number two the impact of some of the polices we’ve pushed.”
Nigeria, Africa’s most populous nation with 180m people, produces less than 4,000MW and power shortages are seen as a critical constraint on businesses. The government made similar pledges last year to invest in infrastructure to create jobs and drive growth, but spent less than a third of the 1.8tn naira ($5.9bn) budgeted. That was blamed on funding shortfalls and delays caused by the late passage of the budget.
Adeosun insisted this year will be different. “We haven’t taken a scattergun approach, we’re focusing on rail and we want to do it sensibly and sustainably,” she said. Nigeria, which depends on petrodollars for 70 per cent of state revenues and 90 per cent of export earnings, is also grappling with a severe foreign exchange shortage and a fiscal deficit the IMF estimates will widen to 3.7 per cent of gross domestic product this year.
The IMF also raised concern at Nigeria’s “higher than historical” debt servicing costs, which doubled in 2016 to 66 per cent of revenue as the government has borrowed to fund capital expenditure. Ms Adeosun said the government was committed to raising revenue by improving tax collection and cutting wasteful spending, saying it had culled 58,000 ghost workers on the state’s payroll last year. “As a people and as a government, we’re chastened by what happened last year,” she said. “We’ve messaged strongly to our people . . . that fiscal discipline has to be a permanent feature.
We are going to continue with this reform programme.” However, concerns over the health of President Muhammadu Buhari, 74, have raised additional questions about the government’s ability to implement its policies. Mr Buhari spent almost two months in London receiving medical treatment earlier this year for an undisclosed illness. He has not been seen outside the presidential villa since his return to Abuja, the capital, in early March and failed to chair a cabinet meeting this week — the third in a row he has missed. But Ms Adeosun said the pace of government had not slowed because of Mr Buhari’s absence from cabinet meetings and other public events. “Nothing is being delayed,” she said.
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