The Minister of Finance, Mrs. Kemi Adeosun, will on Wednesday meet the World Bank to finalise Nigeria’s “policy support document” needed to complete its application for funds to help plug the $11bn budget deficit.
“What was delaying (budget support loans) was a lack of flexibility in the exchange rate…we now have that,” the minister said in an interview with the Financial Times.
The President Muhammadu Buhari administration’s strategy also envisions heavy spending on infrastructure projects to jump-start growth.
Adeosun said the delayed passage of the 2016 budget had stalled the start of those projects to the fourth quarter. By then, she said, Nigeria would have secured funding from abroad for the record N6.1tn budget, quashing concerns that funding would not be available in time for the projects to begin this year.
The central bank’s decision last month to remove a 16-month-old peg on the value of the naira is the signal that international lenders, including the World Bank, have been waiting for, she added.
She also said the Federal Government was hopeful of an economic revival, even as the country slides into recession.
Low global oil prices have helped push Africa’s biggest economy into its worst economic crisis in decades. But many economists believe policies adopted by the central bank during the first year of Buhari’s presidency exacerbated the problem.
Adeosun said the government did not dispute the International Monetary Fund’s forecast last week that the economy would contract by 1.8 per cent.
“We’re simply saying that we have a very credible plan for dealing with the challenges we are facing, which we’ve been very honest about,” she said.
Although the minister thinks “there is still a long way to go,” the government is convinced that “diversifying and repositioning” the oil-dependent economy will bear fruit.
Part of that diversification includes the agricultural sector, where a boost in output is expected this year. Aggressive management of food price inflation, which includes low cost loans to farmers and improved distribution of fertiliser, will help bridge the shortfall in oil revenues, she said.
Investors have also viewed the greater flexibility in the foreign exchange market as a step in the right direction. But restrictions on hard currency allocation to import raw materials are still hurting manufacturers and leaving investors hesitant to bring their money back in.