Nigeria can overcome slowing growth with spending as the government plans to create a $25 billion fund combining public and private financing to develop infrastructure, Vice President Yemi Osinbajo has said.
The decline in oil prices has led Nigeria, Africa’s largest producer of crude, to slash its budget and contributed to a weaker currency.
The country’s credit rating had been downgraded by Standard & Poor’s, while JPMorgan Chase & Co. removed Nigeria from its local-currency emerging market indexes. The nation relies on oil for about two-thirds of its revenue and 90 percent of its exports.
“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 said in an interview in Abuja.
Exchange rate controls have been “largely successful” and “inevitable in the short term” as the Central Bank of Nigeria, CBN, had looked to slow the draw-down in foreign exchange reserves, said Osinbajo.
The country’s reserves had dropped to about $30 billion from almost $40 billion a year ago, from defending the local currency. The naira has declined about eight percent against the dollar since the start of the year.
Government is “mindful that we maintain foreign exchange reserves, so at least we are able to keep investor confidence high, especially direct investment,” he said.
Central Bank Governor, Godwin Emefiele, has resisted pressure from investors and fellow policy makers to devalue the naira, imposing foreign-currency controls instead.
The naira had averaged below 200 per dollar since the restrictions were imposed in February.
Osinbajo said he was mindful that portfolio investors were not pleased about the trading restrictions on the currency, which had led to a slowdown in capital market inflows.