FG To Create $25bn Fund To Avoid Recession – Osinbajo

FG To Create $25bn Fund To Avoid Recession – Osinbajo
By Blessing Anaro
— Oct 22, 2015 3:34 am | Leave a comment
The federal government is planning to create a $25 billion fund through public and private sector financing with the aim of modernising infrastructure and avoiding a recession, Vice President Yemi Osinbajo revealed yesterday.
The halving of oil prices since last year has forced Nigeria, Africa’s largest producer of crude, to slash its budget and led to a weakening of its currency, the Naira.
Standard & Poor’s has also downgraded the country’s credit rating, while JP Morgan Chase & Co. removed Nigeria from its local currency emerging market indexes.
“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.
Economic growth slowed to 2.35 percent in the second quarter of 2015, according to Nigeria’s national statistics agency, National Bureau of Statistics (NBS), the lowest this decade, as falling income from crude exports and foreign exchange shortages hit businesses hard. The nation relies on oil for about two-thirds of government spending and 90 percent of its export income.
Vice President Osinbajo was a lawyer in the commercial capital, Lagos, until his surprise inclusion as the running mate of former military ruler, Muhammadu Buhari, on the ticket of the opposition All Progressives Congress (APC). They eventually won the April general election and took office in May.
Bloomberg reports that the Buhari administration plans to target investment toward improving a power supply system that leaves tens of millions of households without grid electricity for hours each day, and some for days and weeks, as well as modernizing roads, rail transportation and agriculture.
Boosting agricultural output in a fertile nation that has become one of the world’s biggest importers of rice will both save foreign exchange outlays and create jobs. The government is looking to make the West African country self-sufficient in rice production in about 24 months.
“A lot of those projects will be bankable projects, because we’re looking at projects that will interest private sector investors as well, but they are strategic for us,” Osinbajo said.
In the face of declining oil revenue, Central Bank governor, Godwin Emefiele, has resisted pressure from investors and fellow policy makers to devalue the naira. Instead, he imposed exchange rate controls in February that Osinbajo described as “largely successful” and “inevitable in the short term” in an effort to stem the outflow of reserves.
Reserves have dropped to about $30 billion, down from almost $40 billion a year ago, while the naira has weakened about eight percent against the dollar since the start of the year.
Osinbajo said he understands that portfolio investors are not pleased about the trading restrictions on the currency, which have led to a slowdown in capital market inflows.
The government is “mindful that we maintain foreign exchange reserves so, at least, that we are able to keep investor confidence high, especially direct investment,” he said.