Nigeria to spend itself out of economic slump

Nigerian President Muhammadu Buhari PHOTO: COURTESY

Nigeria’s government is looking to spend its way out of an economic slump after the central bank said it cannot bolster growth.

The regulator is instead targeting inflation, with a record interest rate.

The government is planning 1.75 trillion naira (Sh560 billion) in capital spending for the year, more than four times the amount spent in 2015, according to information from the budget office. The state has spent 248 billion naira so far, the Presidency said on August 1 (Sh78 billion).

Nigeria intends to borrow abroad to help plug its 2.2 trillion naira (Sh693 billion) budget gap and make more funds available for capital investments. The Monetary Policy Committee (MPC) “suggested that there was not much it could do to avert a recession.”

Militant attacks

Africa’s largest economy will probably contract for the first time since 1991 this year as oil output slumped amid militant attacks on pipelines, and foreign-exchange restrictions led to shortages of imported goods, including fuel.

The central bank lacks the instruments needed to directly jump-start growth, and the government should fast-track the implementation of the 2016 budget to stimulate the economy, Governor Godwin Emefiele said when he announced on July 26 the monetary policy rate will be increased to the highest in at least nine years.

The MPC raised its key rate by 200 basis points to 14 per cent to curb inflation that accelerated to 16.5 per cent in June, the highest since October 2005, and prop up the naira. The local currency has lost over a third its value.

The economy shrank by 0.4 per cent in the first quarter and may contract 1.8 per cent this year, according to the International Monetary Fund.

When President Muhammadu Buhari presented a record budget of 6.1 trillion naira (Sh1.9 trillion) in December, the government targeted economic growth of 4.37 per cent this year.

A four-month delay in approving spending plans exacerbated the strain on output, as a slump in oil prices and production caused a revenue squeeze.

The economy expanded 2.7 per cent last year, the slowest in 20 years, according to IMF data. — Bloomberg

Business
Premium Financial hardships dampen Easter celebrations among Kenyans
Business
Premium Looming crisis as top lenders stare at Sh500b in bad loans
Business
Premium Water PS Korir put on the spot over Sh14m dam land
Business
Premium Ruto's food security hopes facing storm amid fake fertiliser scam