Adeosun: We’ll Utilise Govt Spending Power to Stimulate Unprecedented Investment Drive
Following the successful outing with the $1 billion Eurobond, which is the third issue by the Federal Government, Minister of Finance, Mrs. Kemi Adeosun, who spoke to journalists last Thursday in New York, is optimistic that the international borrowing wo
Ni ger ia experienced its first full recession in decades in 2016. What is the government’ s strategy for economic recovery?
At the heart of the government’s economic strategy is a recognition that we have to restructure the way the government spends money. Over the last decade Nigeria has experienced relatively strong growth, but much of this was fuelled by high oil prices. The broader economy was not delivering the growth that it is capable of, and which is needed if Nigerians are to experience improving living standards. We have been far too exposed to oil price shocks and in 2016, we saw both a major price fall and a simultaneous reduction in output, which is why the economy fell into recession. We have seen how vulnerable our economy is.
One of the main reasons for this was clear deficiencies with the way the federal budget was structured. Nigeria has a huge infrastructure deficit and we cannot deliver broad-based growth if we don’t address that. Our budget process for the last decade has had only a very limited focus on infrastructure spending. That is why the 2016 and 2017 budgets have been fundamentally re-structured to deliver 30 per cent of spending on infrastructure projects. We want to utilise government’s spending power to stimulate an unprecedented investment drive and attract private capital. Already, in 2016, we have spent more on infrastructure projects than any previous administration.
At the same time, far too much of the federal budget was focused on recurrent expenditure, which had become inflated and inefficient, with much of the money allocated to the process wasted, or ‘leaking.’ That is why we have spent so much time focused on reforming how government collects and allocates funds. The TSA means we fully understand the cash generation profile of all government agencies and can far more efficiently allocate funds to where they are needed. The impact of every naira and kobo that we spend is far greater than it was when we started and we have far greater confidence in our execution capacity on projects.
Nigeria launched a new Euro bond programme earlier this month. Can you tell us why, and what the outcome has been?
Our strategy for funding the 2016 and 2017 budget ensures that we utilise government revenue to deliver on recurrent expenditure obligations, while we raise long-term debt to fund capital spending.
The Eurobond is part of our funding strategy for our 2016 capital expenditure and will be spent on key infrastructure projects, in line with our economic plan.
Over the last 2 weeks I have been privileged to lead a strong delegation including the Minister for Budget and National Planning, the Central Bank Governor, the DG of the Debt Management Office, the DG of the Budget Office and representatives of the National Assembly to engage international investors and we’ve been very pleased with the response. The investment community understand the strategy we are adopting and have been positive. That is reflected in the bond being almost 8 times