By Isaac Anumihe and Chinwendu Obienyi with agency report
Amidst growing contraction in its economy due to recession, the Federal Government said it is looking in the direction of lowering interest rates to enable it borrow locally to boost the economy without increasing debt-servicing costs.
The government also plans to inject funds through assets sales, advance payments for licence renewals and infrastructure bond to raise money for road and housing projects.
Minister of Finance, Mrs Kemi Adeosun, who spoke ahead of today’s Monetary Policy Committee meeting in Abuja, also told CNBC Africa, in an interview, that she is working with the Debt Management Office, Nigeria’s Sovereign Wealth Fund and the pension industry to issue an infrastructure bond to raise money for road and housing projects.
According to her, the central bank should reconsider its July interest rate increase, which it implemented to help support the naira and attract foreign investment.
The central bank, which is independent of the government, is due to announce its next rate decision today.
“We need lower interest rates, because when we are borrowing and interest rates go up, it increases our cost of debt service and it reduces the amount of money that is available to spend on capital projects.
“The attempt to manage inflation and the trade-off for the economy right now is what is a bigger problem: Is it growth or inflation? For me it is growth. I would rather seek growth. We can manage inflation. I think for us, at the moment in the Nigerian economy, growth is the most important thing.” ,” Adeosun told CNBC Africa.
She said some adjustment was needed to narrow the spread between the official and black market currency rates, which is running at 25 per cent since CBN floated the naira.
“We still need to make some necessary adjustment to ensure that the spread is narrow, so that we have true price discovery,” she said.
Nigeria’s economy was thrown into recession for the first time in more than 20 years in the second quarter. As at yesterday, the naira was quoted at a record low of 425 per dollar on the black market as chronic hard currency shortages continued to hurt businesses. But, Minister of National Planning and Budget, Mr Udoma Udo Udoma, told a business conference that the government planned asset sales to inject more funds into the economy.
He also said the government had almost finished preparing a bill asking parliament for emergency legislation powers to improve the business climate.
Meanwhile, the government has spent almost N800 billion ($2.54 billion) on capital expenditures since the budget got approved in May.