The Minister of Finance, Mrs. Kemi Adeosun, has informed multilateral donor institutions and investors that Nigeria is hungry for infrastructure that can trigger growth, not iPhones and pricey suits that will drive consumption.
Adeosun spoke Wednesday night at a session during the International Monetary Fund (IMF)/World Bank annual meetings in Washington D.C., saying investors must start to realise that western economies are matured and offer lower returns, while Africa with its infrastructure gap offers greater returns.
The minister made the remarks on the heels of the announcement by the IMF that it would offer zero interest rate on its concessional lending facility from 2016 to 2018 to Nigeria and other low-income economies that are in dire need of financial support to boost their economies and overcome challenges as a result of low commodity prices.
Adeosun said: “It seems very simple, in terms of what needs to be done. We are quite excited about negative interest rates. We like that you’re not earning any money.
“We are happy to take your money and give you very small positive interest rate. We think that the time has come, everyone is thinking out of the West, but there is nothing left in the West, everybody has to now come to Africa.
“But we don’t want investors to come to Africa to sell us iPhones and many expensive suits.
“We want to become productive, so we want this investment to come into infrastructure that will enable us to compete and really enable Africans to stay in Africa.”
She informed her audience that Nigeria has started a journey, which would take its economy from being dependent on oil as a primary commodity, to a more productive economy.
Adeosun said the economy had moved from spending 90 per cent of its budget on recurrent items and only 10 per cent on capital expenditure, to 70 per cent on recurrent expenditure and 30 per cent on capital expenditure.
“From the numbers that we have done, the infrastructure gap that we face, even if we devote our budget for the next three years, it is not enough, so we’ve got to look for creative ways to mobilise additional capital.
“We started of course with spending our own money (pension funds) because we think, of course, that the first thing we have to do is to re-establish some benchmarks, some ability to deliver on roads, on rails, on basic infrastructure,” she said.
According to her, Nigeria’s long-term plan is to mobilise private capital. “We think the narrative around who pays for infrastructure is a very important one in Africa. I say that because at the moment, if you don’t have infrastructure, you are going to pay anyway. If you spend six hours on a journey that should take you an hour, you’ve paid.
“So how do we convert that payment, which is currently informal and very painful, into a formal payment and therefore turn to a revenue stream that could attract investors, That is the challenge that we are working on now.
“As I have said, we are leading with our own money. We are looking at a regulatory framework that would enable investors to come in. We know it’s a new market and we are going to de-risk it.
“So what we are starting with are just infrastructure bonds that we guarantee, and then hopefully, when investors get an appetite for what the Nigerian infrastructure framework can provide them in terms of returns, we believe, we’d be able to remove some of the safeguards needed at the moment.
“We are hungry for infrastructure. We’ve got 170 million people who don’t have power in sufficient quantities, we don’t have a rail system, we don’t have a road structure, we believe that if we solve these infrastructure challenges, the entire productivity chain — agriculture, solid minerals, manufacturing, our unemployment problems — could all be solved.
“Our population is young; we have to provide a standard of living that keeps young vibrant Africans in Africa, because we think that is very important for eliminating poverty,” the minister stated.
IMF Offers Zero Interest Rate
The finance minister’s remarks came after the IMF said it was offering zero interest rate on its lending facilities between 2016 and 2018 to Nigeria and other low-income countries that are in dire need of financial support to boost their economies.
Addressing the media at the ongoing World Bank/IMF annual meetings, the Managing Director of the IMF, Ms. Christine Lagarde, said the policy was expected to help countries that are members of the donor institution absorb future shocks and continue their efforts to achieve deeper and more sustainable economic growth in line with sustainable development goals.
Despite the concession being dangled by the fund, THISDAY reliably gathered from a top official at the Ministry of Finance, that Nigeria might not be interested in borrowing from the IMF because of the conditionalities that are usually associated with loans from the fund.