Moving away from oil dependency
The rise in crude oil prices was a key reason why Nigeria came back on the radar in the first place. Though regulatory control over the naira’s value was disheartening, international investors lapped up bonds issued by Nigeria – twice – because of the expected positive impact on its fiscal position supported by increasing oil prices.
However, Nigeria wants to move away from this dependency on oil.
It wants its reforms to pave the way for a robust economy instead of one commodity deciding its fate. Nigeria’s Finance Minister Kemi Adeosun told The Wall Street Journal, “If we have a fall in the oil price in the future, we won’t be as vulnerable. We were far too vulnerable.”
In an interview to CNBC in April, Adeosun had said that “I’m not sure that I agree that OPEC is the reason that we will get out of recession. We will get out of recession because we are following the right type of policies. Our objective is not just to get out of recession, our objective is to grow and grow sustainably.”
Ambitious growth plans
The country’s ambitious four-year National Economic Recovery and Growth Plan (ERGP) intends to push economic growth to 7% levels by 2020 and reduce inflation to single digits by that time from the double digit levels presently. The government also aims to reduce inflation to below 10% by then.
Further, it is targeting to create 15 million jobs, increase oil output, and boost infrastructure spending by investing in roads and rail among other aspects.
In 2016, the country had intended to spend 6.1 trillion naira ($20 billion), but it did not have enough money to fund its spending plans. This year, it has pushed its public spending target to 7.3 trillion naira ($24 billion). This one-fifth increase in public spending from 2016 will leave it with a deficit of 2.36 trillion naira ($7.7 billion).
Issuing global bonds is one of the ways Nigeria intends to plug the aforementioned deficit.
Given that lenders are looking at Nigeria in the light of oil prices while giving it money, will the country be able to shed its dependence on oil easily? Let’s look at this aspect in the next article.