In an exclusive interview with CNBC Africa Nigeria’s Finance Minister Kemi Adeosun argued that the focus of the West African country should be on stimulating growth.
I would rather seek growth, we can manage inflation – let’s stimulate the economy, we need lower interest rates, she told the channel.
The finance minister wants the central bank to lower interest rates so that the government can borrow domestically to boost the economy, which is stuck in recession, without increasing its debt-servicing costs.
Adeosun said she is working with the debt office, Nigeria’s sovereign wealth fund and the pension industry to issue an infrastructure bond to raise money for road and housing projects, although she did not elaborate.
She said she wanted the central bank to reconsider its July interest rate hike, which it implemented to help support the naira and attract foreign investment inflows.
The central bank, which is independent of the government, is due to announce its rate decision on Tuesday.
Economists polled by Reuters last week predicted that the central bank will keep its key interest rate at 14 percent and reiterate its focus on resuscitating the economy.
“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,” she told CNBC Africa.
“The attempt was 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.”
Africa’s biggest economy slid into recession for the first time in more than 20 years in the second quarter, and 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.
Adeosun said the government is working with parliament to cut procurement timelines to get contractors back to work and inject money into the economy.
Nigeria has said before that it plans to set up a $25 billion infrastructure fund to invest in the transport and energy sectors.
She said some adjustment was needed to narrow the spread between the official and black market currency rates, which is running at 25 percent after the central bank 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. (Reporting by Chijioke Ohuocha and Alexis Akwagyiram; Editing by Toby Chopra and Hugh Lawson)
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