Nigerian Finance Minister Says Country Needs To Tap Its Non-Oil Revenues

Finance Minister Kemi Adeosun

Nigeria plans to get out of recession by boosting government revenues and cracking down on corruption, Finance Minister Kemi Adeosun said on Thursday, and will also issue more international debt to pay for infrastructure projects.

Reuters report continues:

The country is in its second year of recession, brought on by lower oil prices, which have slashed government revenues, weakened the currency and caused dollar shortages frustrating business and households.

World Bank chief economist for Africa, Albert Zeufack, on Wednesday said fiscal adjustments in Nigeria would be "extremely challenging" and that the country needs to reform its finances to ensure it can hedge against any future currency crisis.

Nigeria also ranks well into the bottom third of Transparency International's global corruption index. On Wednesday, for example, more than US$43 million found in an apartment complex in Lagos was said to be related to an investigation into the handling of humanitarian aid.

Adeosun said her aim was to get the non-oil sector of Nigeria's economy which accounts for around 90 percent of GDP to contribute to government revenues.

"Improving non-oil revenues is something we are working hard on. We are rolling out measures to get more people into the tax net," Adeosun told CNBC Television.

"We are get out of recession because we are following the right type of policies. We are improving our revenues, we are improving our efficiencies in how we spend money.

"We are investing in the infrastructure that is needed, power, rail, road, the big enablers of growing sustainable economies."

Adeosun said liquidity on currency markets has been improving as the central bank has boosted dollar supply, thanks to recently rising oil prices. She added that government was harmonizing fiscal, monetary and trade policies to get the economy growing again.

However, the central bank, worried about the currency effects on inflation, has so far resisted calls to lower interest rates for 14 percent to enable the government borrow cheaply to spend its way out of recession.

Adeosun said Nigeria plans to issue long-term debt on the international markets more regularly for infrastructure projects, taking advantage of the country's debt to GDP ratio of 13 percent. But the interest burden is rising due to low revenues.

Black Market Naira Firms As Nigerian Central Bank Boosts Dollar Sale

Reuters reports that Nigeria's naira shot firmer on the country's black market on Thursday as traders prepared for the central bank to increase the dollar supply to exchange bureaux to keep the official retail rate higher.

The black market rate strengthened 2.6 percent to ₦385 to the dollar.

The central bank plans to sell US$20,000 each to bureaux de change operators on Thursday, the operators' association president, Aminu Gwadabe, told Reuters. It sold US$20,000 each earlier this week to boost liquidity.

The bank has sold around US$4 billion since it started its aggressive intervention on the currency market in February, analysts say, doubting whether it could sustain the trend.

"Until we see a freely traded naira a la Egypt, Nigeria is fighting with one hand tied behind its back," said Aly-Khan Satchu, head of Nairobi-based Rich Management.

The central bank, opposed to a naira float, has been intervening on the official market to try to narrow the currency's spread with the black market rate. On the official market, the currency was quoted at 306 per dollar.

The spread has become far narrower thanks to central bank intervention. It was ₦520 to the dollar on the black market in February after the bank devalued the naira for retail customers to ₦375.

February's move effectively created multiple exchange rates, including official, black market and one to pay for foreign school fees.

Finance Minister Kemi Adeosun said liquidity was improving on the currency markets on dollar injection, thanks to rising oil prices, adding that government was harmonizing fiscal, monetary and trade policies to boost growth.

"Higher oil prices alone are insufficient to explain the central bank's aggressive interventions over the past few weeks and (oil) production seems to have ramped up slowly over the first quarter of this year," said Cobus de Hart, senior economist at NKC in Johannesburg.

"Whether the central bank used funding such as external debt related inflows to intervene in the forex market remains to be seen, but in general we are not convinced that the regulator will be able to sustain this trend indefinitely."

Nigeria has raised a total of US$1.5 billion in Eurobonds in the first quarter of this year.

Gwadabe said the increase in currency sales to exchange bureaux would help take out pressure from the black market, adding that some importers were no longer bringing forward dollar demand as liquidity continues to improve.

On Tuesday, the bank cut the amount of paperwork small and medium-size businesses must provide to buy dollars, also among to improve liquidity and attract them away from the black market.