Nigeria’s economic growth is forecast to accelerate in 2016 from its slowest pace in 16 years, as the government increases investment in power and housing projects and tackles wasteful spending, the statistics agency said.
Growth in gross domestic product is forecast to be 3.8 percent in 2016 from an estimated 3 percent last year, the National Bureau of Statistics said in a report on Thursday. The plunge in oil prices that’s hammering government revenue is fueling a transformation of the economy, the agency said.
“The government is using the 2016 budget as an opportunity to reset and redirect the macroeconomic dynamics of the country,” according to the report. Proposals to plug fiscal leakages and invest at least 1.6 trillion naira ($8 billion) in capital projects are steps moving the economy in the right direction, the agency said.
The spending will help “jump start” economic growth, the agency said, predicting an annual average of 5.4 percent expansion over the three years from 2017.
Nigeria is Africa’s biggest economy and largest producer of oil, which generates about two-thirds of state revenue. The government is in talks for loans worth $3.5 billion from the World Bank and African Development Bank as it tries to combat sluggish growth with record spending this year. The borrowing could help cover Nigeria’s budget deficit, which is expected to widen to 3 trillion naira in 2016, up from an initial estimate of 2.2 trillion naira.
The International Monetary Fund is willing to help Nigeria if there’s need as it comes with up a national response to an external shock, Managing Director Christine Lagarde said during an online press conference from Washington on Thursday.
President Muhammadu Buhari has proposed raising 2016 expenditure by a fifth to 6.1 trillion naira with a budget based on a price of $38 per barrel of oil and expectations the economy will expand 4.4 percent. The Senate is on track to pass the 2016 budget on Feb. 25, Danjuma Goje, chairman of the appropriation committee, said on Thursday in the capital, Abuja.
Rising spending may add pressure to inflation, which the statistics agency forecasts will accelerate to 10.2 percent this year from 9.6 percent in December, staying above the central bank’s target of 6 percent to 9 percent.
Lagarde on Thursday repeated the message she delivered on a visit to Nigeria last month that the IMF supports greater flexibility in the currency, saying the “persistent pegging of the naira would not be such a good idea.”
Buhari has resisted calls by investors to devalue the currency, which has traded at 197-199 per dollar since March after the central bank tightened import controls and placed restrictions on foreign-currency trading. The nation’s gross foreign-exchange reserves declined 19 percent to $28.09 billion by Feb. 2 since the start of 2015.
(Updates with foreign-currency reserves in final paragraph.)