UPDATE 1-Nigeria finmin targets job creation, restoring credit

* Aims to create cheaper credit for growing businesses

* Sees good policy co-ordination with central bank

* Looking at ways to hedge against oil price volatility

By Nick Tattersall

LAGOS, June 4 (Reuters) - Nigeria's new finance minister said on Friday creating jobs and getting affordable credit to smaller companies were among his top priorities in the short time left of the current administration.

Olusegun Aganga, a former Goldman Sachs (GS.N) executive who took over as finance minister two months ago, said a $4 billion bank bail-out by the central bank last year had been courageous and necessary but noted it had had unintended consequences.

Businesses and consumers in sub-Saharan Africa's second-biggest economy have complained of difficulty sourcing long-term credit in the wake of the bailout as banks tightened lending criteria. Bank credit growth to the private sector has been virtually stagnant at 0.3 percent this year.

"One priority for us is to make sure we source and allocate capital to critical areas of the economy, especially for small and growing businesses, so they have access to cheaper credit," Aganga told reporters after his first meeting as finance minister with business leaders in the commercial capital Lagos.

"The second area of importance is job creation ... There is a disconnect between the growth in the economy we have seen over the last 5-10 years ... and the depth of unemployment and the direction it is going," he said.

He said the official unemployment rate, according to the National Bureau of Statistics, stood at around 19.7 percent but noted that around half of 15-25 year olds in urban areas were jobless, according to the figures.

Aganga said small and medium-sized businesses that should be profitable were being forced to close by interest rates of more than 20 percent they were paying on bank loans, further heightening unemployment.

Nigeria's central bank has set up a 500 billion naira ($3.3 billion) fund to allow banks to refinance loans to manufacturers, the power sector and airlines in a bid to boost the availability of long-term credit to key parts of industry.

Aganga said such funds, managed by the Bank of Industry, had allowed some small businesses to bring their interest payments down to 7-8 percent.

CO-ORDINATED POLICY

Some finance ministry officials have been privately critical of the manner in which Sanusi conducted the banking reforms, saying he failed to work closely enough with government economists on the wider economic impact.

Aganga said there was a good relationship between the central bank and the ministry, pointing out that Sanusi was a member of the country's economic management team.

"We have enough opportunity to make sure our policies are very, very well co-ordinated," he said.

Tackling Nigeria's record of weak budget implementation was also at the top of his agenda, Aganga said, particularly in a year when spending is set to increase sharply.

President Goodluck Jonathan has sent a document to parliament, seen by Reuters this week, proposing a cut in spending to 4.2 trillion naira in the 2010 budget but adding a supplementary budget of 640 billion naira, meaning a net rise in spending despite a lower oil price. [ID:nLDE6511HQ]

Aganga acknowledged a budget amendment had been sent to parliament but declined to comment on the figures.

He said the government had ordered an audit of state oil firm NNPC, which has a reputation for corruption, in order to plug "leakages" and said he was looking at ways of using financial instruments to hedge Nigeria against oil price volatility.

Aganga, who was responsible for advising hedge fund managers and also formed the house view of Nigeria during his time at Goldman Sachs (GS.N), said he was keen to make Africa's most populous nation as friendly as possible to foreign investors.

"The only way you can make the environment competitive is to listen to investors and see what they want you to do, as long as it is legal, and it works for Nigeria," he said. (For full Reuters Africa coverage and to have your say on the top issues, visit: af.reuters.com/ ) (Editing by Susan Fenton)