The Federal Government will use part of the N2.3 trillion stimulus package to purchase locally produced items as buyer of last resort in line with its Economic Sustainability Plan, according to Vice President Yemi Osinbajo, SAN.
The Vice President stated this on Friday at the virtual edition of the 2020 Presidential Policy Dialogue of the Lagos Chamber of Commerce and Industry (LCCI).
According to him, “In all of what we are doing, part of the N2.3 trillion stimulus package is to make government the buyer of last resort. This is to ensure that the whole question of demand, which is weak at the moment, is strengthened by the fact that government stands ready to be the purchaser of last resort, with respect to agriculture or even with respect to our housing programme.”
Continuing on measures put in place to support small businesses, he said “Working with the Central Bank, we try to ensure that we are able to put in place a system whereby many businesses that have taken loans will be able to restructure those loans. This is an on-going conversation and we intend to keep the banks reassured that allowing generous restructuring programmes will be supported by the Central Bank and that the Central Bank will not throw them under the bus.”
Below is the full text of the Vice President’s address:
KEYNOTE ADDRESS BY HIS EXCELLENCY, PROF. YEMI OSINBAJO, SAN, GCON, VICE PRESIDENT, FEDERAL REPUBLIC OF NIGERIA AT THE 2020 PRESIDENTIAL POLICY DIALOGUE OF THE LAGOS CHAMBER OF COMMERCE AND INDUSTRY ON FRIDAY AUGUST 7TH 2020
Let me thank you very much for the kind invitation to join you at this occasion. It is a special pleasure to be speaking once again at the Presidential Policy Dialogue of the Lagos Chamber of Commerce and Industry and I must acknowledge the Chamber’s consistency in championing issues and in making valuable contributions to public policy discourse; and to thank you also for this very positive spirit of engagement in our joint endeavor to promote national development.
Nigeria, like all other countries, have been quite seriously impacted in various ways by the COVID-19 pandemic and it has affected us all either as households or as businesses.
Contrary to earlier expectations, it is clear that the pandemic and its effects will remain with us for quite a while. So it has become clear that we have to adapt to it and adopt new ways of doing things.
So it is for what we are doing today. Of course, we used to meet physically, now we must deploy technology and meet electronically. In some ways, we have become efficient and effective, we are deploying far less time and resources to generate similar, if not better impact and outcomes, so there is a silver lining somewhere in these dark clouds.
I must say that the LCCI, with its rich history since 1888 is probably the only indigenous organization of its kind to have been through a global pandemic like the Spanish influenza of 1918-1920. So, I think we must have a few questions about how you coped then, you are probably the ones who can give us any advice on how to cope now.
But quite seriously, the fact that industry and businesses survived even in those early days with all the difficulties, surely must teach us something and the spirit of innovation, the spirit of being creative even in the most difficult times catches the essence of our approach to the challenges of the current situation.
The priority of the Federal Government in response to the economic challenges posed by COVID-19 is essentially to ward off a deep recession and to save jobs and this we are hoping to do by a mixture of stimulus measures to support local businesses; the essence being to retain jobs and to ensure that we create the best possible circumstances for the most vulnerable in the society.
To this end, the Federal Government developed the Economic Sustainability Plan (ESP) with a stimulus package of N2.3 trillion to give fillip to the economy across various sectors.
The size of the stimulus is about 1.5% of national income or GDP. This is not as large as we would have liked it to be but it was the best we could do given existing fiscal and monetary constraints, and this is also based on the assumption that the price of crude will average around 30 to 40 dollars per barrel throughout the year. We anticipate an economic growth of about -0.59% in 2020.
You would already be familiar with details of the Economic Sustainability Plan. In essence it is intended to boost production, prevent business collapse, and provide liquidity. It will also promote the use of labor-intensive methods and direct labour interventions in key areas like agriculture, light manufacturing, housing construction and facility maintenance while increasing infrastructural investment in roads, bridges, solar power, and communications technologies.
It is intended to do all this while extending protection to the poor and other vulnerable groups in our society which of course means that we will be strengthening our social investment programmes and the social safety nets that we have created in the past four years.
The plan covers many economic and social sectors and some of its key provisions include:
Jobs for food – which is our agriculture programme to expand crop cultivation and create a targeted 5 million jobs while guaranteeing uptake by processors, aggregators and the government. In all of what we are doing, part of the N2.3 trillion stimulus package is to make government the buyer of last resort. This is to ensure that the whole question of demand, which is weak at the moment, is strengthened by the fact that government stands ready to be the purchaser of last resort, with respect to agriculture or even with respect to our housing programme.
Jobs through Homes is again, to create jobs and boost the national housing stock using teams of young professionals and artisans in small businesses and building with local products such as cement, gravel, doors, tiles, windows and paint. Because of the large number of houses to be built, we will be intentional in encouraging local manufacture of building materials. As a matter of fact, the whole intent of the Economic Sustainability Plan is to encourage local production. One of the key issues that came up in the Economic Sustainability Committee was the issue of road-building. We currently use a lot of imported bitumen. We are now working very hard towards encouraging local production of bitumen. In the meantime, we have limestone and cement so we are certainly going to be encouraging the building of our roads using concrete. This is a very important component of our Economic Sustainability Plan and the Ministry of Works and Housing has been doing a bit of work in that respect.
The Plan also includes a Solar Homes Systems programme – private solar companies providing modular solar powered units and our targets is to provide 5 million households (to serve 25 million people) in rural or under-served areas. Local manufacture and/or assembling of solar equipment is a crucial objective. This cannot be achieved in the short-term. However the National Agency for Science and engineering Infrastructure (NASENI) is already doing quite a bit of work in the manufacturing of solar panels. We expect to start with assembling considering we are doing 5 million homes which is huge and we have received many expressions of interest for the setting up of solar equipment assembling and manufacturing plants.
The plan also includes supporting MSMEs which are the backbone of the economy to promote local production of pharmaceuticals and COVID-19 essentials like personal protective equipment, face masks, face shields, hand sanitisers etc. Again here, the government is the purchaser of last resort because we want to encourage local industry to produce all these pharmaceuticals and personal protective equipment; so we will certainly be putting in the resources to enable this happen.
The Honorable Minister of Investment, Trade and Industry has already spoke, quite extensively, about some of the support that is proposed under his ministry.
We also have a Future of Jobs programme in technology so that our creative youth are productively engaged while preparing our economy to provide digital services including for the global outsourcing industry. We are taking advantage of this time to support the digital sector in Nigeria to become a hub for outsourcing of technological and engineering services. We hope that we will become a major player in technology and engineering outsourcing.
A fundamental feature of the Economic Sustainability Plan is the role of the private sector. Take agriculture for instance, at 22 per- cent of GDP, agriculture continues to be the major non-oil contributor to national economy and Nigeria is deemed to be “one of the richest potential sources of agricultural growth globally”. Nigerians are consuming more processed food than ever before yet the ratio of agro and food processing to primary agriculture is low leading to imports whereas if agricultural produce is processed locally it can meet domestic needs and even be exported in large quantities abroad. There is no reason why we cannot be net exporters of some of the agricultural products that our land and climate can sustain.
The example of agriculture is useful for understanding the approach of energising the entire value chain taken in the Economic Sustainability Plan. In it, there are opportunities for small-scale farmers just as there are for large scale out-growers. There are opportunities for seed companies just as there are opportunities for companies engaged in land clearing.
Indeed, producers and manufacturers of fertilisers, insecticides, herbicides and leasers of tractors and harvesters are factored into the agricultural intervention just as transporters, commodity exchanges and processors will find lots of opportunities for expansion.
The key constraints in the agricultural value chain such as lack of access to financing and post-harvest losses will be overcomed because of the involvement of banks and large off-takers. The Federal Government will be the ultimate purchaser of produce for use in various programmes like the Home Grown School Feeding Programme and the Strategic Grains Reserve.
This same intention to dynamize entire value chains is also evident in the sectoral plans for housing, solar power and natural gas amongst other things.
Similarly, the ESP is replete with opportunities for micro, small and medium scale businesses to expand their activities in manufacturing and local production and to participate in supply chain activities across various industrial and service sectors. It recognizes nonetheless that many businesses suffered serious losses during the lockdown that was put in place to limit the spread of the COVID-19 virus. Thus, in addition to direct procurement of pharmaceutical and health products from small businesses mentioned earlier, the ESP offers support for small businesses in sectors badly affected by the pandemic such as those in hospitality, aviation, creative industries, road transport, tourism, private schools and export related businesses.
Such support includes direct payroll support to staff of qualifying employers for 3 months, and support for MSMEs on reduction in registration fees and assisted e-registration which will reduce barriers to entry to food and drug sectors. Part of what we are hoping to achieve as we work through the various challenges of this period, is to also impact some of the existing problems regarding the ease of doing business. We hope to do so across board for all businesses, especially the MSMEs which are the engine-room of most economies.
Also pertinent is the enablement of banks to restructure loans and the provision of less onerous credit terms under the auspices of the Central Bank and the National Development Banks like Bank of Industry, NIRSAL and NEXIM.
Working with the Central Bank, we try to ensure that we are able to put in place a system whereby many businesses that have taken loans will be able to restructure those loans. This is an on-going conversation and we intend to keep the banks reassured that allowing generous restructuring programmes will be supported by the Central Bank and that the Central Bank will not throw them under the bus.
Similarly, the recently signed Finance Act 2019 exempts businesses with a turnover or less than N25m from Companies Income Tax while those with turnover between N25m and N100m will only pay 20% CIT instead of 30%.
The Federal Government also realizes the importance of infrastructure to underpin our national aspiration to be a producing country and become less reliant on crude oil exports. However, given the scale of the needs and the limited resource base of government, it is clear that Nigeria needs its private sector to be involved in infrastructure development.
So, the plan does not dwell on major infrastructural development because of its time-frame but also because of on-going and path-breaking infrastructural investments in railways as well as in key projects of the Presidential Infrastructure Development Fund such as the Lagos-Ibadan highway, the Second Niger Bridge, the Abuja to Kano Road, the East-West Road and the Mambilla Hydroelectric Power scheme.
Greater emphasis was placed on provision of rural roads to facilitate evacuation of agricultural produce as well as public works and facilities maintenance programmes with their huge job creation potential.
We recognize of course that national infrastructural needs go beyond these mega-projects and rural facilities and we strongly believe that the private sector has a key role to play in the provision of infrastructure. The plan therefore calls for the leveraging of national savings including pension for such purpose.
Our pension law allows for up to one-fifth of Pension Fund assets to be invested in infrastructure and I think that once necessary steps are taken to de- risk the use of these assets for such purpose then national infrastructural investment will get a boost. The Azura-Edo power plant is also a good example of how government can support and enable private sector provision of infrastructure. It is important for us as a nation to build on such successes bearing in mind that it is a key responsibility of government to help de-risk such investments if they are to be made. I cite that example because the Azura-Edo power plant is the first power plant that had the support of the World Bank, several DFIs, private sector and the state government – the Edo state government. Those types of collaboration are important as we go forward; the Federal Government standing ready to provide the necessary guarantees and to facilitate the financing of major infrastructural projects. We need to think creatively on private-public sector collaboration and how to make this work effectively especially in the production of infrastructure.
A valuable insight that we have got from the COVID-19 pandemic is the key role of digital technology in economic activity going forward. Access to broadband facilities is key for software development, digital education, e-commerce, e-health, e-government, internet banking, and even video conferences such as this one.
Broadband facilities are also vital if Nigeria is to be well positioned to take advantage of cutting edge developments in robotics, 3-D manufacturing, artificial intelligence and smart devices including cars. Improved broadband coverage will also open up opportunities in other sectors of the economy including cloud platforms, digital financial services and digital skills and training. This is why in the Economic
Sustainability Plan, we have paid attention to total national broadband coverage which is a core issue the Federal Government wishes to undertake as robustly as possible.
Not surprisingly, given the health related origins of the economic crisis, a key objective of the ESP is to improve health outcomes. We (governments at federal and state levels) have accordingly built isolation centres and laboratories, bought test kits and personal protective equipment and given incentives to health workers. For example, we have increased the number of modular laboratories that can handle COVID-19 samples from 5 at the onset of the pandemic to over 40 today.
Given the obvious vulnerability of our health sector, the Economic Sustainability Plan calls for speedy movement to universal health coverage using a combination of public finance and mandatory social health insurance. Although we currently have the Universal Basic Health Fund (UBHF) and others, the size of a country such as Nigeria implies that there is no way that the public budget alone can provide the funding for our healthcare. Which is why the plan for universal health coverage is a combination of public financing and mandatory social health insurance. This is one of the outcomes that we hope we can benefit from under the plan in this period of the pandemic.
Although there is still a lot more to be done, our Social Investment Programmes laid a strong foundation for providing support to the more vulnerable sections of our society. The plan says that we are going to deepen social investment programmes including notably the cash transfer scheme, the N-Power programme, the extension of the Home Grown School Feeding Programme to all States of the Federation and deepening of credit opportunities offered by the GEEP such as the TraderMoni, MarketMoni and FarmerMoni programmes.
I think social investment is important, especially in this period of the pandemic and I want to thank many members of the private sector that have also contributed to supporting our efforts in social investment. This is a time when many are out of work; we already had significant unemployment problems without the pandemic. With the pandemic, many who do daily paid work are experiencing great difficulty because of lockdowns and frequent disruptions.
It also means that people who were already well engaged in local industries are suffering such as caterers, mechanics, and those in the hospitality industry. So there is a need for us to provide a much more effective safety net and this is one of the planned objectives of government but we also require the support of the private sector.
The LCCI is of course well-aware of the commitment of the Federal Government to providing an enabling environment for business to thrive. And of course, the Minister of Industry, Trade and Investment has already stated the ways in which we have worked to improve the business environment in the country.
In this regard, we have made some strides in improving the ease of doing business in Nigeria. Through the Presidential Enabling Business Environment Council (PEBEC), a lot has been achieved to fast-track processes, reduce bottlenecks and improve transparency across Government MDAs. As a result, we
have moved 35 places upward in the World Bank’s Ease of Doing Business rankings. We have continued to scale up our business reform initiatives across regulatory agencies.
Of course, there is still a lot more to be done. There is still a lot to be done in improving the ease of doing business in Nigeria. Also the public and private sector needs to spend more time to look at the many ways we can solve these problems. Some of these problems are problems of the environment which we can deal with. Others are attitudinal problems, problems of governance. It is therefore in the interest of our economy to work through these issues, some of which are not lost on the Federal Government and we are very committed to resolving these problems and creating a much better environment for business.
Our aim is to continue to improve our national ranking in the World Bank Doing Business Index Ranking to below 100 in the coming years. It is also very important to reduce the harassment and extortion of businesses by various government agencies. The practice of arbitrary assessments, inspections and intrusions often for contrived reasons just needs to stop. Despite setbacks arising from the effects of the global pandemic, we are steadily working to improve and consolidate on business environment reforms. The Federal Government is not under any illusion that it can do this on its own. Everything we plan to do has to be done lock-step with the collaboration of the private sector. What we have seen in these times is that Nigerian businesses can and are being creative.
The transition from in-person meetings to zoom meetings shows the tremendous resilience of Nigerian businesses and the Nigerian people as a whole. We can see how, very quickly, we have adapted to all that is going on in our environment. The task ahead is challenging, and I believe that the LCCI, working with Federal Government and several other private sector organizations, will together solve all of these pending issues. This period of the pandemic will provide us with the best opportunity to do something significant and to really make a difference in the Nigerian economy.
I believe that this is the best possible time for us as a nation to do something about our business environment. We can take advantage of these difficulties. Clearly, there are many opportunities in this difficult period and I urge you to join us in doing whatever is necessary to ensure that not only do we sustain growth and keep jobs, but that we modernize our economy and make this country a place where everyone, local and international, can do business.
I thank you very much for the opportunity to be here with you this morning and I hope I will be able to say a bit more during the course of our interaction.