‘No economic empowerment without engagement with private sector’

 Last week, Vice President Yemi Osinbajo was in Lagos, as the special guest of honour, at a Presidential Dialogue organised by the Lagos Chamber of Commerce and Industry (LCCI). After the session, he met with some select journalists where he said more on what the administration had done in the last one year and plans for the future. John Omachonu, Deputy Editor, was there. Excerpts:

 

Your Excellency, up till now interactions with the private sector suggest some level of frustration at the pace of reforms; for the private to thrive there is need for government to create an enabling environment. However, there is a sense showing government has been trying to fix things by itself without engaging the private sector. What is your view concerning this?

 

Let me say that our engagement with the private sector has been systematic and quite robust. There may be some situations where you may say it is not sufficient. For example, I met with the Manufacturers Association of Nigeria (MAN), farmers in general and rice farmers in particular. I have met with segments of the business community and I am here in dialogue with the Lagos Chamber of Commerce and Industry (LCCI) with minister of budget and planning. I was here in Lagos last week engaging stakeholders on the medium-term expenditure framework.

The private sector is a large segment of the Nigerian society and you would always find an individual or a group that says this is not quite enough and there cannot be any form of economic empowerment without engagement with the private sector. The private sector is the engine of the economy. We intend to have quarterly briefing with the private sector, beginning with this next quarter.

 

To follow-up on the previous question, I think what people want to see is how the outcome of these encounters with the private sector is factored into public policy formulation that will support the unleashing of the private sector; can you speak on specific initiatives that have come out of those discussions?

 

First, before those initiatives can take root and have effect, you need some time. There is no way you can have a dialogue today and expect to see dramatic changes in the economic environment tomorrow. We are taking it one step at a time. For instance, the ease of doing business is critical and we have a technical committee on the ease of doing business, which I chair. This is of course a robust platform for engagement with the private sector. There are several other ways of engaging the private sector, as in the case of streamlining tariffs.

Again, our engagement with the private sector, in this instance with rice farmers through the Central Bank of Nigeria’s Anchor Credit programme, has enabled us to realise that what they need is credit to purchase their input and not necessarily subsidies on fertilizers. In Kebbi State for instance, this understanding has enabled us to help farmers increase their tonnage per hectare.

 

Today, many are conversant with this mantra of the government to diversify the economy. However, many are worried that there seems to be no clear policy direction in this regard. For instance, the 2016 budgetary allocation to agriculture is not up to 1 percent, which seems to be antithetical to the diversification drive of your government. What do you say about this?

 

Let me say, first that the diversification effort of the Federal Government is rooted in reality. The question is not whether the economy is diversified or not, but to deepen the diverse nature of the economy. For instance, services and the agriculture sectors are the largest contributors to the Gross Domestic Product (GDP) of the economy. But all we talk about is the third largest contributor to GDP, which is oil.

So, in actual terms the economy is already diversified. Now, to look at the budgetary allocation to any given sector in isolation is not enough. There are other factors that must be dealt with, rural roads, road networks and railways to facilitate the movement of farm input and produce. A lot of what is been spent on infrastructure will obviously help uplift agriculture.

Power is extremely important for the entire economy. As at February 2015, we had peaked at 5000 megawatts the highest in the history of Nigeria. When you look at recent bombing incidents and given that most of these power stations depend on gas, you will realise that about 40 percent of the gas supply has been lost; this ripples over and affect every other sector of the economy like manufacturing.

To return to agriculture we are determined to develop the whole agro-allied value chain, supporting massive investments in the petrochemical industry and providing incentives among numerous other incentives.  I think we are on course in terms of the general framework to deepen our already diversified economy.

 

I understand that we still owe up to N400 billion to local contractors; one would think that if we address this it would help with job creation. I want to know the strategy put in place to address this?

 

You must recognise that these are legacy debts, which mean debt inherited from previous administrations, and we have been in conversation with the construction industry, exploring ways to deal with this situation. It is a matter of form and when the debt will be paid. Otherwise, the debt will be paid.

When oil prices were at $100, $150 per barrel, the government at the time did not pay off those debts, and oil prices are now down to $40 per barrel. This is certainly a massive drawback in terms of what it is the government can do. But again we are talking with global financial institutions and our development partners to figure out what it is we can do.

Your Excellency, on the bailout of states, one would have expected that the government would restructure the states before the last tranche of the N90 billion. Did all the states meet their fiscal responsibilities plans as agreed before the funds were disbursed, and is the bailout achieving the purpose for which the Federal Government is disbursing it?

 

Let me say first that as of a few weeks ago, 27 states met the conditions required to access the bailout funds and disbursements are only made when a state has met all the requisite conditions. I am not so sure whether between those few weeks ago and now additional states have met the conditions.

In terms of how the states have utilised these funds, I am not in the position to say how well or otherwise they have utilised the funds. This is not a one off thing and we will not be in position to support states that fail to meet their fiscal responsibilities.

 

Sir, in a recession as we are experiencing, do you see the action of the government as enough to wriggle Nigeria out of the current economic situation, considering the expenditure pattern of the states, the legislature on recess? Don’t you think there are needs for a coordinated approach in terms of communicating clearly to the people? Again, is this budget not supposed to be a stimulus one designed to spend our way out of the current economic stagnation?

 

Let me say that the judiciary or legislature being on its annual vacation does not necessarily constitute an economic bottleneck. I must say that sometimes, it is useful to get some rest. Sure, the budget is expansionary in nature and you are aware that there are some problems or challenges in meeting revenue targets. Most of this is on account of the sabotage going on in the Niger Delta.

Oil revenues are down, close to 60 percent. This is a very huge drop in revenue. So, we are looking at non-oil revenues, particularly taxes. But there is no doubt about government’s commitment to resolving these challenges. Deregulation of the downstream sector has taken place, which is a major policy change in the history of this country. So to let the market determine prices in that sector are a step in the right direction, however little this might seem.

 

The fiscal challenges are huge and to come out of this, innovative thinking is required. What clear strategy does government have to come out, with particular reference to attracting Foreign Direct Investments (FDIs)?

 

We are not particularly interested in hot money or portfolio investments. We expect that deregulation would help to revitalise the economy and entice direct investments, both foreign and local. Some of the local investments are those of the Dangote Group in refineries and petrochemicals, among others. These are significant local investments and we are of the opinion that if these local investments are encouraged; we would be off to some good start.

For example, 650 thousand barrels of refining per day would mean that local refining has come to stay. Everyone knows that Nigeria is the next frontier of investment and there may be difficulties but these are not insurmountable and foreign investors would definitely come. Foreign investors are looking at Nigeria. For instance, there is a Mexican farmer, one of the biggest farm holdings in Mexico that has arrived in Nigeria and is investing massively in that sector.

 

The legislature and judiciary go on recess for two to three months, and three times in a year. In a term of four years, this adds up to a full year’s holiday. Linking this to the ease of doing business, which partly consists in the speed with which issues or disputes are resolved, and all these cases have to wait until these arms of government resume, does this not affect the ease of doing business?

 

The important question is that our adjudication system is slow, vacation or no vacation. Besides, there are provisions meant to deal with criminal cases even when the judiciary is on recess.

 

What are some of the fiscal conditions states must meet to access the bailout funds?

 

The key conditions states must meet to access the bailout funds include: to clean their payrolls through biometric applications in order to enable them access some electronic platforms through which these funds are disbursed. The second is to keep their current expenditure within reasonable limits. Another condition is improvement in Internally Generated Revenue (IGR).

There are also issues around the whole public expenditure profile and how they are handled. At the Federal Government level, the Treasury Single Account (TSA) is meant to help with streamlining public expenditure and curbing wastes.

 

 John Omachonu